US durable goods orders disappoint; Boeing tanks; Chinese profits rise; China's bond market leaps; IMF warns; UST 10yr at 1.01%; oil firm and gold soft; NZ$1 = 71.8 USc; TWI-5 = 73.4

Here's our summary of key economic events overnight that affect New Zealand, with news risks from vaccines and gamblers are unnerving financial markets today.

The rise of the power of unprofessional daytrader gamblers in equity markets is roiling financial markets and it is hard to see how it can end without huge losses. They don't understand how short squeezes work. However, it may also clear out the professional hedge fund gamblers. However it ends, market values will be lower.

The American durable goods orders data for December came in much below expectations and set the tone for a dour market pullback. They were expected to rise +0.9% after a +1.2% gain in November. But that actually rose a very trivial +0.2% in December from the prior month. Non-defense capital goods orders were up +9.0% above year-ago levels but markets ignored that promising data point.

The pace of American mortgage applications has reversed, and is falling now.

Boeing has reported a -US$12 bln annual loss, a record for them of course. Free cash flow fell -US$20 bln in 2020. Airlines are canceling orders, even those in the only healthy passenger market; China. They are in deep trouble.

Update: The US Fed is meeting and released its decision at 8am NZT. It didn't change any rate or policy settings but it is clearly worried their recovery is sagging. The US Fed balance sheet has been growing again at a minor rate, now at a record US$7.415 tln.

Profits at Chinese industrial firms, many of the SOEs, rose +4.1% pa in the year to December and that was way better than the +2.4% rise in 2019. They have been growing for eight straight months. It is also better than analysts were expecting and supports the view that the Chinese economy is doing well at present.

The biggest gamblers of all might be Chinese bond investors. In 2020 the Chinese market issued an eye-popping +US$8.9 tln in corporate and government bonds according to their central bank. That was a +26% rise over 2019, and they now have US$25.2 tln in bonds on issue. That alone is almost double their 2020 GDP of US$14 tln. It is yet another indication the Chinese economy is built on debt. Globally, the bond market value is about 90% of world GDP.

South Korean consumer confidence is on the mend, and that is quite the turnaround from the unexpected fall in December.

But the reverse is going on in Germany, with gloom spreading from their re-imposed lockdowns.

And the IMF is warning of financial stability risks from vaccine shortages.

In Australia, their December CPI came in at +0.9% pa above the same period in 2019, and higher than markets were expecting (+0.7%). However it seems this was driven by Federal and State government actions rather than real economy price changes. Despite that, the rises are still very low in any event.

Australian business confidence fell -9pts to 4 index points in December, while business conditions rose +7pts to an above-average 14 index points, a level last seen in August 2018. The slip in confidence is because of uncertainty around pandemic responses. The rise in conditions shows most businesses there are actually doing ok.

And residential rents diverged sharply in Australia in 2020. House rents were up +3.3% over the year, while apartment rents fell -4.6% on the same basis.

Equity markets have opened in New York in a sharp risk-off mode with the S&P500 down -1.6% in afternoon trade. Earnings season nerves are showing. Overnight, European markets were down by about -1.5% on average, and canceling yesterday's gains. Yesterday, things stabilised in Asian markets with Shanghai up a minor +0.1%, Hong Kong was down by -0.3% while the very large Tokyo market was up +0.3%. In Australia, the ASX200 fell -0.7% yesterday, while the NZX50 Capital Index rose +0.4%.

The latest global compilation of COVID-19 data is here. The global tally is rising faster, now at 100,442,000 and up +576,000 in one day. The UK variant is increasing its grip, and other variants are emerging too. It is still very grim everywhere except in our region. The Chinese have a new testing method. Global deaths reported now exceed 2,162,000 and +17,000 since yesterday. More countries have started their vaccination programs. And although 71.2 mln doses have been given so far (+2.8 mln in a day), nowhere has the tide turned on infections or deaths yet - except perhaps in Israel, and maybe just starting in the US.

But the largest number of reported cases globally are still in the US, which rose +163,000 over the past day for their tally to reach 26,038,000. The US remains the global epicentre of the virus. The number of active cases rose overnight and is now just on 9,831,000 and +10,000 more than yesterday, so more new infections than recoveries. Their death total is up to 436,000 however (+4000). The US now has a COVID death rate of 1314/mln, awful but made to look 'good' by the disastrous UK level (1496) where deaths are still raging.

In Australia, their community outbreak is over. That takes their all-time cases reported to 28,786, and only +6 more cases overnight, all new arrivals and all in managed isolation. 106 of these cases are 'active' (-9). Reported deaths are unchanged at 909.

The UST 10yr yield will start today down -3 bps at just on 1.01% with the bond market's version of risk aversion. Their 2-10 rate curve is flatter at +89 bps, their 1-5 curve is now flatter at +32 bps, and their 3m-10 year curve is also flatter at just under +97 bps. The Australian Govt 10 year yield is up +1 bp at 1.04%. The China Govt 10 year yield is unchanged at 3.19%, while the New Zealand Govt 10 year yield is up +4 bps at 1.08%.

The price of gold will start -US$7 lower today at US$1846/oz.

Oil prices are firmer by +US$1 at just over US$53/bbl in the US while the international price is only up marginally and now just under US$56/bbl.

And the Kiwi dollar will open -½c lower at just under 71.8 USc on a rising USD. Against the Australian dollar we are unchanged at 93.5 AUc. Against the euro we are also little-changed at 59.4 euro cents. That means our TWI-5 is marginally lower at 73.4.

The bitcoin price has fallen sharply over the past 24 hours and is now at US$30,754 or another -4.7% lower since this time yesterday. It touched US$28,298 at one point. Volatility has been a high +/- 6.2%. It has now fallen -22% since its peak earlier in the month so it is definitely in a bear market phase. 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 ».