Here's our summary of key economic events overnight that affect New Zealand, with news it seems to be the season for some "shock therapy" - from OpenAI to Argentina.
But first in the US, this is the lead-up week to their long Thanksgiving holiday weekend, a four-day Thursday-to-Sunday work-break - for many. Wednesday is usually a travel crush day. Thursday (Friday NZT) a quiet family day, and then followed by an all-out retail shopping frenzy, shopping for Christmas gifts traditionally. Economic eyes will be on the retail impulse. Financial market activity is already thinning out in the run-up to the holiday.
On Wall Street, all eyes are on the ructions at the ChatGPT firm OpenAI. Overnight, Microsoft hired its fired CEO and 500 staff said they were ready to join him. These are juicy headlines in a newly high-profile business segment, but not likely to have much lasting economic impact. The motivation for the OpenAI board, one ultimately controlled by core AI scientists, seems to be that the company’s expansion was out of control, maybe even dangerous.
In China, their central bank kept its key lending benchmarks unchanged in their November review - despite the obvious need for stimulus. It won't come from lower lending rates because this would expand downward pressure on the yuan and risk increasing capital and portfolio outflows. Those outflows hit -US$100 bln in both September and October. However as long as the interest rate spread to the USD remains heavily against the Chinese yuan, these outflows will likely persist. All they can do at the moment is not make matters worse which is why the one-year and five-year loan prime rates were held steady at 3.45% and 4.20%, respectively.
Taiwanese export orders rose +2.9% in October from September to be -4.6% lower than year-ago levels. But they have been on a steady recovery since the low point in April, and are now back to the high levels they were in the 2020-2022 period.
In Argentina, they have elected right-wing libertarian firebrand Javier Milei as its new president. He won decisively, 55:45. He is a hard-line social conservative with ties to the American right, opposes abortion rights and has called climate change a “lie of socialism.” He has promised to slash government spending by closing Argentina’s ministries of culture, education, and diversity, and by eliminating public subsidies. He also wants to close their central bank and "dollarise" their economy. But their central bank has no US dollars, so the challenge will be huge. How do you "dollarise" when you have no dollars? This will be new territory: no country of Argentina’s size has previously turned over the reins of its own monetary policy to American decisionmakers. The whole affair smacks of abject desperation.
When he won through to the final in the first round, the Argentine peso came under immense pressure and was devalued -18% to 350 to the USD. Now he is president-elect, another large devaluation is underway. The unofficial rate is now 1000 to the USD. Campaigning against his own currency has become self-fulfilling. He seems to have engineered a situation of making his own currency completely worthless while lacking the resources to dollarise. Who knows what happens from here. Those without US dollars are now destitute.
Also, while we are not looking, Turkey's currency is falling further while its inflation rate hovers stubbornly above 60% and almost double what it was in June. All this is the result of another crazy "shock therapy" experiment that went badly wrong.
The UST 10yr yield is little-changed from yesterday, now at 4.42% and -2 bps lower. The key 2-10 yield curve is still inverted by -46 bps. Their 1-5 curve is marginally less inverted, by -80 bps. Their 3 mth-10yr curve inversion is now -95 bps and little-changed. The Australian 10 year bond yield is now at 4.51% and up +4 bps from yesterday. The China 10 year bond rate is unchanged at 2.67%. And the NZ Government 10 year bond rate is up +4 bps at 5.02%.
On Wall Street, the S&P500 is up +0.4% in its Monday session. Overnight European markets closed little-changed although Paris did manage a +0.2% firming. Yesterday, Tokyo ended its Monday session down -0.6%. But Hong Kong rose +1.9%. Shanghai ended its session up +0.5%. The ASX200 closed up minor +0.1% in Monday trade while the NZX50 was up +0.3%.
The price of gold will start today at US$1974/oz and down -US$7/oz from this time yesterday.
Oil prices have risen +US$2 to be just over US$78/bbl in the US. The international Brent price is now at US$82.50/bbl.
The Kiwi dollar starts today at 60.2 USc and up +¼c from yesterday. Against the Aussie we are down marginally at 91.9 AUc. Against the euro we are little-changed at 55 euro cents. That all means our TWI-5 starts today at just under 69.2.
The bitcoin price starts today at US$37,269 and up +2.5% since this time yesterday. Volatility over the past 24 hours has also been modest however at just on +/- 1.5%.
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