Here's our summary of key economic events overnight that affect New Zealand with news Australia has been assessing their exposure risks to upcoming Trump tariffs - and they are nervous.
But first in the US, their November CPI rate came in without any surprises. It rose for a second consecutive month to 2.7% in November from 2.6% in October. But the rise is partly influenced by low base effects from last year. Core inflation, without food and energy, was stable at 3.3%. Food prices rose +2.4% and rents +4.7% (which will please landlords, like The Trump Organisation). Petrol costs fell -8.1%.
For a fifth straight week, US mortgage applications rose, and by +5.4% from the week before, driven by a surge in refinancing (loans for new homes actually fell), putting them +4% higher than year-ago levels. At the same time, mortgage interest rates dipped, but it was a minor move.
Another very well-supported UST 10yr bond auction this morning delivered a median yield of 4.19%, down from 4.29% at the prior equivalent event a month ago.
As expected, the Bank of Canada cut its key interest rate by -50 bps for a second consecutive time in its December meeting, to 3.25% and make -175 bps of cumulative rate cuts from this cycle’s peak of 5%. Still, rhetoric from policymakers suggested that there will not be any more outsized rate cuts next year, and officials dropped the statement that borrowing costs are due to be lowered should their base case hold. The sharp interest rate cut followed data showing that the Canadian GDP grew an annualised +1% in the third quarter, below the central bank’s projections, and shrank on a per capita basis, and growth in the fourth quarter poses the risk of also missing forecasts.
In Japan, producer prices rose +3.7% in November from a year ago, higher than in October and exceeding market estimates of +3.4%. It was the 45th straight month of producer inflation, marking the highest figure since July 2023. These pressures will eventually show up in consumer prices. And that in turn will encourage the Bank of Japan to raise its +0.25% policy interest rates. They next review it on Thursday, December 19, 2024, when a +25 bps rise is anticipated by financial markets.
In China, Reuters is reporting that officials are open to let the value of the yuan slide in 2025 as a way to push back against the expected Trump tariffs.
In Malaysia, retail sales rose +7.1% in October from the same month a year ago, rising from a +5.5% rise in the previous month. It was the strongest growth in retail sales there since June. Malaysian CPI inflation is running at +1.9% pa.
In Australia, their policymakers have been reviewing their risks from upcoming Trump tariffs. They found direct risks were low - in fact very low. But indirect risks were unusually high and cited some startling analysis from the BIS. (See graph 6.) The more China is affected, the more Australia is.
The UST 10yr yield is now at just on 4.24%, unchanged from this time yesterday. The key 2-10 yield curve is more positive, now by +11 bps. Their 1-5 curve inversion is a little less, now by -10 bps. And their 3 mth-10yr curve inversion is also less, now at -15 bps. The Australian 10 year bond yield starts today at 4.23% and up +1 bp. The China 10 year bond rate is at 1.88% and unchanged. The NZ Government 10 year bond rate is now at 4.43% and up +3 bps.
Wall Street is up +0.9% on the S&P500 in Wednesday trade. Overnight European markets were all +0.4% firmer. Yesterday Tokyo closed unchanged. Hong Kong fell -0.8% but Shanghai rose +0.3%. Singapore also ended lower by -0.5%. The ASX200 ended its Wednesday session down -0.5%. But the NZX50 ended up +0.3%.
The price of gold will start today at US$2713/oz and up +US$20 from yesterday, and a two-week high.
Oil prices are up +50 USc to just under US$70/bbl in the US while the international Brent price is unchanged at just under US$72.50/bbl. OPEC has cut its forecasts for global oil demand growth in 2024 and 2025.
The Kiwi dollar starts today at just under 58 USc and unchanged from this time yesterday. Against the Aussie we are down -10 bps at 90.9 AUc. Against the euro we are unchanged at 55.2 euro cents. That all means our TWI-5 starts today at just over 67.8 to be down -10 bps from yesterday.
The bitcoin price starts today at US$100,588 and up +6.0% from this time yesterday. Volatility over the past 24 hours has been high at +/- 3.6%. (And there's this.)
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