Here's our summary of key economic events overnight that affect New Zealand, with news that today's key data shows the giant US economy with resilient strength while inflation is slowing.
The US economy added +199,000 jobs in November, more than the +150,000 added in October and better than the expected +180,000 gain. The strength was across the board, including for manufacturing.
Away from the headline seasonally-adjusted data, the actual employer payrolls came in at a record 158.5 mln, up a strong +488,000 from October. For the broader household survey of employment which includes the unincorporated self employed, it rose to 162.1 mln and also an all-time record, swelling +473,000 in the month (revealing a small shift to company payrolls). Either way you look at it there were many more workers getting paid in November than October, +3.4 mln more in a year (+2.8 mln more on company payrolls). It is a significant shift (and achievement).
The golden jobs run is lifting confidence. The University of Michigan's consumer sentiment survey surged to 69.4 in December, rising from 61.3 in the previous month and surpassing market expectations set at 62.0. It was the highest level recorded since August, largely driven by positive shifts in the expected path of inflation. They dropped to 3.1% from November's 4.5%, marking the lowest level recorded since March 2021.
And there doesn't seem to be any stress showing up in American consumer debt levels. They rose a much tamer (and minor) +US$5.1 bln in October from September to US$4.968 tln or just 18.1% of US GDP. A modest +US$9 bln rise was expected and that too would have been low. Rising employment and solid pay increases (+4.0%, so higher than inflation) are helping consumers keep a lid on their consumer (non-housing) debt. If the global economy does wobble, it won't be because of US household finances in the current state.
All this run of positive data has markets pulling back on their enthusiastic expectation that the Fed will be cutting rates in 2024. Again, it is the Fed that is getting the future view right, not the commentariat.
The release of the December version of the USDA WASDE report caused barely a ripple, mainly because they report a sanguine crop and livestock situation worldwide with adequate stocks and balanced demand and supply. US beef import estimates are raised for 2024 on expectations of demand for processing-grade beef. US milk production is retreating somewhat.
The UN FAO also reported on December global food prices and they said the same. Food price stress has long eased and the global costs of meat and dairy have eased more than most other categories. Overall prices are falling and back to early 2021 levels and far below the intervening bubble.
Taiwan's export growth was expected to have turned positive in November and that is how it turned out - although the year-on-year gain wasn't quite what was expected even if the miss was minor. It has been a year and a half since they have had a gain like this.
Later today China will release its November CPI and PPI inflation rates which are expected to confirm they are back in solid deflationary conditions.
But even in the face of current and obvious economic restraints, Beijing looks set to launch an ambitious growth target for 2024. Maybe as high as +5%. But there is no indication that huge stimulus programs are about to be launched. New debt support however will be a part of it. One thing is becoming clearer however, Hong Kong's days as a financial center are drawing to an end with mainland policies undermining its judicial independence and court transparency. Contracts entered into their have to meet Beijing's control measures. This sort of window dressing doesn't apply when it puts the CCP in a bad light.
The Reserve Bank of India held its benchmark policy rate at 6.5% for the fifth consecutive meeting overnight. They seem confident they are keeping inflation within their generous 2-6% target range. The rate hold was in line with market expectations. India's annual inflation slowed to a four-month low of 4.9% in October.
In Australia, the incoming Labor Government ordered a competition review of how banks treat retail savers. They were particularly keen to get banks to automatically switch savers to the 'best rates' on rollover. Borrowers got the RBA's rate changes in a full pass-through, but savers did not. That review has now ended and the results will be tabled this coming week. It will be interesting to see whether the industry responds with generally lower savings rate offers, or higher lending and deposit rates.
The UST 10yr yield is on the rise again, up +12 bps from yesterday at 4.23% on the jobs data. A week ago it was at 4.21% however. The key 2-10 yield curve is marginally less inverted by -48 bps. Their 1-5 curve inversion is also less inverted, now by -90 bps. And their 3 mth-10yr curve inversion is now -116 bps and much less inverted. The Australian 10 year bond yield is now at 4.37% and up +9 bps from yesterday. The China 10 year bond rate is little-changed at 2.70%. And the NZ Government 10 year bond rate is up +6 bps at 4.98%.
In New York, Wall Street is satisfied it can handle the jobs data and is up +0.3% its Friday session on the S&P500, heading for a weekly rise of +0.8%. Overnight European markets were book-ended by London up +0.5% and Paris up +1.3%. Yesterday Tokyo ended its Friday session down -1.7% to be a full -3.0% lower for the week. Hong Kong was unchanged yesterday but down -3.5% for the week. Shanghai ended Friday up +0.1% but was -2.1% lower for the week. The ASX200 rose +0.3% yesterday to be +1.7% higher for the week while the NZX50 finished its Friday session down -0.1% but was up +1.1% for the week.
The Fear & Greed index we follow has stayed in the 'greed' side as risk appetites remain.
The price of gold will start today just on US$1997/oz and down -US$23 from yesterday. We have ended -US$63 lower than a week ago.
Oil prices are up +US$1 from yesterday at just on US$70.50/bbl in the US. The international Brent price is now at US$75.50/bbl. A week ago these prices were US$74.50 and US$79/bbl so a net -US$4 shift lower since then. Lower prices are showing up at our pumps, but given that the biggest component of the petrol price is our taxes on ourselves, the reductions are not as large as the crude price changes.
The Kiwi dollar starts today at 61.1 USc and more than -½c lower than yesterday. A week ago we were at 62 USc. Against the Aussie we are down -40 bps at 93.1 AUc. Against the euro we are down -30 bps to 56.9 euro cents. That all means our TWI-5 starts today just on 70.2 and -40 bps lower from this time yesterday, -50 bps lower than a week ago.
The bitcoin price starts today at US$43,699 very little changed from this time yesterday (+0.1). However, a week ago it was US$38,773, so +12.7% a rise from then. Volatility over the past 24 hours has been modest at +/- 1.1%.
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