Here's my summary of the key issues that affect New Zealand overnight with news of a giant budget proposal from the US Federal government.
In the US, President Obama has proposed a nearly US$4 trillion budget package which is a bit over 20% of GDP, aimed at improving their roading infrastructure and boosting the middle-class, at a cost of tax increases on large businesses and the wealthy. 54% of the spending is for healthcare and social security programs, 15% is for military programs and 16% is for income security programs.
Back in today's economy, American construction spending in December rose from a revised-higher November but came in under expectations. For all of 2014, spending on construction was +5.6% more than for 2013 at a level approaching US$1 tln.
The release overnight of the US personal income and expenditure data has shown the extent and power of the recent oil price falls on household budgets. In December incomes rose +0.3% from November, but expenditures fell -0.3%, giving consumer spending power a sharp boost. This effect is expected to grow in coming months. This is the core real inflation and incomes data that the Federal Reserve prefers over the more traditional CPI data.
The push to get the Trans Pacific Partnership trade agreement is heating up so that it can go before the US Congress well before next year's Presidential election campaign. The American's think a deal is close and doable and there are high expectations Obama will get 'fast-track' authority to push it through.
Today we get the latest Reserve Bank of Australia rate decision and markets genuinely don't know what is coming. Their forward pricing assumes a rate cut, but not necessarily at today's meeting. But governor Glenn Stevens could well opt to change his previous guidance given the stuttering state of Aussie economic prospects. We will know at 4:30pm today.
In New York, benchmark UST 10 year bond yields are up slightly today at 1.68%. It is likely we will see a reactive shift locally when New Zealand swap markets open here.
The oil price rose price rose again, this time more modestly, up to US$49/barrel with Brent crude at US$54/barrel. Speculators are in the market now, betting we have reached a floor. There was an equivalent jump in energy stock prices overnight.
Gold didn't get the same support and is down to US$1,274/oz and its price is meandering.
We start today with the New Zealand dollar at slightly higher levels. It is up to 73 USc, at 93.4 AUc and the TWI is now at 76.2.
If you want to catch up with all the changes yesterday we have an update here.
The easiest place to stay up with event risk is by following our Economic Calendar here »
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