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Dudley waits, but warns on hikes; services strong worldwide; EU holds its nerve after Italy 'no' vote; Aussie retailing booms; UST 10yr yield at 2.37%; oil up, gold down; NZ$1 = 71.3 US¢, TWI-5 = 76.9

Dudley waits, but warns on hikes; services strong worldwide; EU holds its nerve after Italy 'no' vote; Aussie retailing booms; UST 10yr yield at 2.37%; oil up, gold down; NZ$1 = 71.3 US¢, TWI-5 = 76.9

Here's my summary of the key events overnight that affect New Zealand, with news markets are absorbing the implications of the 'no' vote in Italy.

But first, the American election result has created "considerable uncertainty" over the policies the new Administration will pursue but it is too soon for the Federal Reserve to judge whether its plan for gradual interest rate hikes needs adjusting, according to one of the key voting members. He went on to say that a strong fiscal stimulus program might in fact speed up the Fed' s rate hike plans.

But in the meantime, the US economy rolls on. Today we got data on its giant services sector and both sources showed it expanding fast in November.

The Chinese services sector also expanding faster, and together with the US, that is driving the fastest expansion in services worldwide in a year.

In Europe, financial markets held their nerve after Italian voters decisively rejected changes to their country’s Constitution intended to speed government decision-making and spur Italy’s stagnant economy. In part, that was because polls had predicted the “no” vote, giving investors time to adjust, and also because political instability in Rome is not exactly unusual. But the potential for market turmoil is still there if there is a long period of government paralysis and delayed plans to fix Italy’s ailing banks, whose shares fell sharply overnight.

One thing that may reverberate here from the Italy situation is that sovereign bond yields may rise (causing conservative bond investors losses).

In Australia, they are expecting their biggest holiday retail season of all time. Revenue growth may be faster online, but it turns out margins are great in Aussie bricks-and-mortar retailing, so much so the main threat to their retailers is the arrival of foreign-owned physical stores chasing that higher margin.

The Aussie property market is changing too, and banks there are raising rates, boosting margins.

Meanwhile, the RBA will review its policy rate today, but no change is expected.

In New York, the UST 10yr yield rose for much of the trading session there but is now lower, at 2.37%.

Oil prices are up again today, now at just under US$52 a barrel for the US benchmark, while the Brent benchmark is now just under US$55 a barrel. However, there are concerns in the market over OPEC's ability to restrain output as agreed and the early signs are not good. And, the US rig count climbed to its highest level in more than 10 months, and is set to grow by +30% in 2017.

The gold price fell sharply today in London, down to US$1,166/oz, but is clawing back much of that retreat in late trading in New York.

The New Zealand dollar will today at about the same level it was this time yesterday, at 71.3 US¢. On the cross rates it is at 95.4 AU¢, and against the euro up at 66.5 euro cents. The NZ TWI-5 index is now up at 76.9.

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

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

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4 Comments

everyday, interest raises all around he world, printing money was always going to lead us here, just surprised it took so long

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All is well with retail..

Christmas is coming, the goose is getting fat, please put a penny in the old mans hat?

Spending like there is no...'tomorrow"...maybe just got "real"????.

http://www.aol.com/article/finance/2016/12/05/sears-is-on-the-brink-of-…

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Plus there is no "Accounting" for profit when online..looking for a cheap getaway...with ya....Travango. Going Dutch, has a different meaning...to me.

How strange. Blow up the shares out of all proportion...then perhaps .."quit whilst ahead'

Expediency....is not how I would spell it....but Expedia ...might.?

http://www.marketwatch.com/story/5-things-to-know-about-hotel-search-pl…

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The season of giving: "Criminals can find the card number, expiry date and security code for a Visa debit or credit card in only six seconds using computer-powered guesswork, researchers have warned.

Experts at Newcastle University said that fraudsters could figure out the complete details starting with as little as the first six digits of the card number — which cover the bank and the card type, and so are the same for every card from a single provider.

The method works because although crooks have only a limited number of guesses at each website before they are stopped, they can try endless combinations by moving between hundreds of different sites.

Mohammed Ali, a PhD student at the university’s school of computing science, said: “This sort of attack exploits two weaknesses that on their own are not too severe but when used together, present a serious risk to the whole payment system."

http://www.thetimes.co.uk/article/fraudsters-take-six-seconds-to-steal-…

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