Here's our summary of key economic events overnight that affect New Zealand, with news Moody's has downgraded the Chinese economy's outlook.
First up today however there was a dairy auction overnight and that came in with a minor +1.6% gain in USD terms, although only a +0.5% rise in NZD terms. Rather oddly, most of the major components managed better rises. Cheddar cheese recovered +9.7%, SMP was up +1.2% and WMP rose +2.1% from the prior event two weeks ago. This auction won't be changing minds about farm gate payouts, but at least it wasn't negative.
In the US the news is quite mixed. Starting with the positives, the ISM services PMI expanded faster and by more than expected. A feature is that it led by faster expanding new order levels. The internationally-benchmarked S&PGlobal (ex Markit) one also reported a pick up in expansion and better new order levels, but at a lower level that the ISM one.
However the LMI logistics survey revealed a contracting sector in November quite a sharp turn down from October. But at least inventory levels and freight costs are reducing, which is probably a good thing for them.
Also falling however are job openings. This data is for October and the retreat reported is quite sharp, down -617,000 from the previous month to 8.733 mln and the lowest since 2021. Perhaps this is the early indication of a slowing American jobs market, something analysts have been expecting for almost two years now. But the current forecasts for non-farm payrolls are a +185,000 expansion in November when the data is released Saturday NZT (and the ADP report at +130,000) and analysts have been increasing their bets recently.
US retail sales as reported by their Redbook index for bricks & mortar stores on a same-store basis has slipped back to +3.0% year-on-year. Just enough to account for inflation perhaps, but nothing more and certainly not the real gains we have had in the past eight of twelve months.
In China, Moody's affirmed their credit rating at A1 but revised the outlook from "stable" to "negative", citing growing risks stemming from lower medium-term economic growth, rising debt, and the ongoing restructuring of their property sector.
The OECD released their PISA review results of education and they make grim reading for New Zealanders. Schools are failing our kids, according to these reviews. The education community is brushing these results off as "pandemic-related" and that may be a part answer. But the OECD itself says there is more at play here. Australia also scored worse although got gains in science. The US held its own, but Japan for instance improved.
Yesterday, the Reserve Bank of Australia held its policy rate unchanged at 4.35% and delivered the expected hawkish commentary.
Internationally, the Bank for International Settlements has warned that rapid global growth in buy now, pay later services could create risks in the financial system. The warnings are focused on both Australia and Sweden who have the heaviest adoption.
Air cargo volumes continue to rise and in October were +3.8% higher than the same month a year ago. For the Asia/Pacific region they are up +7.6%. But to be fair they still trail pre-pandemic (2019) levels although the shortfall is now a minor -2.4% on that basis.
On the same basis, international passenger travel is still -20% lower in the Asia/Pacific region than pre-pandemic equivalents, down -5.8% globally. But the gains from last year are very sharp as the return to globe-trotting returns to normal. But the biggest gains aren't international, they are domestic air travel which is now greater than pre-pandemic.
The UST 10yr yield is down -11 bps from yesterday at 4.18% with the slide resuming. The key 2-10 yield curve is now inverted by -42 bps. Their 1-5 curve inversion is a bit less inverted at -81 bps. And their 3 mth-10yr curve inversion is now -122 bps and much more inverted. The Australian 10 year bond yield is now at 4.29% and down a very sharp -26 bps from yesterday. The China 10 year bond rate is little-changed at 2.70%. And the NZ Government 10 year bond rate is down -3 bps at 5.02%.
In New York, Wall Street has started its Tuesday session with the S&P500 little-changed. Overnight European markets rose +0.8, except London which fell -0.3%. Yesterday Tokyo ended its Tuesday session down -1.4%. Hong Kong fell a sharper -1.9%, and Shanghai fell an unusually large -1.7% again with sharp falloffs at the end of their sessions. The ASX200 ended down -0.9% while the NZX50 ended down a minor -0.1%.
The price of gold will start today just on US$2,017/oz and down another -US$9 after yesterday and now way off its all-time high.
Oil prices are -50 USc lower at just under US$73/bbl in the US. The international Brent price is now at US$77.50/bbl and -US$1 lower. These are new 5 month lows.
The Kiwi dollar starts today at 61.3 USc and down another -40 bps from yesterday. Against the Aussie we are up +40 bps at 93.6 AUc. Against the euro we are down -20 bps to 56.8 euro cents. That all means our TWI-5 starts today just on 70.5 and down a mere -10 bps from this time yesterday.
The bitcoin price starts today at US$42,725 and up another +2.7% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.6%.
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