Eyes on new US fiscal stimulus; US retails sales slip, PMIs weaken; US labels more currency manipulators; China gets winter power blackouts; UST 10yr at 0.92%; oil and gold up; NZ$1 = 70.8 USc; TWI-5 = 72.4

Here's our summary of key economic events overnight that affect New Zealand, with news of some sagging economic indicators in the US.

But first in Washington DC, congressional leaders said they were close to an agreement on a relief package that could be worth as much as US$900 bln. But markets have heard the talk before and now want more than talk. Legislators are attempting to complete both a pandemic aid package and a catchall federal spending measure before government funding lapses at the end of this week.

Meanwhile, American retail sales fell in November is a surprisingly large decline. A flat result was expected from October, but a -1.1% fall was recorded. Every major category was weak, but car sales were the weakest. Economists said the decline was a “warning sign” that the economy was entering a rough patch and in need of the jolt from another round of government stimulus. Holiday season retail doesn't look promising.

Meanwhile, the US December 'flash' PMIs confirm the downbeat mood. Their services sector PMI fell sharply although it is still expanding. The factory sector held at a similar expansion level.

The US Federal Reserve board is meeting today and will release the results of its deliberations at 8am NZT. Although nothing significant is expected, the tone of their meeting will be closely watched. Analysts are watching for an expansion of their asset purchase (QE) programs. See here.

In a departing shot, the Trump Treasury Department labeled Switzerland and Vietnam as "currency manipulators", and added Taiwan, Thailand, and India to a watch list that now includes ten countries. These are designations designed to hide flaws in US policies themselves.

Both China and Japan, reduced their holdings in October of US Treasury debt. China’s holdings fell to $1.054 tln, the lowest since January 2017, a fifth straight month of reductions. Japan, the largest foreign holder also pared back its investments for a third straight month. These reductions may have a part to play in the rising yields the US Government has to pay.

Yesterday, we reported a strong rise in electricity production in China. But it seems it isn't enough. Two provinces there have had blackouts as an electricity supply shortage leads to power rationing.

In Australia, their advance December PMI results report an expanding service sector with momentum building. Their factory sector is expanding too.

In New York, the S&P500 is up +0.2% in its opening session today, awaiting definitive action on the promised stimulus extension proposal. Overnight, European markets were higher, led by the +1.5% rise in Frankfurt and trailed by the +0.3% rise in Paris. Yesterday, the large Tokyo market closed its Wednesday day session up +0.3%. Hong Kong rose almost a full +1%, but Shanghai closed unchanged. The ASX200 rose +0.7% on the day while the NZX50 Capital Index ended its Wednesday session up +0.5%.

The latest global compilation of COVID-19 data is here. The 'news' is all about vaccine rollouts but the global tally just keeps on rising, now 73,697,000 and +626,000 more overnight. At this rate, we will top 100 mln by mid 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 1,641,000 and up +14,000 in one day as death rates spike everywhere.

But the largest number of reported cases globally are still in the US, which rose +200,000 in one day to 17,177,000. The US remains the global epicenter of the virus. The number of active cases is surging and now at 6,850,000 and that level is up +66,000 on a day, so many more new cases more than recoveries. Their death total now exceeds 311,000, up more than +3000 in a day. The US now has a COVID death rate of 939/mln, and now well above that in Argentina (908) and approaching the disastrous UK level (954).

In Australia, they are not getting any resurgence. There have now been 28,059 COVID-19 cases reported, and that is just +12 more cases overnight. Now 50 of their cases are 'active' (+3). Reported deaths are also unchanged at 908.

The UST 10yr yield will start today at just over 0.92%. Their 2-10 rate curve is steeper at +80 bps, their 1-5 curve is unchanged at +28 bps, while their 3m-10 year curve is also little-changed at +85 bps. The Australian Govt 10 year yield will start today up +1 bp at 1.00%. The China Govt 10 year yield is unchanged at 3.32%, while the New Zealand Govt 10 year yield is up +2 bps at 0.89%.

The price of gold is up by +US$7 to US$1854/oz.

Oil prices are marginally higher and now just over US$47.50/bbl in the US, while the international price is up by +50c to US$51/bbl.

And the Kiwi dollar is marginally softer at 70.8 USc. Against the Australian dollar we have also had a further softening to just under 93.6 AUc. Against the euro we are down to 58.1 euro cents. That means our TWI-5 is lower by -20 bps at 72.4.

The bitcoin price has risen again and is now at a new all-time high of US$20,890, a +7.9% leap from this time 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 ».