Momentum building in the US economy but leaking in China's; Singapore has its struggles too; Chocolate and insurance costs buck overall inflation trends; UST 10yr 4.16%; gold and oil up; NZ$1 = 61 USc; TWI-5 = 69.9

Here's our summary of key economic events overnight that affect New Zealand, with news analysts and economists that predicted a 2023 recession or one in 2024 have gone very quiet, not reminding anyone of their error.

American inflation seems to be cooling, and in a way that the US Fed will like. While overall PCE inflation was unchanged at 2.6%, their core PCE rate came in lower than expected at 2.9%, down from 3.2% in November. Remember this was running at almost 5% a year ago.

And all this happened while personal spending rose in the December quarter, and by more than anticipated. Higher activity and lower inflation is a goldilocks outcome. 'Real' personal consumption is +3.2% higher than a year ago - that's after inflation!

And to add to the vibe, personal income has come in +4.2% higher that year-ago levels on the same 'real' basis, showing households are more than keeping up with inflation.

December American pending home sales also rose rather strongly in December, up +8.3% from November to finally to year ago levels by +1.3%. They haven't had a gain like this outside the pandemic period since early 2017. A surge in California helped although most regions showed gains. And recall, we noted yesterday a similar strong rise in new home sales nationwide.

This past week China rolled out some very large and unexpected stimulus, much of it targeted. Their central bank now seems to have an outsized role in these efforts and the signals are more is to come, with the central bank providing cheap funds via its "Pledged Supplemental Lending" programs.

But investors from well-known global institutions and local icon firms who gathered in Hong Kong this week cast doubts on how effective the policies would be. So far, key concerns such as China's property crisis and low confidence appear unaddressed.

Meanwhile, the Chinese New Year travel rush, known as "春运 or Chunyun," has now started, but the government is projecting a -14% decrease from last year in the number of people using public transportation for returning home or going on trips. In 2024 Chinese travellers are notable by their absence from international destinations. Now local tourism is proving patchy as demand peters out. Chinese New Year formally begins on Saturday, February 10 and continues for 15 days, with the Lantern Festival marking the end of the celebrations from Thursday, February 22 to Sunday, February 25.

Singapore was expecting to report a bounce-back in industrial production in December after the November fall. But it didn't happen. They reported another, albeit smaller, retreat. Analysts there aren't anticipating any significant improvement in the first half of 2024.

We should note that food prices generally are retreating world wide. This is especially true of soybeans. But we should keep an eye on the rice price; it is one that isn't retreating. (Cocoa isn't either and is now at an all-time high.) On the minerals front, coal prices remain very weak. And you wouldn't want to be a nickel producer.

It is not really 'news' but locally we should keep an eye on the cost of insurance. Rises here are going to test many households, remembering you need house insurance to keep a mortgage. We may see many more uninsured cars on our roads. And people may choose insurance based on price and take severe risks on coverage. It is going to be tough.

Remember, it will be Auckland Anniversary Day on Monday. While some of our staff will be on holiday, we will have a full day of news. And there are some interesting data scheduled to be released on Monday. And don't forget, this year Waitangi Day is on Tuesday week, February 6. That probably means Monday, February 5 will be a day of light economic news with many taking the day off.

The UST 10yr yield starts today at 4.16% and up +2 bps from this time yesterday. A week ago it was 4.16% so little-change since. The key 2-10 yield curve is back at -20 bps. Their 1-5 curve inversion has stayed less inverted, now by -74 bps. And their 3 mth-10yr curve inversion is unchanged at -123 bps. The Australian 10 year bond yield is now at 4.24% and unchanged from yesterday. The China 10 year bond rate is little-changed at 2.51%. The NZ Government 10 year bond rate is down -4 bps at 4.75%. It was at 4.82% a week ago so a -7 bops fall since then.

Wall Street has opened its Friday session with the S&P500 down a minor -0.1% but is up +0.7% for the week to a record high weekly close. Overnight European markets were mostly up strongly featuring Paris' rise of +2.3%. However Frankfurt only rose +0.3%. Yesterday Tokyo ended down -1.3% for a -1.5% weekly fall and off its recent highs. Hong Kong fell -1.6% yesterday but still managed a +3.9% weekly rise, And Shanghai gained a minor +0.1% yesterday to finish their week up +3.0%. Singapore rose +0.4% yesterday to finish its week unchanged. The ASX200 ended its shorter week on Thursday +1.9% higher than a week ago. The NZX50 was down a minor -0.1% yesterday to close out the week up +1.8%.

The Fear & Greed index has pushed over to the "extreme greed" range which is also where it was a month ago.

The price of gold will start today up another +US$2/oz from yesterday at just on US$2016/oz. A week ago it was at US$2025/oz so a -US$9 fall from then.

Oil prices are up another +50 USc at just over US$77/bbl in the US while the international Brent price is now just over US$82/bbl. A week ago these prices were US$73.50 and US$78.50 respectively so we are now +5% high from seven days ago.

The Kiwi dollar starts today at 61 USc and marginally lower from this time yesterday. And that is virtually unchanged in a week too. Against the Aussie we are a little softer at 92.7 AUc. Against the euro we are -¼c lower at 56.1 euro cents. That all means our TWI-5 starts today at 69.9 and -20 bps lower in a day but little-changed in a week.

The bitcoin price starts today firmer. It is now at US$41,930 which is up a strong +5.6% from this time yesterday. And it is up +3.4% from this time last week. Volatility over the past 24 hours has been high at just on +/- 3.0%.

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