Wall Street eyes Feds next liquidity moves; EU data weak but investor confidence turns up; China reveals tax cut size, twist to equity investments; Aussie drought brings cracks; UST 10yr yield at 1.80%; oil and gold higher; NZ$1 = 66.7 USc; TWI-5 = 71.5

Wall Street eyes Feds next liquidity moves; EU data weak but investor confidence turns up; China reveals tax cut size, twist to equity investments; Aussie drought brings cracks; UST 10yr yield at 1.80%; oil and gold higher; NZ$1 = 66.7 USc; TWI-5 = 71.5

Good morning, wherever you are. Here's our summary of key economic events overnight that affect New Zealand, with news markets are hesitant and nervous as weird data mixes with weird public policy choices.

Wall Street is flat today, unsure what to make of the rising global tensions. But at least their fears of a year-end funding squeeze never materialised thanks in large part to the quarter-trillion dollars the Federal Reserve stuffed into the market via repos to ensure nothing became gummed up. Now attention is turning to how the Fed gets out of the liquidity fix it is in.

In Europe overnight, equity markets were weak, with most bourses down about -0.6%.

German retail sales for November came in better than expected, but German car production is on the skids, with 2019 recording -9% lower output than for 2018 and exports down -13%.

And the Sentix global investor survey has surprised with sharply improving sentiment worldwide. It is a result that has flummoxed the survey takers.

In China, they revealed their tax and fee cut program in 2019 released NZ$425 bln in liquidity and they say that had the effect of adding +0.8% to 2019 GDP. Given that China's 2019 GDP rose +6.1%, that is a lot of one-off stimulus from just one policy action.

And the China Banking and Insurance Regulatory Commission, their financial watchdog, released a guideline saying it would promote the conversion of household savings into long-term capital market fund. It did not say how it would do this. But it is a move that will juice up the Chinese stock market substantially when it is implemented.

In Australia, as their subsoils and clays start a rare drying out, they are shrinking. And that is causing buildings to crack and other structures to subside. Australia may have avoided the leaky building problems of more temperate countries (New Zealand, Canada, USA), but they have a new and worrying building crisis ahead of them too now, one that won't be going away, and one that will cost billions to remediate.

Update: This is an excellent update on Australia's bush fires.

And the two rival PMI reports of their factory sector both show it contracting in December. The long-running AIGroup report and the internationally benchmarked Markit one both reveal declining new orders and declining production. When January data is available, almost certainly it will be weaker as the drought and fires bite. Services are also contracting although not as sharply yet.

The UST 10yr yield will start today little-changed at 1.80%. Their 2-10 curve has moved little overnight, now at +25 bps. Their 1-5 curve is at +6 bps. And their 3m-10yr curve is holding at +28 bps. The Aussie Govt 10yr is unchanged at 1.22%. The China Govt 10yr is also unchanged at 3.19%. But the NZ Govt 10 yr is down again, down another -5 bps to 1.54%.

The price of gold is much firmer again today, up another +US$12, now at US$1,564/oz, after serious American mis-steps in the Middle East.

US oil prices are holding at their higher level at just over US$63/bbl and the Brent benchmark is also higher at just under US$69/bbl. The potential for an oil price shock hit the Tokyo stock markets hard yesterday, down -1.9%.

The Kiwi dollar will start today unchanged at 66.7 USc. On the cross rates we are a lot firmer at 96.2 AUc. Against the euro we are holding at 59.6 euro cents. That keeps our TWI-5 at 71.5.

But bitcoin is up +1.1% to US$7,534. 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 ».

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Street eyes Feds next liquidity moves;

So more free and cheap money..... How long can economy continue on such life saving device. Ventilator though needed but cannot be on lifesupport for ages.

Sounds like its time to download the Z app, and buy 1000l of fuel at todays price. With the 50 bonus litres added, it was possible to pre buy 91 at the equivalent of $192.2 in the weekend in Christchurch, diesel was $125.6. Fill up at Z anywhere in the country, no wonder everyone wants to live in Christchurch!

Man the south get screwed on fuel. Not uncommon to see diesel at 1.25 at the pump up north. When i was in queenstown, diesel was nudging 1.69/litre

Currently $1.45 - $1.47 in Whangavegas

$1.80 for diesel in Franz josef, pity there is no Z there

$1.1191 for Mobil truckstop diesel in mid-December in Christchurch.....

serious American mis-steps in the Middle East.

I'm hearing about approaches being made to China from both sides to mediate in this drama. Will the US play its Hong Kong card? That is back off with its meddling in Hong Kong for Chinese help in the ME? China no doubt will want a little more. Back off meddling in Western China as well. Negotiations are no doubt in progress.

Tactical victory, strategic mistake by the US.

Iran can attack the US anywhere at any time, while US drones and missiles have much more limited options.

Iran has the technology, weapons and allies to take on the US in WWIII. Most of the world will happily join Iran in full scale war against the US. Trump has doomed us all and I have been tweeting my support of Iran in the hopes they don't kill me, but if I don't die from WWIII then the climate emergency crisis will kill us all anyway.

I think it would be another repeat of the Great Iraq War of 20/03/2003 (first shot fired) to 9/4/2003 (when Baghdad fell). If Iran can last a month I would be amazed.

The great Iraq war? It still in progress as far as I know and Afghanistan..sheese - Operation Enduring Freedom (2001–14) and Operation Freedom's Sentinel (2015–present), followed the United States invasion of Afghanistan of 7 October 2001...

Trying to stop rapists and pillagers looting Iraq/Afghanistan is not really a war (more like police assistance). In terms of turning a country to shit my point is USA could turn Iran to shit in a month (or less). If the USA learned anything from Iraq and Afghanistan they will then get out of dodge and let the country implode after destroying its military and infrastructure.

HeavyG. 'Letting the country implode' ie, facilitating the expansion of shiite power and making a catastrophic war between the two principal branches of islam inevitable. The resulting vast scale of human misery would make the current Iranian initiated human suffering in the Yemeni civil war seem like a side show.

Which is what Trump wants. It will be very difficult for Iran to build a nuclear bomb when ISIS is chopping off scientists heads and raping anything that moves (and even some things that don't).

If Iran goes down Shia will be at a disadvantage. Sunni are already 85% of the Muslim population and Iran is the most powerful Shia Country. Iran supplies weapons to Shia forces in Iraq, Syria, Lebanon and Yemen. If Iran goes so do the Shia forces in those countries as the Sunni/Wahhabi ramp up their domination of the Muslim world.

Trump is incapable of thinking that far ahead and the current US resistance to withdrawal from Iraq rather undermines your proposition. Military capacity is not derived from population numbers. Iran through its experience of fomenting numerous fratricidal wars in the ME is militarily more capable than the combined sunni nations, with perhaps the exception of Turkey. None of the shia nor sunni nations want a resurgent ISIS style caliphate, whether in salafist or wahabist guise; they would all again fight to eliminate such a movement and enlist big power support to do so.

Trump wants out of Syria, Iraq and Afghanistan (his voters want USA out as well). His resistance is basically "pay for the bases we built and we will leave". The only problem he has with the ME now is Iran and it's push for nuclear weapons and attacks on Saudi oil facilities (USA's main Muslim Ally) through Yemen proxies armed by Iran.

Trump will be happy to bomb Iran back to the stone ages thereby diffusing the nuclear threat and attacks on Saudi Arabia. An ISIS caliphate is a lot less of a threat to USA and Saudi Arabia than a nuclear capable Iran or an Iran supplying sophisticated weapons (e.g. drones) to Shia militants in the region.

Turkey and Egypt have a better military than Iran. Indonesia and Pakistan are comparable to Iran and Saudi Arabia would give them a run for their money.

On the other hand who does Iran have as a shia ally? Iraq (cannot even defeat ISIS without help), Bahrain? Azerbaijan?...

The Iranian Supremo has put out an $80 million contract on Trump

The problem for Trump is there will be a lot of interest inside the USA from elements who do not necessarily have middle eastern suntans who will be motivated by that sort of loot. Whoever they are they will want a deposit up front

I remember similar claims being made during the planning of operation Red Beard.

More international fall out after the US targeted assassination of Gen. Qasem Soleimani— and in a worrisome for Washington — China and Russia once again find themselves allies in thwarting US plans.

On Monday the United States slammed Russia and China for blocking a United Nations Security council statement condemning the Dec. 31 mob attack on the US embassy in Baghdad — an event which precipitated the Trump administration's order to take out Soleimani days later, accusing the IRGC Quds Force leader of plotting more attacks on Americans. Link

The UN is such a basket case. Unreformable due to the permanent members of the security council being, well, permanent. Outdated and useless and bloated. Most of the members are countries run by murderous, thieving, thugs.

We need a new organisation that has membership rules and suspends members who break them. Contrast the Commonwealth which suspended Fiji after the last military coup, whereas the UN just kept paying them big $$$ for their mercenaries.

%20 drop in milk consumption since 2008.

"Milk processors are seeing their margins pinched as wholesale milk costs climb and consumers gravitate to dairy-free options such as almond, soy and oat beverages". Yup - helping a Oat based milk company out of Christchurch - demand huge from cafes in NZ. Better health ..less dairy

it's a crisis the industry never saw coming, paid millions to CEO's, to not even notice the elephant in the room.

Hi Frazz, I don't know what your ethnic background is, but if it's Celtic or Anglo-saxon like mine you're here and alive now because your ancestors have lived off, in large part, dairy products in the last 10,000 years at least since cows were first domesticated.

I'm reminded off those current anti-meat-brigade advocates who forget that our ancestors incorporated meat into their diet well before humans developed farming in the hunter/gatherer/scavenger days.....hundreds of thousands of years ago.

I'm also reminded of those who think they know someone whom they just met yesterday on an online platform by reading their text and emoticons when it's taken humans about 500,000 years to learn by evolution how to 'read' someone by their face-face body language and gestures.

And yet even in Northern Europe, Lactose intolerance is becoming more common as is Gluten. I have a wife who is blue eyed, blond hair/ Nth Europe and who won't touch milk. I'm thinking of getting her to try raw milk, perhaps the devil is in the detail.

I'm reminded that driving by looking through the rearview mirror at the road behind you is a great way to end up in a ditch.

Patrick Moore.
Explains why he helped create Greenpeace
And why he decided to leave it

Why I left Greenpeace
https://youtu.be/BpBnJq19R60

Our daily ration of spin.

How about a fresh story?

What/where will be insurable in future.

TBTF – Scott Morrison has just bailed out the Insurance Industry

And saves NZ from suffering increased premiums from the AU owned insurance companies

“We will meet every cost”: Bushfire recovery to take priority over budget surplus

https://www.smh.com.au/politics/federal/bushfire-recovery-fund-to-get-2-...

Paid for by increased coal exports, gotta love the irony.

Any Greenie who have lost their house will be put in an uncomfortable position..

Why?

I presume NG is alluding to the proposition that it could be seen as blood money by a Greenie?

However, given money is fungible I am sure a Greenie will rationalise the payment as a return of their tax payments (or a host of other sources) rather than profiting from the sale of coal.

Got it thanks

Well, building on ridge-tops which have highly combustible valleys just below, and with fuel loads un-managed for decades, that just hasta be a starter for swingeing insurance premia......

Interesting article in SMH about 'cultural burning' - which saves buildings.....