Here's my summary of the key news overnight to keep you up-to-date over these holidays.
The American trade deficit fell to an 11-month low in November as declining crude oil prices sharply reduced their import bill, prompting some economists to raise their growth estimates for fourth-quarter GDP.
And on Saturday we get the next reading of US unemployment with the release of the December non-farms payrolls report. Earlier today the precursor ADP Employment Report was released and that showed that private payrolls rose +241,000. That is in line with estimates for the non-farm payrolls report and would represent a strong finish to the quarter.
Across the Atlantic things are not so cheery. Inflation has turned negative; has turned to deflation with prices falling -0.2% on an annualised basis. Most of the fall can be attributed to the sharply lower cost of energy however. Excluding that, inflation was up +0.6%. I suspect we will be regularly talking about inflation excluding energy from now on.
American interest rates are likely to rise in 2015, while eurozone rates probably won't. How this can be sustained (and it probably can) is the subject of some debate. Paul Krugman has been looking at the issue, as have others.
Locally, December median rent levels show that a 3 bedroom house will cost $365/week, equal to its all-time high. In Christchurch that figure is unchanged in December at $450 per week, in Wellington it is $480 per week, while in Auckland the median is up to a record high $575 per week.
Low oil prices continued overnight with the he benchmark US price is now just on US$48/barrel and the Brent benchmark is just on US$50/barrel. In Australia, billions of dollars worth of projects face an uncertain future amid write-downs and job losses across their battered oil and gas sectors as the global oil crash deepens. In fact one analyst said giant Santos is 'worthless' at current prices and exchange rates.
This stunning oil price rout seems to be nothing more than economics 101 - in this case caused by markets clearing a huge increase in supply. Years of high prices pushed consumers to curtail their demand and seek alternatives and efficiency. Those same high prices encouraged suppliers to invest to more production, making many long-term bets. The resulting production increase has all come along at roughly the same time, and the markets are clearing the imbalance via the price.
Gold also lost some ground and is now at US$1,213/oz.
UST benchmark 10yr bond yields have stayed low overnight in trading on Wall Street and are currently at 1.98%, a fresh four year low. As we noted yesterday, New Zealand interest rate swaps saw more yield falls. Today the 1-5 curve is now just 19 bps and the 2-10 is just 16 bps, also fresh 5 year lows.
The NZ dollar has held yesterday's higher levels following the better dairy auction prices and is now at 77.6 USc, still rising against the Aussie and now at 96.4 AUc, and the TWI is now at 79.8.
The easiest place to stay up with event risk over the holiday period is by following our Economic Calendar here » Have a fun, safe New Year celebration.
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