US retail store sales soft; China to insure deposits; Swiss reject gold, price tumbles; UST 10yr yields 2.17%; oil price slump continues; NZ$1 = 78.3 USc, TWI = 78.5

Here's my summary of the key news over the weekend with news of oil and gold at centre-stage.

Firstly in the US, the talk is of softer Thanksgiving retail sales, but actually that is the bricks-and-mortar result. The continuing shift online is bolstering overall spending and shifting it later.

China has announced it will start a state-backed insurance system for bank deposits, a move toward scrapping remaining controls on interest rates and allowing lenders to fail in a more market-driven economy.

In Switzerland, voters have rejected going back to the gold standard. The vote was a clear 40/60 rejection of the initiative. The result will take even more off the gold price when it opens although markets anticipated the vote and the price of the yellow metal fell US$30/oz on Friday London time.

In Australia, the recent slide in the iron ore price has prompted ANZ to cut its economic growth forecast for the 'lucky country' by -0.25% to 2.9% in 2015 , but the bank is still expecting the RBA to begin lifting rates next year. That compares to their 3% forecast for NZ next year.

UST 10yr bond yields are keeping on falling and ended last week in New York at just 2.17%, its lowest level in more than 17 months. The same thing happened here last week with falls in our wholesale swap rates and they flattened at the same time. Given the New York benchmark moves, I expect the local downward trend will continue. In fact we are seeing the main banks drifting their mortgage rates down and term deposit customers will be starting to get uneasy at these levels.

Meanwhile, the oil price seems to be in free fall. the US WTI price is now below US$66/barrel and the Brent price is just on US$70/barrel. The combination of too much supply and leveling demand in Europe and China seems to be the spur for the decline. Lower oil prices will drive inflation data lower. But on the flip side it means we are not spending as much on this energy source, leaving cash available to other purchases. In New Zealand we see the oil retailers 'keeping' as much as 10c/litre more in margin than they usually do as prices fall at the pump. When the latest crude prices show up in New Zealand pricing, petrol will be well below $2/litre, probably more like $1.90 if the retailer margin reverted to normal.

That is a lot of extra spending power in the New Zealand economy. We have calculated that since the $2.20/litre price that basically applied all year up to mid October, a minimum 20c reduction in pump prices is equivalent to $50 mln per month in customer savings, $35 mln that accrues to households and about $15 mln that accrues to businesses. Diesel savings are on top of this. At an annual rate that is a $600 mln windfall. Low petrol prices - and the resulting lower CPI - won't all be 'bad'. In fact, the pump price savings will likely end up much more than 20c.

The gold price has also taken a big drop and is now at just US$1,167/oz.

The US dollar is the main beneficiary of all this. The NZ dollar starts the week marginally lower at 78.3 USc, 92.4 AUc a four month high, and the TWI is at 78.5.

If you want to catch up with all the changes from yesterday we have an update here.

The easiest place to stay up with today's event risk is by following our Economic Calendar here »