Here's our summary of key events overnight that affect New Zealand, with news there are positive signals that the 'phase one' trade may be making real progress.
But first, the US Conference Board is reporting that November consumer confidence slipped, and for the fourth month in a row. It is still at a healthy level, but the fall was unexpected; most analysts thought it would rise in November.
Sales of new houses in October were strong in the US, similar to the September level but more than +30% higher than the October 2018 level. That means new home sales took 11.9% of the total housing market in October 2019, and that is up from 9.6% a year ago.
American inventories are rising. Wholesale inventories are up +3.9% in October from the same month a year ago. Retail inventories are up +3.1% on the same basis.
The US merchandise trade deficit has narrowed in October and more than expected. But that is because less trade is happening. Exports were down -3.7% and imports were down -6.9%. Together, that is US$20 bln in less trade in October compared to the same month a year ago. The big reductions are in industrial supplies and capital goods, both exports and imports. Their monthly merchandise trade deficit fell to -US$66.5 bln, -US$4 bln less than for September. The politically sensitive balance with China wasn't released with this advance data.
Also falling, and in fact slipping into negative territory, is the next Fed regional survey, this one from their mid-Atlantic states. Those lower imports don't seem to be being replaced by domestic factory production.
In fact, in a new research paper by NY Fed economists, they have found that almost all the costs of the tariffs imposed by Washington on China have been paid by Americans. China may be selling slightly less to the American importers (made up by selling more to others), but the US tariffs have been passed on in full in prices paid by the consumers of the goods involved. Higher tariffs are an own-goal by Washington. It seems only one person is in denial.
Meanwhile, China offered its most positive message in recent weeks that trade talks with the Americans are going smoothly after a phone call overnight between the countries’ top negotiators, raising the prospects for a limited deal. This time, equity markets are ignoring the news.
There is widespread alarm however at China's renewed coal expansion. A new report said that China’s proposed coal power expansion through 2035 means that their coal power capacity alone could “far exceed” the total capacity allotted to the entire world under the Paris Agreement, which aims to keep global warming below +2oC above pre-industrial levels and targeting of +1.5oC. The IMF is now saying central banks need to factor in the risks of climate change.
In China, a major commodities trader, publicly owned by a provincial government, is about to default on its bonds and the central government authorities look like they will allow that to happen. It will be the largest SOE default in twenty years.
Meanwhile, China as raised US$6 bln in its largest-ever international bond sale.
In Canada, their rail strike may be near an end. It has cost Canada heaps so far.
In a sign of the times, the company that prints banknotes for about 140 central banks says the steep decline in demand for 'paper' currency means it could soon fail.
In Australia, there has been yet another fall in consumer confidence there, pushing their index down to 106.8. Confidence was down again last week, falling -2.8% on top of the prior week's -1.1%. The growing weakness was predominantly due to the economic conditions component of their index. Current economic conditions fell by 2.6%, while future economic conditions were more downbeat, falling 4.9%. Both these sub-indices are near their multiyear lows. (For comparison, the same RoyMorgan survey in New Zealand last had our consumer confidence index at 118 and it was also falling. The next New Zealand report is due on Friday.)
The UST 10yr yield is now at 1.74% which is another -2 bps lower than this time yesterday. Their 2-10 curve is stable at +15 bps. Their 1-5 curve is narrower, now at just +2 bps. Their 3m-10yr curve is also less positive +13 bps. The Aussie Govt 10yr is at 1.07%, another dip of -1 bp since this time yesterday. The China Govt 10yr is now at 3.22% and a +1 bp blip up. The NZ Govt 10 yr is now at 1.33%, also down -1 bp.
Gold is up +US$2 to US$1,459/oz.
US oil prices are higher by nearly +US$1 at just under US$58.50/bbl. The Brent benchmark is just under US$64/bbl.
The Kiwi dollar is continuing its stable run against the greenback, up slightly at 64.2 USc. On the cross rates we are also firmish at 94.6 AUc. Against the euro we are firm at 58.3 euro cents. That puts the TWI-5 up at just on 69.6.
Bitcoin is still volatile, and now down at US$7,075 which is a fall of -1.9% from this time yesterday. 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 ».