Good morning, wherever you are. Here's our summary of key economic events over the weekend that affect New Zealand, with news China's bullying style of governing has been soundly rejected again.
In Taiwan, their presidential election ended in a landslide win for the incumbent, anti-Beijing candidate, a strong echo of the Hong Kong democratic vote. Interestingly, it was also a strong repudiation of ham-fisted Beijing social media election interference. Hong Kong had a rare weekend of peace. There was an echo in Europe as well. And we have an election this year, and Chinese behind-the-scenes string-pulling could become an issue here too.
And away from politics in Hong Kong, they are preparing for the launch of a slew of new digital banks. One interesting consequence is that competition for deposits is expected to spike, and raise the offer rates significantly. Current TD rates in Hong Kong are similar to ours but the first of these new banks is offering 6% for a three month TD to selected new customers. Real competition in action.
International air travel rose +3.1% in November with the Asia/Pacific region rising +3.9%. These rates are similar to the growth recorded in previous recent months. Of special concern in January however will be travel in China during the major Golden Week holiday. It has the chance to rapidly spread a new deadly pneumonia virus discovered in central China - a kind of SARS II.
American payrolls grew in December by +145,000 and that was considerably below expectations of a +160,000 gain. They were lucky it wasn't worse. The results for the previous two months were revised down. That caps a year where private sector employment rose by +1.9 mln people (or +1.5%), and far less than the +2.6 mln rise in 2018. In December, factory sector jobs actually shrank by -12,000 jobs and over the whole year grew by less than +0.4%. More analysts are saying the American goods producing sector is now in recession. If it wasn't for a curious +39,000 spike by the retail rag trade over the holiday period, the overall result would have been much worse. And going forward, Boeing's increasing woes won't help either. In fact, a top Treasury official says it could cut -½% from US economic growth this year.
Average weekly earnings rose less than +2.3% in December from a year ago and that is a sharp slowing from the +2.8% rise in November. (For factory pay, the gain was just +1.6%.) In fact, you have to go back almost three years to find a slower wage gain. It is unsure what the Federal Reserve will make of today's jobs report.
In Canada, the jobs market was a lot better in December. They added +35,000 jobs and all of them full-time. Their jobless rate reduced. Average weekly earnings rose +3.7% although that was slightly lower than expected and lower than the +4.5% rise in November.
Back in the US, the Federal Reserve paid to the US Treasury US$55 bln in dividends in 2019, down from US$65 bln in 2018 and a ten year low. It's not as profitable being a central bank as it once was.
Australian retail sales came in better than expected for November, according to official data. They were up +3.2% year on year and that is the best rise since April 2019. Apparently Australians took to the Black Friday event more enthusiastically than expected. Now the question will be, was this at the expense of the traditional Christmas season? In November, Queensland, Tasmania and the ACT all starred, Western Australia was average, Victoria and South Australia were below average, and NSW was weak. Bush fires are unlikely to help December and January in NSW or Victoria.
The ECB has published a paper that reaffirms the traditional relationship between growth and inflation, despite theri recent struggles to reconcile the two in the digital age. Raising inflation is still the way to get economies growing again and reduce joblessness, they say.
The UST 10yr yield is now just on 1.82%. Their 2-10 curve has tightened up, now at +25 bps. Their 1-5 curve is flatter at just +11 bps. And their 3m-10yr curve is moved the most, much narrower at +30 bps. The Aussie Govt 10yr is at 1.23% and very similar to where it was a week ago. The China Govt 10yr is down -5 bps from this time last week at 3.14%. And the NZ Govt 10 yr is -10 bps lower for the week at 1.49%.
Gold will start the week up +US$4 at US$1,562/oz.
US oil prices have fallen further today now just over US$59/bbl and the Brent benchmark is down too at US$65/bbl.
The Kiwi dollar is firm and now at 66.3 USc. On the cross rates we are at 96.1 AUc. Against the euro we are at 59.7 euro cents. That puts our TWI-5 at 71.5 and the same level it was this time last week.
Bitcoin is now at US$8,103 and up +10% from this time last week. 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 ».