The RCEP is signed; China's bond market tested; China at odds with Australia; BNPL in regulator sights; US sentiment falls; US deficit doubles; UST 10y at 0.90%; oil down and gold unchanged; NZ$1 = 68.5 USc; TWI-5 = 71.4

Here's our summary of key economic events over the weekend that affect New Zealand, with news the world's largest multilateral trade deal has now been signed.

The RCEP, a 15 country trade deal covering a third of global GDP and 2.2 bln people was signed yesterday and is now in force, and New Zealand was one of the signatories. New Zealand exported over $36 bln of goods to RCEP countries and nearly $12 bln of services in 2019. It eliminated 92% of tariffs on traded goods, and eased services trade as well. It is much shallower than the TPP and avoids the pesky environmental, labour and IP protections the TPP does. Therefore China has been active in leading its adoption and it is a big win for them. Still, it is a major trade achievement, especially in the face of Trumpism.

Interestingly, because it involves China and not the US, protesters have been silent on this deal despite there being more to worry about on labour laws, IP, and the environment.

In China, there is drama in their corporate bond market with ripple effects spilling over into other markets. A State-owned coal miner has defaulted on a ¥1 bln bond triggering official investigations and wiping out equity market gains in Shanghai. Regulators have increasing said they will allow companies to fail if their financial situation is untenable. But this is a test of that policy - and many expect the regulators to revert to old habits, cave in and bail out this failure, again. State-owned companies probably can't be allowed to fail by Beijing given the optics of omni-control. All eyes are on Beijing. On that basis, vulture funds are buying up this debt aggressively.

Meanwhile, China's Foreign Ministry has unloaded on Australia in official comments in Beijing yesterday. They are worth reading. China is not backing away from tackling Australia for "repeatedly [having] spoken and acted out of turn on issues concerning China's core interests". And they see it is up to Australia to reverse their positions.

In Australia, ASIC is signaling it will release a report soon on the "harms we continue to see" in the BuyNow, PayLater sector, an unregulated corner exploiting credit regulation.

American consumer sentiment fell rather sharply in early November as consumers judged future economic prospects less favourably, while their assessments of current economic conditions remained largely unchanged. The closeness of the presidential election as well as the resurgence in covid infections and deaths were responsible for the early November decline.

Also going south was the US monthly budget deficit which at -US284 bln for the month, widened the annual result to -US$3.3 tln in the year to October, easily a new high. That is a massive -15.5% of 2020 nominal GDP. It was twice as large on October 2020 as October 2019. It is just another huge challenge the incoming Biden Administration will face.

The latest global compilation of COVID-19 data is here. The global tally is 54,127,000 and a surge of +1,082,000 rise in the past two days. It is still grim in France, Russia, the UK, Spain and central and southern Italy with very serious stress on their hospital systems. And the death rate is rising. Global deaths reported now exceed 1,315,000 and up +17,000 from when we last checked on Saturday.

The largest number of reported cases globally are still in the US, which rose +345,000 since this time Saturday to 11,237,000. The US remains the global epicenter of the virus. The number of active cases is surging at 4,094,000 and that level is up +180,000 in two days, so many more new cases more than recoveries. Their death total now exceeds 251,000 and continuing to rise by more than +1000 a day. The US now has a COVID death rate matching Bolivia, Mexico and the UK of 758/mln.

In Australia, they are not getting any significant resurgence. There have now been 27,725 COVID-19 cases reported, and that is+22 more cases over the weekend. Only 69 of their cases are 'active' now. Reported deaths remain unchanged at 907.

The UST 10yr yield will start today marginally up at 0.90%. Their 2-10 rate curve is little-changed at +72 bps, their 1-5 curve is unchanged at +28 bps, and their 3m-10 year curve is also little-changed +81 bps. The Australian Govt 10 year yield is unchanged at 0.91%. The China Govt 10 year yield is also unchanged at 3.29%. And the New Zealand Govt 10 year yield is stable at 0.83%.

The price of gold has changed little over the weekend and now at US$1889/oz.

Oil prices are lower again today and by about -$0.50/bbl so it is at US$40/bbl in the US, while the international price is now just under US$43/bbl. 

And the Kiwi dollar is unchanged today to 68.5 USc but it is up more than +65 bps from this time last week. Recall it was up +1½c the prior week. Against the Australian dollar we are also soft at 94.2 AUc. Against the euro we are little-changed at 57.9 euro cents. That means our TWI-5 is now at 71.4.

The bitcoin price is -1.4% lower this morning from this time Saturday, now at US$16,018. That makes the weekly gain more than +US700 and that was on top of the prior week's almost +US$2000 huge jump. 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 ».