Here's our summary of key economic events overnight that affect New Zealand with news commodity prices are facing some headwinds, and that may get worse as trade prospects dim and the de-risking from China builds.
Today's full dairy auction brought lower prices from both last week's Pulse event, and the prior week's full event. But the dips were largely as expected and foreshadowed in the derivatives market. In the event, overall prices were -2.8% lower than the last full event, but with the NZD weaker, in NZD the decline was just -0.7%. Today's retreat doesn't interrupt the 2024 rising trend so it seems unlikely any farmgate payout forecasts will be adjusted because of this.
Demand from China was lighter today, but that may just because they have already built their requirements for their upcoming CNY holiday season.
US retail sales as monitored by their Redbook survey were a healthy +4.8% higher last week than the same week a year ago.
And November retail sales as reported by their official data were up +3.8% from the same month a year ago, the best gain of 2024. And that was driven by strong car sales. Business inventories remain at very manageable levels, so not building stress there.
Meanwhile US industrial production actually slipped in November, down -0.9% from a year ago, although there were signs of stabilising in the November month. Factory production actually rose, undermined by both mining and utility production.
For a second event in a row, demand for the latest US Treasury bond eased again. This 20 year auction was still well supported, just not as much as usual. The median yield at 4.62% was actually slightly higher than the 4.60% at the prior equivalent event a month ago. While that night seem insignificant, it reverses the recent pattern of falling yields at these Treasury fund-raising events.
Canada's November CPI inflation rate came in at 1.9%, pretty much as expected. Their central bank will be happy with that, because it allows them to continue to unwind their policy rate which is at 3.25% and next reviewed at the end of January.
Across the Pacific, we should note that Nissan and Honda have begun merger talks.
In China, new official data shows that capital flight by foreign investors reached a record level in November as the de-risking trend rose to a new urgency. And international airlines are also pulling back on their China routes.
One of the things to come out of the recent Central Economic Work Conference is that Chinese leaders reportedly agreed to raise their budget deficit to -4% of GDP in 2025, its highest on record. (For reference, the New Zealand equivalent is -2.4% of our GDP. In the US, it is -6.3%.) They are holding on to an economic growth target of around 5%.
Singapore's exports rose more than expected in November, up +3.4% and a better-than-expected comeback after their weak October result. Imports also rose, by +2.8% on the same basis.
And we should probably note that there was a general easing of commodity prices generally overnight, not just dairy products.
The UST 10yr yield is now at just on 4.39%, down -1 bp from this time yesterday. The key 2-10 yield curve is positive, now by +13 bps. Their 1-5 curve inversion is +1 bp positive. And their 3 mth-10yr curve is still positive at +6 bps. The Australian 10 year bond yield starts today at 4.34% and down -3 bps. The China 10 year bond rate is now at 1.74% and recovering +2 bps from yesterday. The NZ Government 10 year bond rate is now at 4.55% and unchanged.
Wall Street has opened its Tuesday session with a -0.4% slip on the S&P500. Overnight European markets were mixed with London down -0.8% but Paris up +0.1%. Yesterday, Tokyo closed down -0.2. Hong Kong closed down -0.5%. Shanghai closed down -0.7%. Singapore was down -0.6%. The ASX200 ended its Tuesday session up +0.8%, and the NZX50 ended with a +0.9% gain.
The price of gold will start today at US$2641/oz and down -US$10 from yesterday.
Oil prices are down -US$1 to be just on US$69.50/bbl in the US while the international Brent price is down almost -US$1 to be just over US$72.50.
The Kiwi dollar starts today just on 57.6 USc and down -20 bps from yesterday. Against the Aussie we are up +20 bps at 90.9 AUc. Against the euro we are also down -20 bps to 54.8 euro cents. That all means our TWI-5 starts today at just on 67.6 to be down -20 bps from yesterday at this time.
The bitcoin price starts today at US$106,952 and up less that +0.1% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.3%.
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