Here's our summary of key economic events over the holiday period that affect New Zealand, with another quick news wrap-up so you can get back to 'time-off'.
We are still seeing geopolitics and great power rivalry upending some parts of the global economy, and oil prices as a consequence, but generally conditions are quite stable-to-positive which is perhaps a bit of a surprise in the circumstances. The latest set of US Fed meeting minutes set the scene for more 'normal' market conduct.
First up, markets are turning their attention to the US labour market again, a market the bears have thought would be tanking by now (they have expected a rise in joblessness there monthly for more than two years now). But they may be disappointed yet again and have to reach deeper into their excuse box. The December non-farm payrolls report is out tomorrow and analysts now expect a +150,000 gain.
Today, US jobless claims came in lower than expected and a decrease from the prior week. Seasonal factors had anticipated a rise in claims, but it was not to be. There are now 1.89 mln people on these benefits, and insured jobless rate of 1.3%.
American employers announced the fewest job cuts since July, just 34,817 in December, down -24% from 45,510 in November. Announced layoffs fell -20% from December 2022.
The pre-cursor ADP employment report anticipated a payroll gain of +115,000 in December, but delivered a +164,000 rise in filled jobs, driven by big gains in California which accounted for about half the rise. This same December report shows that pay rose +5.4% for people who stayed in their jobs, and by +8.0% for people who changed jobs. This is more evidence that workers are making real pay gains in this labour market.
The first of the two reports on the services sector in the US in December is out and it underpins the stronger labour market data. It reports the fastest upturn in new business since June which is spurring the rise in activity, and employment growth rose its quickest in six months. The ISM services report will be out tomorrow. From an historic perspective the pace of this expansion isn't notable, but it certainly isn't a contraction.
But sadly, Canada cannot claim the same. Its services sector was shrinking in December and at a faster pace.
In China, the Caixin services PMI reported an activity expansion at its quickest pace for five months in December (52.9). This is in marked contrast to the official services PMI which found barely any expansion (50.4) in the firms they surveyed. The Caixin survey found better underlying market conditions and greater intakes in new business.
Germany reported its December inflation rate at 3.7% which was up from 3.2% in November. But this was basically because of base effects on energy costs, and their core inflation rate continues to track lower, now at 3.5% and its lowest rate since mid-2022.
In Australia, insurer IAG said they have more than 17,000 severe weather claims from recent Queensland and Northern NSW storms. This will hit the insurer and others like Suncorp who say they have 19,000 claims from the same events. The blowback could well accelerate premium rises and coverage restrictions in future that include New Zealand. The effect of climate change at work.
And staying in Australia, evidence is mounting that CBA's stand against home loan rate cutting can't be sustained as rivals eat away at their market share. You will recall this reticence drove ASB to avoid low margin deals, and that too saw its share shrink. Now there appears to be a change of heart within CBA that has them actively defending their portfolio. ASB will no doubt fall into line as well and now be more active.
The Suez Canal / Red Sea shipping risks are roiling global container freight rates. These jumped an outsized +61% last week. Even trans-Pacific rates rose a sharplish +30%. But the really big increases were for China to Europe routes where prices rose more than +110% in a week. However, it is equally notable that bulk cargo rates have moved little over this same period.
The UST 10yr yield starts today at 4.01% and up +11 bps from this time yesterday. The key 2-10 yield curve is now inverted by -40 bps, little-changed. Their 1-5 curve inversion is less inverted, now by -88 bps. And their 3 mth-10yr curve inversion is also less inverted, now by -137 bps. The Australian 10 year bond yield is now at 4.09% and +4 bp higher. The China 10 year bond rate is now at 2.58% and down -1 bp and back down to levels we last say in August and prior to that in the pandemic. And the NZ Government 10 year bond rate is +4 bps higher at 4.60%.
Wall Street has started today little-changed in Thursday trade on the S&P500. Tech stocks are also holding their own today. Overnight European markets all rose about +0.5%. Yesterday Tokyo ended down -0.5 after a much weaker start. Hong Kong also recovered from a weak start to end unchanged. Shanghai however fell -0.4% as the home team support faded. On the other hand, the ASX200 fell -0.4% yesterday. In its second day of trading this year, the NZX50 closed up +0.3% but only because of a building recovery in the afternoon session.
The price of gold will start today up +US$10/oz at just on US$2043/oz.
Oil prices are -50 USc softer at just under US$72.50/bbl in the US. The international Brent price is now just over US$77.50/bbl.
The Kiwi dollar starts today at 62.2 USc and -20 bps lower than this time yesterday. Against the Aussie we are holding higher at 92.9 AUc. Against the euro we are more than -¼c lower at 56.9 euro cents. That all means our TWI-5 starts today just on 70.6 and down -10 bps.
The bitcoin price starts today higher, bouncing back up to US$44,085 and a gain of +2.7% from this time yesterday. Volatility over the past 24 hours has been extreme at just under +/- 5.7%.
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50 Comments
LOL, pirates. No they a group that fought a number of Arab countries and the US and arguably won. They figured out how to make it too costly for the other side to continue the war. They are armed with very modern weapons (by that I mean extremely cost effective rather than more capable).
Have a look at the belligerents they went up against. It would be another Afghanistan or Iraq for the US but this time they have the weapons to shoot back and a very experienced army. The geography is also very in Yemen favor.
The USA could smash them, the only reason they are not going in is because the whole middle east would blow up and so would gas prices and freight costs. They are trying hard to keep a lid on it without being seen as having direct intervention but that is getting harder by the minute.
The USA in theory could but in practice they might not have enough left in the tank after Afganistan, Iraq and Ukraine to do another unwelcome Middle East Occupation along with maintain presence everywhere else.
Yemen have attacked is Israel and blockaded trade the US have gone to war over far less. I said Ansar Allah "won" the war by making it too costly to continue it not because they had superior forces. If the US go in they will take casualties and lose equipment well in excess of Afghanistan or Iraq. If they eventually lost in Afghanistan they will lose here as well. The world has access to proper anti-tank weapons these days and the US has done nothing to mitigate this. The US would also have to put carriers in range of anti ship missiles if it wants to employ air strikes against a side armed with proper SAMs.
The other option of escorting trade is also not really feasible as the destroyer's SAM interceptors are not remotely effective enough (both cost and reliability) to stop attacks on trade ships for an extended period.
The NZ news is very censored when it comes to "western" military losses. Again look the belligerents in the "civil war" invading Yemen has been tried before.
You seem to have left out the most obvious and easiest strategy. Who is the biggest direct loser in this financially? It's not the West and it's not Israel - it's Egypt (US$500m in 2022). They are heavily insentivised to keep trade flowing and enabling them to tackle the situation is the US best strategy.
How would Egypt be capable of this? Do they have a naval invasion force and is it capable of supporting an army at this extended distance? If the Saudi's let them though their oil production burns.
I would think the population would be very unwilling to suffer Military losses and Missile/Drone strikes from Yemen for the ultimate purpose of allowing Gaza to "cleansed".
Plus, if the Palestinians are removed from Gaza Israel can go ahead with it's competing "Ben Gurion canal".
I suggest Te Kooti makes a good point. Egypt stands to be the biggest loser here. The Houthi may claim they are supporting the Palestinians in Gaza but the truth is they are attacking Egypt. Their rebellion has essentially left their country, Yemen with no income at all so piracy is about all that is left. Seems to be the goal of fundamentalist powers to return their people to the stone age, oppressing their populations through brutality all in the name of a God who looks by their actions, to be pure evil.
Egypt may well ask the US for help, but in the end they need to be able to step up and patrol the Red Sea themselves to stop this.
Are you boomers confusing Yemen for Somalia? I don't get any good hits for googling Yemen piracy.
Again, the "Ben Gurion canal" is a thing and if Israel gain control of Gaza it's really bad for Suez profits.
TK. In the ME it's only the Iranian govt that wants to tip over the established order. Gulf states such as Qatar host Hamas leaders (and their billions pilfered from the Palestinian people) but there's no way they, nor almost all other ME countries, want an escalation. Too much to lose, as you observe. But as for those states 'tackling the situation' themselves, that's a pipe dream. They have neither sufficient unity nor military capability to do so.
I would not try to guess what the USA might do. I would think they would be better staying at home, given 50 years now of either losing pointless stupid wars wars, or producing in complete c##kups.
Yemen has all the signs.
But the USA does seem to need a war somewhere.
There are Arab nations with a lesser bellicose attitude to the West. Qatar hosts a large US military base. Oman gifted an off shore island as a base to the Royal Navy and Airforce. Jordan came in on the campaign against ISIS. Bahrain is listed amongst the participants in the international force just announced that NZ & Australia have joined. Egypt as a bordering nation would hardly be the only one interested in seeking a resolution by either political or military means. In the interview that Audaxes has posted here today Mr Pilger argues very well and to my mind at least very emphatically, that solutions to regional conflict are best left to be found by the occupiers of that same region.
Pilger was a biased commentator who massaged facts to support his preformed agendas, usually virulently anti American. Solutions to regional conflicts being left to local actors to determine is precisely how tyrannies arise. The 'solution' always becomes what the stronger party wants.
If it hadn’t been for WW1 ousting the Ottomans and then precipitating the exploitation of oil reserves worth billions and billions and still counting, those local actors may well have been settling matters tribally on the basis of the survival of the fittest as they had done for centuries and completely without regard to the imposition of borders that were hitherto entirely unrecognised by the multitude of nomadic inhabitants. In other words just like Afghanistan conducts its affairs when there are not incursions such as the British, Soviets and Americans.
A Jewish surgeon helped my daughter through a potentially life-threatening medical issue. I have a number of Jewish acquaintances through my wife, they are all incredibly bright, hard-working, successful and generous. I see musch of the pro-Palestine support as thinly disguised anti-semitism.
Have you asked those people if they support what Israel are doing? Not all Jewish people support Israel, and it is rude to suggest they all do.
I could equally suggest that people supporting Ukraine and not the Gazans were simply racist, but that would just be an easy way to ignore any facts about what is going on.
Ukraine is a conventional war where mostly soldiers from each side die in roughly equal proportion. If Ukraine looses they simply become part of Russia. Not a pleasant situation at all, but a pretty standard land-grab war.
Israel is an occupying army ethnically cleasing the local population, where most deaths are civilian, almost all deaths are from the side without a proper army, and half the dead are children. Israel have purposely destroyed most buildings in Gaza and are planning to expel everyone out of the area. Their latest plans are about sending them all to the Congo.
TK. Yes, it's a common (and insulting) misconception that all 'Arabs' are the same. I'd go further than 'ambivalent' when characterising ME attitudes towards Palestinians; bitter experience of hosting them at various times has caused countries such as Jordan to be very wary of them. The Gazan blockade is nearly always described by MSM as Israeli imposed when the reality is that Egypt strenuously enforces a similar blockade to the south boundary of Gaza.
Indeed, both elements of automation, guided tech and local tech support are used. The blue haired non-binary kids, (a higher proportion of which who are neurodiverse who perform well in Stem roles) are the ones that design, make, and control drones while those with less Stem capabilities are normally the ground support, although even then those roles are less useful than say having locals with local knowledge and language understanding guide the deployment to areas with more high risk targets that when attacked would affect the future outcomes more.
However in the US it is not a crime to be lgbtqi+ and those who are can serve in the military in equal roles so there is no major restrictions. Just the hair color differs which is not an aspect of identity, and the military already accommodates for hair styles according to different hair types (not much but there is already precedent for a lot of variation esp with women styles added with standard safety positions).
Compared to the opposition they would be fighting where being lgbtqi+ is a crime often met with capital punishment by the ruling group.
Trickery, Humiliation, Death – and the Timeless Hunger for 'Honour and Glory'
Can Biden recoup America’s standing in this way – with the ‘cleansing’ in Gaza; eruptions in the West Bank; and war brewing with Hizbullah? Biden clearly wants some portion of honour to accrue to him that compensates for the humiliation he suffers from Netanyahu. So he has to keep going.
Emily Wilson reminds us: “Attempts to repair one loss (such as Ukraine), historically lead to more losses: Loss can never fully be recouped”.
‘NZ presenter Kim Hill's embarrassing 2003 interview on the invasion of Iraq with John Pilger’ | 1News Archive https://youtu.be/jzSTY4IRDnM?feature=shared via @YouTube Link
Such an overrated broadcaster. The arrogance / ignorance oozed from her at times and this is a perfect example. The worst excesses of our Ponsonby / Grey Lynn faux intelligentsia. While I find it easy to listen to, Hill's accent and diction also sounds fake to me. Like she was trying to be something - from a better class of society. Hill once interviewed a NZ publisher out of Taiwan. Fascinating character who is largely unknown in NZ. Wasted opportunity. It was clear Hill had not done her homework and had no interest (the arrogance thing stemming from her own ignorance on Taiwan and culture.
You don't have a show for 21 years without talent JC.., who would you rate as good then? The Hosk?
Maybe that's indicative of her audience. Hill possibly was good on some issues / topics / interviewees. The interview I mentioned she was harping on about China-Taiwan and pollution. It was clear she had no understanding of and interest in the interviewee and his achievements (which are many).
The Hosk is gifted with the steady line of patter. And I'm not ashamed to say that I think he's grown and become more knowledgeable on issues. But similar to Hill, NZ media personality does seem to be ego-driven. Big fish in a small pond kind of thing.
Peak Oil
"According to S&P Global, a consultancy, America and Canada together pumped more oil and gas in 2023 than the whole of the Middle East. The bonanza spread to South America, where producers in Brazil and Guyana also drilled unprecedented amounts of oil. Daniel Yergin, an energy historian, calls it “the great rebalancing”—a historic shift of oil production away from the Gulf and towards the western hemisphere.
...Forget the scrappy frackers. It is the deep-pocketed, tech-savvy supermajors that the sheikhs should worry about.The two firms look like the shrewdest operators in today’s oil markets. One reason is their focus on oil that is cheap to produce."
https://www.economist.com/business/2024/01/03/meet-the-shrewdest-operat…
During the Iraq/Iran war early in the 1980s the Royal Navy operated the “Armilla Patrol” to safeguard the shipping through the Red Sea & Suez. In fact in 1982 HMNZS Canterbury was the senior ship having provided relief for a Royal Navy vessel to redeploy to the Falkland wars. Recent developments suggest a similar flotilla, but of international composition, is in the offing. Don’t know though that this time that New Zealand has a suitable vessel to offer and/or even sufficiently man.
As you know, the proposed new ferries would have been too big for existing terminals.
As you also probably know the whole idea was an ill conceived & effectively uncosted grandstanding empire building fiasco from NZR/Labour incorporating the self serving uneconomic poison pill of roro rail freight into the ferry spec which rightly will now be reviewed.
First up, markets are turning their attention to the US labour market again, a market the bears have thought would be tanking by now (they have expected a rise in joblessness there monthly for more than two years now). But they may be disappointed yet again and have to reach deeper into their excuse box.
Average US Household Can Afford Only Cheapest 16% Of Listed Homes
Government, Social Assistance, & Health Is Over 100% Of Job Creation In These 3 'Progressive' States
Germany reported its December inflation rate at 3.7% which was up from 3.2% in November. But this was basically because of base effects on energy costs, and their core inflation rate continues to track lower, now at 3.5% and its lowest rate since mid-2022.
EU overpaid for gas due to its own sanctions against Russia - 185 billion euros
Rock and a hard place isn't it. Sanction and fit in with the rest of the big boys yet effectively help indirectly fund the war, or save money and have trade and currency impacted by the increasingly fragile mentality of the western world, and again, indirectly fund the war.
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