Here's our summary of key economic events overnight that affect New Zealand, with news global food prices are rising as China gobbles up supplies as its food security concerns widen.
But first in the US, consumer sentiment posted a surprising increase in early December due to a partisan shift in economic prospects. Following Biden's election, Democrats became much more optimistic, and Republicans much more pessimistic. And as there are more Democrats than Republicans in the country that has raised this index. However, this index is still -18% lower than where it was a year ago.
The December versions of the USDA WASDE report says Australia, Canada, and Russia all will have their second largest wheat production on record, filling a rising global demand. They also see US milk production rising and prices falling as they forecast out to 2021 (pg 33).
The US federal budget deficit widened by a quarter in October and November from the same period last year to a record -US$429 bln. For the full year, it is a deficit of more than -US$3.2 tln and up from -US$1 tln in the equivalent period in 2019/20. That raised it from a high 4.9% of GDP to 15% of GDP and a suddenly and increasingly dangerous level. The incoming Administration has been handed a toxic situation from an incompetent four years of mismanagement. The Trump Administration ignored the advice to "fix the roof when the sun shines" insteat flogging it off to its mates. Tax cuts for the rich have seen revenues stagnate at just above 2016 levels while spending has grown by +60%. It is mismanagement on an epic scale and leaves them very disadvantaged to handle the pandemic consequences.
Bipartisan US Congressional negotiations for an extension of aid for the jobless don't look like they are going anywhere, undermined by Republican leaders in their Senate. And unreported elsewhere, it appears the US Federal Government may have to shut down in about a week because they will have run out of funding, and this authorising legislation is stuck in the partisan gridlock and the move to lay waste for the incoming Administration. Usually these approvals come at the last minute (which is now), but it may be less likely this time. A one week extension has just been agreed however.
In Canada, their have set a track for sharply rising taxes on carbon. The price on carbon will be increases by +C$10/tonne until it reaches C$50 per tonne in 2022, and then it will rise annually until it hits C$170/tonne in 2030.
In Australia, AML regulator AUSTRAC says Australian casinos have been exploited or infiltrated by criminals and even foreign agents.
Brexit deal prospects dim and the hardest of separations seems the most likely outcome for December 31, according to both sides in these ongoing talks. And London's days as a global banking hub may be coming to an end.
Globally, food prices are rising. The November increase did not only mark the biggest month-on-month rise since July 2012, but it also resulted in the FAO index reaching its highest level since December 2014. China seems to be crowding out others with aggressive buying, driven by a slowly deteriorating food security issues there. This is particularly true for dairy and meat, the FAO notes.
Chinese futures pricing for corn, palm oil, and rice are all at historically high levels. And Chinese prices for iron ore and coal round out the rising evidence that Chinese demand is stoking all commodity prices. Copper is at a seven year high, and aluminium prices are rising sharply too. All this is happening while the US and Europe are in the demand doldrums. But it is a boom lifting the AUD (and to some extent the NZD as well).
China’s car sales increased more than +12% in November from the same period a year earlier to log the highest monthly sales this year as the world's largest car market continues to bounce back. Almost 2.8 mln vehicles were sold in the month, and NEVs ("new energy vehicle") sales are on the rise. China's steel production is at a record high.
The S&P500 is down -0.7% in early afternoon trade and heading for a weekly loss of -1.5%, wiping -US$½ tln from market values in the past seven days. But since the start of 2020, it has still gained a net +US$3.4 tln. Overnight European markets closed about -1% lower with Frankfurt down -1.4% for the week, Paris down -1.8% for the week, and London down a mere -0.1% on the same basis. Yesterday, the very large Tokyo market ended its session down -0.4% and ending its week also down -0.4%. Hong Kong was up +0.4% yesterday but for the week was down -1.2%. while Shanghai was down -0.8% yesterday and that locked in a weekly loss of -2.8%. The ASX200 closed out yesterday with a -0.6% loss and locking in a weekly result of just a +0.1% gain. However the NZX50 Capital Index was the star of the week, ending yesterday with a +0.5% daily gain and a weekly rise of +2.2%.
The latest global compilation of COVID-19 data is here. The global tally is 69,874,000 and a +734,000 rise in one day. At this rate, we will top 100 mln by the end of January. It is still very grim in Russia, the UK, Eastern Europe, Brazil, Turkey and Indonesia. It does seem to be easing further in Europe generally although not in the UK, Sweden, or Germany. Global deaths reported now exceed 1,588,000 and up a very sobering +13,000 in a day as death rates spike everywhere.
In Sweden, after making an emergency u-turn from their disaster herd-immunity strategy, things have turned gruesome. Stockholm was reported today to be running ICUs at 99% capacity. Now, 80+ year olds are not being admitted to ICUs any more. These folks are just denied care and are being left to fend for themselves. They have run out of options given the surge in serious cases, and the age limit is likely to be lowered progressively to ration ICU bed availability.
But the largest number of reported cases globally are still in the US, which rose a record +251,000 overnight to 16,117,000. The US remains the global epicenter of the virus. The number of active cases is surging and now at 6,460,000 and that level is up 131,000 in just one day, so many more new cases more than recoveries. Their death total now exceeds 301,000 and up +3000 in one day. The US now has a COVID death rate of 907/mln, and now higher than Argentina and approaching the disastrous UK level (927).
In Australia, they are not getting any resurgence. There have now been 28,012 COVID-19 cases reported, and that is just +12 more cases yesterday. Now 49 of their cases are 'active' (+2). Reported deaths are also unchanged at 908.
The UST 10yr yield will start today softer, now at just under 0.90% and a -3 bps retreat as global recovery hopes fade. Their 2-10 rate curve is a little flatter at +77 bps, their 1-5 curve is also flatter at +27 bps, and their 3m-10 year curve is much flatter at +82 bps. The Australian Govt 10 year yield will start today back down -3 bps at 0.97%. The China Govt 10 year yield is unchanged at just on 3.32%, while the New Zealand Govt 10 year yield is down -2 bps at 0.88%.
The price of gold is firmer today, up +US$6 to US$1842/oz.
Oil prices are -US$1 lower today, now at just on US$46.50/bbl in the US, while the international price is up slightly more at just over US$50/bbl.
And the Kiwi dollar is little-changed and still at 70.8 USc. But against the Australian dollar we have slipped again, now down to 94 AUc. Against the euro we are little-changed at 58.5 euro cents. That means our TWI-5 is still at 72.8, at the upper part of the tight range it has been in over the past month.
The bitcoin price has fallen another -1.1% today and is now at US$17,992 and its lowest in two weeks. 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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