US housing sentiment improves; Fed pushes back on rate cut expectations; China property problems spread; more shippers avoid the Red Sea; UST 10yr 3.96%; gold down and oil up; NZ$1 = 62.1 USc; TWI-5 = 70.4

Here's our summary of key economic events overnight that affect New Zealand, with news 2023 is winding down with mixed outlooks in what may look like second tier data and events, but some of which could blow up over the holiday period.

In the US, house builder sentiment has turned higher. The closely-watched Housing Market Index has risen from its lowest in nearly a year, beating forecasts. It was the first improvement in sentiment in five months, driven by declining mortgage rates that sparked increased interest among potential buyers and raised expectations for sales.

But the iconic US Steel business is to be sold, ending a 122 year run, and it will be acquired by Japan's Nippon Steel. They beat out other local and offshore bids and have acquired the business for less than US$15 bln.

Meanwhile, more Fed officials are coming out says they are surprised by the outsize market reaction to the Fed’s updated quarterly economic projections last week. They think the market is getting ahead of itself in expecting significant 2024 rate cuts.

In China, their property crisis is getting worse, A developer in the southern city of Shenzhen (and partly owned by the City authorities) has warned it can’t pay interest due tomorrow, raising the risk of its first default. China South City Holdings said that it doesn’t have the resources to pay the interest of its 9% notes due July 2024, citing "liquidity and cash flow constraints from a deteriorating operating environment". That developer stress is now infecting local government-owned companies is an increased worry, especially as Shenzhen is an icon city featuring China tech prowess.

In Singapore, (non-oil) exports rose +1.0% in November from a year ago but that was off a low base in 2022. Their export of electronic goods decreased rather sharply (down -12.7%) while the much larger group of non-electronics exports grew +5.7% from a year ago

In Germany, the widely watched Ifo Business Climate indicator slipped to a three-month low in December from a downwardly revised November adjustment, but to be fair the shifts were minor and this sentiment index is bouncing along in a trough after a good start to the year. The Bundesbank released its Monthly Report today and that noted much lower inflation, but they are not "all clear" yet on the inflation front, they said.

In the Red Sea, now BP says it will cease using the Suez Canal for tanker transit while the security situation deteriorates.

The UST 10yr yield has risen +4 bps today, now at 3.96%. The key 2-10 yield curve is marginally less inverted, now by -51 bps. And their 1-5 curve inversion is still inverted by -103 bps. And their 3 mth-10yr curve inversion is also less inverted at -141 bps. The Australian 10 year bond yield is now at 4.11% and up +3 bps from yesterday. The China 10 year bond rate is down -1 bp at 2.64% and a new three month low. And the NZ Government 10 year bond rate down -5 bps from yesterday at 4.62%.

Wall Street has opened its week up +0.6% in Monday trade. Overnight, European markets closed mixed with London up +0.5% and Frankfurt down -0.6%, Paris in between. Yesterday, Tokyo fell -0.6% in Monday trade, Hong Kong was down -1.0%, and Shanghai dipped -0.4%. The ASX200 ended its Monday session down -0.2% whereas the NZS50 managed a minor +0.1% gain.

The price of gold will start today down -US$11 at just on US$2022/oz.

Oil prices are +US$2 higher from yesterday at just on US$74/bbl in the US. The international Brent price is now at US$78.50/bbl.

The Kiwi dollar starts today at 62.1 USc and unchanged from yesterday. Against the Aussie we are still at 92.7 AUc. Against the euro we are still at 56.9 euro cents. That all means our TWI-5 starts today just on 70.4, essentially unchanged from yesterday.

The bitcoin price starts today at US$41,443 and down -1.1% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.3%.

Please note that we have normal weekday service this week until Thursday when we transition into holiday mode. Then we publish our content at a lesser intensity, more focused on holiday reads, reviews, and catch-ups. The advertising that powers much of our sustainability is already on holiday-mode, so this is when we really appreciate the vital support of readers. If you can support us during this commercially fragile time till the end of January, the team at interest.co.nz will be very appreciative.

The easiest place to stay up with event risk is by following our Economic Calendar here ».