Here's our summary of key economic events overnight that affect New Zealand, with news 2020 is shaping up to be a very weak year for world trade.
Firstly however we should note that today is a public holiday in the US, with the NYSE closed and very limited trading in commodities markets there. But overnight, European markets rose about +0.3% across all of them, and yesterday Shanghai was up a very strong +2.3%, followed by Hong Kong which was up +0.5%. Tokyo however fell, down -0.7% on weaker-than-expected GDP data.
In China, foreign direct investment in the final quarter of 2019 was +4.0% higher than for the same period a year earlier. This was a somewhat better result than many were expecting, and it is unlikely to be repeated in the first quarter of 2020. The flow of investment into China has been pretty steady since the end of 2017, despite the Americans and their tariff 'war'.
Overnight, the Chinese central bank let its official interest rate ease by -10 bps to 3.15% with a relatively small liquidity injection. Liquidity in the Chinese financial systems doesn't seem to be an issue at present.
But that may not last. China’s overall leverage ratio, which measures outstanding debt in the real economy against nominal GDP, increased to 245% at the end of 2019, up from 243% in 2018, Very high leverage carries with it very high risks during financial stress.
A new survey shows that almost 70% of companies can survive a cashflow crunch of three months and about 45% can sustain it for more than half a year. But by the same token, that means that 30% can't survive a 90 day economic crisis.
Today's updates for Covid-19 sees the tally of official infection up over 71,900 and 1775 deaths. A week ago these levels were at 40,500 and 910 respectively.
China's economic growth will obviously take a heavy hit in 2020 and current estimates are that it could fall to +4.5% pa. Those estimates may prove optimistic.
Japan's economy suffered its biggest contraction in five years in the final quarter of 2019, slowed by a combination of their sales-tax hike and a destructive typhoon. Japanese GDP ended 2019 -0.4% lower than in the same quarter in 2018. But for all of 2019 they ended up +0.7% above 2018. The annualised rate of fall on Q4 was however a startling -6.3% from Q3. You may recall this was also the time of the Rugby World Cup, an event that had almost zero impact on their economy. Perhaps this year's Olympics in July and August later this year will be more influential.
Japan's December industrial production surprised the other way, rising at an annual rate of +1.2% from November and clawing back some of the -3% year-on-year decline. Of course this 'progress' will be undone in February.
In Singapore, they reported that their economy grew at less than +1% in 2019 and they see that slowing further in 2020.
So it is hardly surprising that given all this news, the WTO sees 2020 as a poor one for world trade.
In Australia, new official research finds that "lower interest rates increase housing wealth inequality, while higher rates do the opposite". And they find that investor activity accentuates the inequality effect of low rates.
The UST 10yr yield is still just on 1.59%. Their 2-10 curve is less positive at +16 bps. And their 1-5 curve is still negative at -7 bps. And their 3m-10yr curve still negative at -1 bp. The Aussie Govt 10yr is unchanged at 1.06%. The China Govt 10yr now at 2.92% and up +3 bps. The NZ Govt 10 yr will start today at 1.36% and down -2 bps.
Gold is down -US$3 to US$1,581/oz in very limited trading in New York today.
US oil prices are at just over US$52/bbl. The Brent benchmark is lower just under US$57.50/bbl.
The Kiwi dollar will start today unchanged at just over 64.4 USc. On the cross rates we have held at 95.9 AUc. Against the euro we also unchanged at 59.4 euro cents. That means our TWI-5 is now at 70.3.
Bitcoin has stayed down at US$9,718 after the sharp fall 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 ».
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