Powell sees few risks; US PPI up; US budget deficit hits -US$1 tln; China growth slows; Germany avoids recession; Australia loses jobs; UST 10yr yield at 1.81%; oil soft and gold up; NZ$1 = 63.7 USc; TWI-5 = 69

Here's our summary of key events overnight that affect New Zealand, with news that China's growth is slowing, but it is still at a healthy level.

But first, in a second day of Congressional testimony, US Fed Chairman Powell said that he sees few risks to the ongoing modest American economic expansion.

But markets are not giving the thumbs-up today with the S&P500 turning lower in afternoon trade and benchmark bond yields falling as a risk-aversion mood settles in. Prompting the shift is a sharp and unexpected rise in jobless claims.

American producer prices rose by the most in six months in October, slightly better than expected, lifted by gains in the costs of goods and healthcare services. It is a result that underlines the Fed's recent public stance that it will probably not cut interest rates again in the near term.

The US budget deficit grew by more than a third in the first month of the new fiscal year as federal spending outpaced revenue growth, pushing the 12-month deficit past US$1 tln for the first ever in a non-recession period. (See page 5.) The Americans are leaving the roof damaged when the sun is shining.

China’s key economic activity continued to slow in October as several major indicators posted multi-month or even multi-year lows. Retail sales were up +7.2% year-on-year and below expectations, industrial production was up +4.7% and also below forecasts, and the important fixed asset formation data, a key driver of their economy, was up +5.2% when a gain of +5.4% was expected. True, all these numbers are way above what most other countries can deliver, but they do indicate a continuing slowdown. But it is not sharp, and it certainly isn't a contraction. And it is miles better than for most OECD countries. And it doesn't indicate China is "on its knees" as the US Administration seems to think.

And the China data isn't all soft. Property sales picked up and new construction starts surged in October in a sign developers are seeing improved demand.

And here's a trade war development that you may not have expected. The block by the US on chip supply to China (and Huawei in particular) is being filled by - Taiwan. It is home to the globally crucial supplier TSMC, and they are critical for the US as well. The US may not have the leverage they assume.

And China says it is in in-depth talks with the US about rolling back the American tariffs.

Germany has narrowly avoided a recession, according to official data. The country's economy grew by +0.1% in the third quarter of the year after contracting in the previous three months, and the annual growth was down to +1.0%. But this was better than was expected.

For the EU as a whole, the growth was slightly better coming in at +1.4% and was also better than expected.

In Australia, official data shows the Australian economy lost -19,000 jobs in October, the first fall in three years, and their unemployment rate edged back up to 5.3%. Analysts had thought employment would rise +15,000 so the miss is substantial. Full time jobs fell more than part time jobs. That saw the AUD fall sharply and taking the NZD with it.

The UST 10yr yield is lower at 1.81% and an -8 bps fall. Their 2-10 curve is positive at +23 bps. Their 1-5 curve is firmer at +16 bps. Their 3m-10yr curve is at +24 bps. The Aussie Govt 10yr is down another sharp -9 bps at 1.13%. The China Govt 10yr is now at 3.27% which is unchanged again. The NZ Govt 10 yr is now at 1.44% which is -5 bps lower.

Gold is up today, up +US$9 to US$1,472/oz.

US oil prices are a little softer at US$57/bbl. The Brent benchmark is just on US$62.50/bbl.

The Kiwi dollar is lower today at 63.7 USc having weakened overnight. On the cross rates we are holding at 94 AUc. Against the euro we are soft at 57.9 euro cents. That puts the TWI-5 at just on 69 and a -30 bps dip in a day.

Bitcoin is also lower at US$8,629 and a drop of -1.3% overnight. The bitcoin rate is charted in the exchange rate set below.

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