US readies a huge rescue package; US data weak; China makes big gains; Canada readies some firepower; Australia says it has done enough; UST 10yr at 1.10%; oil and gold down; NZ$1 = 71.5 USc; TWI-5 = 73

US readies a huge rescue package; US data weak; China makes big gains; Canada readies some firepower; Australia says it has done enough; UST 10yr at 1.10%; oil and gold down; NZ$1 = 71.5 USc; TWI-5 = 73
Whatipū beach and lighthouse at the Manukau Heads
Image sourced from Shutterstock.com

Here's our summary of key economic events overnight that affect New Zealand, with news the pandemic death toll has it 2 mln and public heath policy mistakes are hurting some giants while public health successes are helping others. The separation is stark.

In the US, the new Administration is gearing up to launch a US$1.9 tln relief and rescue program for the US.

They need something dramatic.

After a -1.4% fall in November, analysts had expected US retail sales to be unchanged in December. They were disappointed as the official data shows a further -0.7% decline on a seasonally-adjusted basis and capping a dismal year and ending with three straight months of retreats. For the full calendar year retail sales came in just +0.6% higher than for all of 2019.

But December industrial production came in much better than expected, up +1.6% from November and reducing the year-on-year decline to -3.6%.

However, going into January, the New York Fed's Empire State factory survey isn't too flash. Bad local weather on top of the pandemic lockdowns had their timid expansion nearly evaporate in the month.

Also retreating is the latest UofM consumer sentiment survey. The surveyors call the retreats 'trivial' but they are down almost -2% in a month and down -20% year-on-year. Perhaps in light of the sharper bite from the pandemic they are not as bad as they had expected.

China is due to report 2020 GDP on Monday and is widely expected to record +6.1% growth in Q4 and an annual rise of +2.1%. In 2021 they expect growth closer to +8%. They are closing the gap on the US fast and are now expected to have a larger economy by 2028, two years earlier than the pre-pandemic estimates. Currently the US generates 16% of world GDP and China will record 14.5% in 2020. China's share was 12% in 2016 when the US share was 16.5%.

Of course, they are miles behind on a per capita basis, but even on that front, while the progress is somewhat chaotic, they are also catching up fast.

In Canada, they are increasingly worried about surviving the next few quarters economically. The Canadian prime minister has instructed their government to use “whatever fiscal firepower” is needed over the coming weeks and months until their economy improves. But he also says they must do that in such a way as to “avoid creating new permanent spending.”

Meanwhile in Australia, their government isn't worried at all, saying growth there will come without any more fiscal assistance programs being required.

The total value of new loan commitments for housing in Australia and their value of owner occupier home loan commitments both reached record highs in November 2020. They were up +5.6% from October to AU$24 bln, and were +24% higher than in November 2019. This latest level is a record high for them. Interestingly, the owner-occupied rise was +31% whereas the rise of investor lending was only +4%, year-on-year.

In the UN Human Rights Council, China, Russia and Saudi Arabia all desperately tried to prevent a candidate from Fiji getting elected as its new chief. She actually promotes human rights, something autocracies are fearful of. However, she won overnight, and convincingly.

Wall Street has declined by -0.4% in early afternoon trade and is heading for a weekly loss of -1.1% and erasing much of the prior week's +1.8% gain. Overnight European markets were down across the board and by about -1.2%. Yesterday, Shanghai closed flat and for the week it was also unchanged. But Hong Kong rose +0.3% yesterday for a weekly rise of +2.5%. Tokyo fell -0.6% yesterday but ended with a weekly gain of +1.4%. The ASX200 ended its session unchanged yesterday with a late selloff and culminating in a weekly dip of -0.6%. The NZX50 Capital Index ended its session down -0.7% resulting in a weekly fall of -3.9% and wiping out the prior weeks +3.6% gain.

The latest global compilation of COVID-19 data is here. The global tally is rising faster, now at 93,418,000 and up +855,000 in one day. We are heading for 100 mln in about a week now mainly because the UK variant is taking off worldwide now. It is still very grim everywhere except in our region. Global deaths reported now exceed 2,001,000 and +17,000 since this time yesterday as death rates rise everywhere.

But the largest number of reported cases globally are still in the US, which rose +252,000 for their tally to reach 23,902,000. The US remains the global epicenter of the virus. The number of active cases rose overnight and is now at 9,383,000 and that level is up +116,000 in just one day, so many more new cases than recoveries and again by a substantial margin. Their death total is up to 399,000 however (+4000), a daily disaster that they brought on themselves with a woeful response. Their CDC is sounding the alarm, now expecting more than 90,000 more deaths over the next three weeks, stunning. The US now has a COVID death rate of 1202/mln, sadly comparing with the disastrous UK level (1282). Only Belgium and Italy have a higher rate and both of those have slowed substantially now.

In Australia, their community resurgence is back under control although officials are on high alert over the risks from the UK variant which is starting to show up in managed isolation intercepts. That takes their all-time cases reported to 28,669, and only +8 more cases yesterday with all in managed isolation. 257 of these cases are 'active' (-18). Reported deaths are unchanged at 909.

The UST 10yr yield will start today little-changed at 1.10% although it did rise quite a lot in between. Their 2-10 rate curve is unchanged at +95 bps, their 1-5 curve is flatter at +35 bps, and their 3m-10 year curve is also unchanged at +101 bps. The Australian Govt 10 year yield is down -3 bps at 1.03%. The China Govt 10 year yield is higher however, up +2 bps at 3.16%, while the New Zealand Govt 10 year yield has followed the trend lower by its own -3 bps to 1.04%.

The price of gold is down -US$19 from this time yesterday in New York at US$1829/oz. Silver has fallen quite sharply today, down -2.8%.

Oil prices are just over US$52/bbl in the US and down about -US$1, while the international price is at just over US$55/bbl and softer for a third straight day. Meanwhile rig counts of wells in production rose again last week.

And the Kiwi dollar is much weaker today from this time yesterday at 71.5 USc, a drop of almost -¾c. Against the Australian dollar we are softer as well at 92.7 AUc. Against the euro we are down to 59.2 euro cents. That means our TWI-5 is now down at 73 and a -50 bps retreat.

The bitcoin price is on the move again, but this time lower and down by 7.2% since this time yesterday and now at US$36,361. 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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27 Comments

Only in London, which is has been in lockdown a lot longer than the rest of the UK. But let's hope it keeps coming down nationally.

andrewj,

Yes, from really high to just very high. Over 55,000 new cases and just under 1300 deaths. The all important R number remains above 1.

Having lived there for over 57 years, I want the UK to succeed in getting Covid under control, but am immensely thankful not to be in a country led by an incompetent liar. Were I still there, I would certainly now vote for Scotland to leave the Union.

I think Scotland will go independent too, how that works out, who knows. Wonder if I could get a Scottish passport as all my great grandparents were born there?

I wonder if, in the UK, the virus isn't slowing simply because so many people have contracted the disease? At Christmas around 2% of the UK population where thought to currently have the virus with something like 10%+ of people having had it and a daily growth rate of between 2 and 9% at the time. The average time for transmission is about 4 days after infection. Those numbers where probably higher in the SouthEast and London. The people who've had it (along with the few that have had the vaccine) may just be starting to provide a firebreak to rapid transmission.

Also there is little evidence lockdown is modifying peoples behaviour:
https://www.bloomberg.com/news/articles/2021-01-16/england-isn-t-listeni...

Problems with flammable building in UK looks a nightmare
https://wolfstreet.com/2021/01/15/flammable-cladding-crisis-in-residenti...

Isn't this just an echo of our NZ leaky building fiasco - just an apartment subset. Happy I bought an 50 year old stand alone house ~ there are problems with old roofing iron and some asbestos sheeting along the base and it is cold in winter but at least any repairs and maintenance are 100% my responsibility to organise and finance.

Sort of. The failure of the high rise cladding design involved a greater number of professionals and suppliers, remembering the failure resulted in the loss of 51 lives at Grenfell.

But you are right, the underlying issue is the same, ie a building code system that encourages this to happen. There were numerous people that questioned what was happening but were told it was legal, or within the interpretation of the 'rules' and/or were just ignored by their bosses or other professional bodies including Govt. departments.

And NZ takes its lead from the British system because of our Commonwealth legal links.

Ultimately it was not the flammable cladding that caused the deaths, it was the whole rundown complex and dodgy electrical wiring and old appliances that caused a fire in the first place. Sure the cladding made it worse but the whole building was an accident waiting to happen anyway. Like any serious accident, its a string of events that when they all line up at the same time a disaster happens, take out any one of them and it wouldn't have happened.

Rabobank, 'The Fed Is In A Fantastic Position Where The More It Fails, The More It Is Needed"

'And in a sign of how the world isn’t changing, Aussie home loans were up 5.6% m/m when only 1.2% was expected. As someone joked a few decades ago, after a nuclear holocaust the only things left would be cockroaches and Cher. I would add cowbells and Australian property bulls.'

https://www.zerohedge.com/markets/rabobank-fed-fantastic-position-where-...

And with that, I am off, taking the children to the beach for some sunburn.

Enjoy Andrew ..as I strolled around Oriental Beach yesterday after watching Team IENOS smash it in the Prada Cup - I gave thanks to our government who had the balls to go hard and listen to the scientist's, and we can enjoy the benefits (well those that own property).

Nature tried to help the struggling young people as well as solve the problem of too many old people.

Zachary,

Interesting. You presumably approve of mechanisms-in this Covid- which 'solve the problem of too may old people'. Who do you class as old?

What exactly is the problem being 'solved'? What other mechanisms would meet with your approval?

You are/were? a great admirer of Trump. Is that still the case?

To be old and wise you first have to be young and dumb. NZ needs more old people - the real issue is their health not their age.

No we don't. We need clever people

So more older people then?

No. Old doesn't mean clever. Stupidity is pretty evenly spread across all ages. So less stupid more clever

No not clever people - wise people. I spent a lifetime as a computer programmer and enjoyed it - but it was those clever people left tangles impossible to modify whereas the really wise people were those who said "why computerise this system?"

By far the cleverest UK prime minister was Harold Wilson - cleverest but one of the worst. One of the most effective put downs in politics is to accuse someone of "Being too clever by half".

Just like any bubble, FOMO means all the lemmings pile in at the end.

In the UN Human Rights Council, China, Russia and Saudi Arabia all desperately tried to prevent a candidate from Fiji getting elected as its new chief. She actually promotes human rights, something autocracies are fearful of. However, she won overnight, and convincingly.

Let's hope the new president can materially influence the United States to keep its promise and shut down the extraterritorial prison at the Guantanamo Bay Naval Base.

I fear not and suspect she will be as credible as officers presiding at the indefensible International Criminal Court.

Interesting concept the International Criminal Court. Some lawyers are making a fortune out of international human rights. On the face of it a powerful International Criminal Court ought to be a good thing but in practise I fear it will make unpopular dictators just dig their heels in deeper and result in more woe. In the past Idi Amin had a bolthole in Saudi; his current equivalents will act like cornered rats.
PS: I agree about Guantanamo Bay. Indefensible. Could never understand why Obama didn't close it down - bringing those prisoners to the USA and a public trial would have been unpopular but it could have been done day one of his presidency.

'a public trial would have been unpopular.' That's the reason.

Very unpopular especially since some of the prisoners were just unlucky people in the wrong place. And some of the worst of the detainees had insufficient evidence to be proven guilty without doubt. The more important the trial the more important it is to be held publically. If all the Guantanamo detainees had simply been released many may have gone on and committed terrorist acts but even then less terrorism than the acts of people who have been inspired by their being held without trial.

So China is approaching US GDP and has about 3x the population, so that is about 1/3 US GDP per capita. That is a lot higher than I thought it would be, pretty impressive really.

No doubt China has done well. I'm not sure if I would take figures provided by the Chinese government at face value.

Yes I'm constantly impressed by China these days. Yes you can go on about their human rights record, but really is it any worse than the USA at the end of the day. China does something wrong and the rest of the world jumps on it. How many black ops and clandestine operations are the Americans running right now you don't hear about ? How many drone strikes on innocent civilians ? and thats before you even look at all their wars.

The USA makes sure it exports all of it's human rights abuses. Hundreds of thousands of civilians dead in Iraq (an illegal war based on obviously flawed intelligence), Operation Menu during Vietnam, arming the Saudi's attacking Yemen, Guantanamo Bay, Abu Ghraib... the list goes on and on...