Dairy prices disappoint; services expand worldwide; US trade deficit grows; HNA scraps share sale; RBA confident of coming inflation; Amazon launches in Australia; UST 10yr yield at 2.37%; oil up and gold down; NZ$1 = 68.8 US¢, TWI-5 = 71.7

Here's my summary of the key events overnight that affect New Zealand with news the world's services are expanding nicely.

Firstly however, today's dairy auction did not bring the expected rise in prices signaled by the derivatives market. True, they did not fall overall either, coming in up just +0.4% in USD terms, but down -0.3% in NZD terms. A New Zealand weather-induced bounce in WMP prices didn't occur as expected; WMP prices are up just +1.7%. That will disappoint industry observers because it seems to cook in the last four consecutive falls leaving prices -10% lower than where they were in September. There were rises for some other components, but butter fell -11% and cheese fell -4% at this auction, (a lot, but these two products make up less than 10% of auction volumes). Farm gate milk pricing is under pressure now.

In the US, the latest service sector PMI has come in strongly. It is lower than for October, but still indicating a strong expansion. A second index shows the same thing. This is the latest evidence their economy is experiencing another quarter of solid growth.

Services in China improved marginally, while those in the Eurozone expanded strongly. In Japan, their services sector could not match their factory sector, showing a subdued level of growth.

In other data out overnight, the US trade deficit for both goods and services came in slightly worse than expected in October, pushed out by a fast pace of imports especially from China and even faster from the EU.

In China, a unit of HNA has scrapped a local share sale worth NZ$1.1 bln because it could not get regulatory approval.

In Australia, the RBA sounds more confident falling unemployment should ultimately force companies into paying higher wages - a key trigger for rate hikes.

And we should also note that Amazon launched yesterday in Australia with a local website, local distribution, and local offers.

In New York, the UST 10yr yield is now at 2.37% as yields flatten worldwide.

The price of crude oil is a little higher, now just under US$58 / barrel, while the Brent benchmark is just over US$63.

The price of gold is down -US$11 to US$1,263 oz which is as low as it got in August.

The Kiwi dollar is just a little firmer from this time yesterday. We are now at 68.8 US¢. And on the cross rates we are at 90.4 AU¢, and against the euro at 58.2 euro cents. That puts the TWI-5 at 71.7. And bitcoin is sharply higher again today, now at US$11,745 having reached a new all-time record high of US$11,860 a few hours ago.

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 today is by following our Economic Calendar here ».

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10 Comments

"When it gets serious, you have to lie" and the published Stats are starting to fit that mould......

As many of us have been saying since 2011, stimulation has not worked; Zirp may have brought forward credit spending but it has also reined in the more comfortable 'savers'; recovery is not under way in Asia any more than it is in the US or Europe; all margins are under extreme pressure; fiscal policies account for about 60% of boosted profits; sales remain laggard; all the smart senior business heads know that there is no natural growth at all outside a few hitech sectors; the bourses are overvalued; oil’s price level is silly; a lot of medium-sized investors are thinking about gold.
But according to the US “business” media, ‘world growth is starting to look healthy’. No it isn’t: local eyes say spending confidence isn’t there, banks are nervous, China is a potential credit basket case, and the asset prices boosted by Zirp are being given unreal valuations they cannot support. So you watch the local news and grasp the issues, which you can then compare to the rubbish being spewed out by the BBC, CNN, Bloomberg, Sky and CNBC. Then you can read what the best Net commentators are saying……and that, usually, is far closer to what regional business and banking is concerned about.

(John Ward)

With similarity to 2008, the US car market today is beginning to show signs (in terms of non-performing loans) of that fine old institution the US housing sector. Nearly one in 10 car loans made to borrowers with bad credit was delinquent by 90 days or more in October, according to a new report on household debt by the Federal Reserve Bank Of New York. Can't we see what's coming down the road?! The marginal borrowers that have 'supported' the system through QE, are going to default....then...

In New York, the UST 10yr yield is now at 2.37% as yields flatten worldwide.

Hmmmm....

The yield curve is quite simple, which again proves Economists don’t understand bonds (therefore money). The long end is saying unequivocally that nothing has changed or will change no matter what happens in the short run (TIPS and eurodollar futures agree, too). If the yield curve was to have flattened at higher nominal rates across-the-board consistent with, or even just close to, pre-crisis levels, then these attempts to force benign interpretations of what otherwise is a very, very bad sign would stand a chance of being other than laughable. Read more

We are on track for a steep two quarter rise in fuel prices, the steepest rate of increase since 2008. Consequences of extolling a 'lower currency' or fuel retailers rubbing hands, the numbers will show thru in 4Q CPI, the joy of inflation.

"In other data out overnight, the US trade deficit for both goods and services came in slightly worse than expected in October, pushed out by a fast pace of imports especially from China and even faster from the EU."

Could be a sign of growth, especially consumer spending, finally gaining some momentum in the US.

"Black Friday sales fail to lift high street gloom"
https://www.ft.com/content/981b8706-d901-11e7-a039-c64b1c09b482
Worse!
"Black Friday only shifted spending away from Christmas"

HNA were throwing money around like drunken sailors on shore leave , it was never going to end well when the authority took over the the sailors need to muster in the morning with hangovers, empty pockets and little memory of who they spent the night with