Eyes on NZ CPI; US retail strong but manufacturing not; Japan holds; China readies big stock market rescue; Aussie stage 3 tax cuts to get big makeover; UST 10yr 4.15%; gold and oil hold; NZ$1 = 60.7 USc; TWI-5 = 69.8

Here's our summary of key economic events overnight that affect New Zealand, with news reports of an impending large Chinese share market rescue that were enough to stop falls there yesterday.

But first, it is an important day here in New Zealand because we get the Q4-2023 inflation data at 10:45am. That will set the tone for our OCR direction for the first half of the year and the related monetary policy decision-making. Financial markets expect a headline rate of 4.7%, down from the Q3-2023 level of 5.6%. Anything about these levels is still far too high, and with the RBNZ back to having a single inflation-control mandate, they have less room for patience. But as always, the detail (core, or tradable/nontradable) will be what markets are watching. See this.

In the US, their weekly monitoring of bricks & mortar retail trade by the Redbook index shows stronger gains, up +5.2% last week from the same week a year ago, notably more than accounted for by inflation. That caps the best four week run since late 2022.

But another Fed district has delivered a dour factory survey, this one from the Richmond Fed. But the sluggish manufacturing situation there contrasts with a more upbeat services survey in the same region, although little-changed to be fair.

In Japan, their central bank kept its key short-term interest rate unchanged at -0.1% and that of 10-year bond yields at around 0% during its January meeting. This was as expected. Meanwhile, in a quarterly outlook, they trimmed their 2024 CPI estimate to 2.4% from October's projections of 2.8%, reflecting a recent decline in oil prices. For 2025, they expect core inflation to hit 1.8%, slightly higher than its earlier estimates of 1.7%. Policymakers also cut their 2023 GDP growth forecast to 1.8% from 2.0%.

Data released in Taiwan yesterday for December wasn't good. Retail sales rose only +1.1% in December from a year ago, a weak result. And industrial production actually fell -4.0% on the same basis. But this is consistent with the weak new order data we reported yesterday.

In an effort to stabilise local equity markets as they head into the Chinese Luna New Year holiday (which starts on February 9), Bloomberg is reporting that Beijing is trying to mobilise ¥2.3 tln (NZ$525 bln) for a home team buying spree. Just the rumour brought a turnaround in Hong Kong, Shanghai and Shenzhen yesterday, but the big question is will it be sustained and change attitudes of investors, or will they just take the opportunity to lock in prices they wouldn't otherwise be offered. China has a history of these types of emergency responses, but few of them work. During the 2015 rout, the home team spent about ¥1.7 tln in a summer support drive but stock prices fell anyway after the state buying wound down. It was never clear how the losses were absorbed.

And in their property market, newly released data for 2023 shows that foreclosures in the residential market jumped a lot from 2022, up more than +35%. There were 796,000 foreclosure auctions monitored nationwide in 2023 and 389,000 were for residential units. Non-auction foreclosures will be on top of that. (For perspective, there were 357,000 residential properties "entering the foreclosure process" in the US in 2023. About 270,000 were actually foreclosed. This was little-changed from 2022. If the US foreclosure-to-dwelling rate applied in New Zealand we would have had 5,150 in 2023, and clearly we had far, far less than that.)

The expected small improvement in EU consumer sentiment has not eventuated in January. But to be fair, it is only a minor hesitation in the broader perspective.

In Australia, the NAB business confidence index climbed to -1 in December from a downwardly revised -8 in the prior month. It was the third straight month of negative readings but the softest figure in the sequence, supported by a pick-up in the mining and retail sectors.

And staying in Australia, it looks like the "stage three" Morrison tax cuts for high earners are to be revised so that they shift to help those on middle and low incomes, including people earning less than AU$45,000 pa, a level ignored in the prior version. High earners who were counting on the tax break are not happy. The 37% tax bracket for workers earning more than AU$135,000 pa is likely to be retained. (Meanwhile, Scott Morrison is quitting the Australian parliament to go work for some ex-Trump Administration officials.)

The UST 10yr yield starts today at 4.15% and up +5 bps from this time yesterday. The key 2-10 yield curve is slightly less inverted, now by -26 bps. Their 1-5 curve inversion is also less inverted, now by -80 bps. And their 3 mth-10yr curve inversion is less inverted too, by -124 bps. The Australian 10 year bond yield is now at 4.27% and up +4 bps from yesterday. The China 10 year bond rate is up +1 bp at 2.52%. The NZ Government 10 year bond rate is down -4 bps at 4.72%.

Wall Street has opened its Tuesday session with the S&P500 little-changed but still near its all-time high. Overnight European markets were about -0.3% lower on average, except London managed a +0.1% rise. Yesterday Tokyo ended essentially unchanged, also holding its highs. Hong Kong bounced back +2.6% on stimulus talk and Shanghai gained +0.5%. Singapore fell -0.4%. The ASX200 ended its Tuesday session up +0.5% while the NZX50 ended up +1.0% with a very late surge.

The price of gold will start today little-changed, up a mere +US$1/oz from yesterday at just on US$2024/oz.

Oil prices are down -50 USc at just over US$74.50/bbl in the US while the international Brent price is still just over US$79.50/bbl. Not much net change but it has been volatile in between.

The Kiwi dollar starts today at 60.7 USc and -¼c lower from this time yesterday (and a two month low). Against the Aussie we are softish at 92.5 AUc. Against the euro we are holding at 56 euro cents. That all means our TWI-5 starts today just under 69.8 and down -15 bps in a day.

The bitcoin price starts today lower, again. It is now at US$39,145 and down another -3.4% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.9%.

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