Here's our summary of key events overnight that affect New Zealand, with news the world's giant services sector is expanding steadily.
Firstly in the US, employers stepped up hiring in December and layoffs fell sharply, pointing to continuing labour market strength that will likely keep the US central bank course to increase interest rates in March. Today's data comes ahead of tomorrow's official non-farm payroll report and all eyes will be on the impact on wage gains.
But the latest assessment of the giant American services sector was not so upbeat. It showed a slower expansion in business activity in December and business confidence slipped to a 15-month low. This was despite and upturn in new orders which is staying a relatively strong aspect.
But markets are looking past this: the Dow is up over the 25,000 index level for the first time, a gain of 0.6% on the day. The wider S&P500 index is up +0.5%.
The global state of the services sector is better than in the US. The EU and China are recording faster expansions, and Japan's factory sector has come in at nearly a four year high.
In China, a review of corporate bond risk shows a heightened expectation of defaults with developers and construction firms the most vulnerable. Chinese builders face a record US$31 bln of onshore and offshore bond maturities this year, which may more than double if put options are exercised. Fundraising curbs have hurt their ability to sell bonds in the domestic market, with onshore note issuance plummeting -67% in 2017 as Beijing tightens is control and oversight of the sector.
In Vancouver, regulations there to try and quell runaway housing prices are having perverse impacts. Sales volumes are much lower for houses and prices are softening - but not collapsing. However, the apartment ("condo") market is booming with sharp rises in prices for these more affordable units. Those regulations have shifted the game in an unexpected way. Average apartment (condo and townhouse) prices are up +25.9% in a year and are now over C$650,000 for the first time.
The UST 10yr yield is unchanged at 2.45% today. In China, the equivalent 10yr sovereign bond is yielding 3.94% (+2 bps) while the equivalent NZ 10yr sovereign bond is yielding 2.77% (unchanged).
Oil prices are up again in the US today with the WTI benchmark now just under US$62 a barrel, while the Brent benchmark is just under US$68. The rise is to its highest since May 2015 and driven by concern about supply risks from the unrest in Iran, the effect of OPEC-led output cuts, and short-term demand-boosting cold weather in the US. But if the US Administration gets its way, vast new areas will be opened up for oil exploration there.
Gold is up another +US$3 to US$1,318/oz.
This morning the Kiwi dollar is up ½c from this time yesterday at just on 71.5 USc, and on the cross rates it is at 91 AUc, and against the euro it's also higher at 59.3 euro cents. That puts the TWI-5 at 73.7.
Bitcoin has had a minor net slippage in the past 24 hours and is now at US$14,823 although at one point is was US$500 higher.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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