Australia leads a global rise in services PMIs; China improves; Trudeau resigns; German inflation rises; eyes on China financial markets; UST 10yr at 4.63%; gold and oil little-changed; NZ$1 = 56.5 USc; TWI = 67

Here's our summary of key economic events overnight that affect New Zealand with news China's financial markets are flashing some unwelcome signals.

But first up today, there were a range of services PMIs for December released overnight. And the most interesting one (for us) is the Aussie one. Their service sector expanded in the month, with new business growth accelerating, inflation rising, and business confidence at its highest level in 2½ years. This got the attention of financial markets who promptly downgraded the chance of ab RBA rate cut when they next meet on February 18. Australian benchmark Government bond yields rose sharply across the board with their 10 year up an outsized +14 bps.

In China, you may recall we reported that their official services PMI jumped from a no-change growth position in November to an outsized positive 52.2 expansion in December - and we counselled to wait for confirmation by the private Caixin services PMI. Well, that Caixin services report is in and it also recorded a 52.2 expansion, an improvement although not as sharp as the official version reported. So we can be confident the Chinese services sector is expanding now at a good pace. And it does seem to confirm that the Beijing stimulus measures are having a positive impact.

In Japan, their December services PMI improved to a better expansion, although to be fair it was only a marginal gain.

In India, they also reported an uptick with faster growth and softer inflationary pressures. They still have a very strong expansion, although the December gain wasn't quite as strong as analysts had expected.

In Canada they slipped from a November expansion to a December contraction in their services sector. (And we should probably note, unrelated to that, Justin Trudeau has resigned as prime minister today, ending a long political career. He has been their prime minister since 2015. They alternate the role between Conservatives and Liberals and their successful leaders seem to remain in office for about nine years each.)

In the US, their S&P/Markit services PMI rose in December to a good expansion, although not quite as strong as was expected. Their widely-watched local ISM services PMI is due out tomorrow and is also expected to report a modest improvement.

Meanwhile, US factory orders slipped marginally in November from October to be only a marginal +0.1% higher than the same month in 2023.

The US Treasury had a well-supported three year bond auction earlier today. That came in with a median yield of 4.29%, substantially higher than to the 4.07% yield at the prior equivalent event a month ago.

In the EU, their service sector expanded in December after being neutral in November. But it may not last because the gains did not include rising new orders.

And in Germany, there was a bit of a surprise overnight when they reported 2.6% CPI inflation (2.9% EU harmonised). Both levels were unexpectedly higher. Excluding food and energy it came in at 3.1%, and driven by higher services costs. They still have work to do to get inflation's impulse down to the target 2% level.

Back in China, yesterday we noted the bond bubble they are having as sentiment about their economic policies takes a hit in financial markets. All eyes will be on these markets today, but the official pressure is being ramped up to quell the "wrong moves" by bond traders. Local media is saying "the worst of the derating is over" - although local media just parrot official narratives.

The UST 10yr yield is now at just on 4.63%, and up +3 bps from yesterday. The key 2-10 yield curve is more positive, now by +35 bps. Their 1-5 curve inversion is a bit more positive too, now by +26 bps. And their 3 mth-10yr curve is little-changed at +30 bps. The Australian 10 year bond yield starts today at 4.53% and up a sharp +14 bps. The China 10 year bond rate is now just under 1.60% and down another -1 bp to a new record low. The NZ Government 10 year bond rate is now at 4.56% and up +4 bps.

Wall Street has opened its week up +0.9% on the S&P500. Overnight, European markets closed their Monday trade all higher. London was up +0.3%, Frankfurt was up +1.5% and Paris was up +2.3%. However, Tokyo fell -1.5% yesterday, Hong Kong was down -0.4% and Shanghai slipped -0.1%. Singapore rose +0.5%. The ASX200 closed its Monday trade up a minor +0.1% while the NZX50 was virtually unchanged.

The price of gold will start today at US$2639/oz and little-changed from this time yesterday.

Oil prices are also little-changed from this time yesterday at just on US$74/bbl in the US while the international Brent price is still just on US$76.50.

The Kiwi dollar starts today just on 56.5 USc and up +40 bps from this time yesterday. Against the Aussie we are up +10 bps to 90.3 AUc. Against the euro we are down -10 bps at 54.3 euro cents. That all means our TWI-5 starts today at just on 67 and up +20 bps from this time yesterday.

The bitcoin price starts today at US$102,103 and up +4.1% from this time on yesterday. Volatility over the past 24 hours has been moderate at +/- 2.5%.

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