Has Japan started 'stealth tapering'?; Mexico inflation high; Nikkei225 bests 1991 levels; German production & exports strong; iron ore prices and volumes rise; UST 10yr yield 2.54%; oil up and gold down; NZ$1 = 71.7 USc; TWI-5 = 74.1

Here's our summary of key events overnight that affect New Zealand, with news from all over.

Firstly, the Bank of Japan appears to have started a process of tapering their QE program. Traders are calling it 'stealth tapering'. It is hard to know whether this move is significant, but Japan has been money-printing since 2001 so any change will be noticed. The latest move is to just dial back the level of money-printing (QE) a little. It certainly isn't ending anytime soon.

In the US data out overnight showed weakness in new job openings, and a decline in small business confidence off a very high November result.

In Mexico, they announced their consumer inflation was +6.8% in December, its highest rate there in 17 years.

Back in Japan, the Nikkei index of 225 leading Japanese shares reached its highest level since 1991. That was 26 years ago, and marks the point when a deflationary cycle started there. The recent rise in the Nikkei225 recently has been dramatic; in the last four years it has risen by 2.8 times from an index level of 8,500 to today's 23,850. That period mirrors the Prime Ministership of Shinto Abe.

Data out in Germany overnight shows industrial production up +5.6% in November from the same month a year ago, and exports are up +8.2%.

The price of iron ore is very firm at US$77.62/tonne today despite nearly every analysts warning it is about to fall. In fact, analysts have been saying that ever since the price went through US$60/tonne. The high price is based on China demand, and the world's largest export port for the stuff has just handled a world's record tonnage in December. We should also keep an eye on Aussie exports of lithium, which are rising fast too.

The UST 10yr yield has had an unusual move higher overnight to 2.54% today (+6 bps). That is its highest level since March 2017. In China, the equivalent 10yr sovereign bond is unchanged at 3.92% while the equivalent NZ 10yr sovereign bond is yielding 2.81% (+3 bps). These rises are sure to make many bond traders nervous as they signal sharp drops in the face value of their holdings. KiwiSaver members in conservative funds are likely to feel the impact if the rises hold. For everyone else, the rise in yields signals optimism.

Oil prices are higher in the US today by about +US$1.50 with the WTI benchmark now just under US$63 a barrel, while the Brent benchmark is just under US$69. (Keep an eye on our petrol pump prices - the impact will bite there.)

Gold is lower by another -US$6 to US$1,310/oz.

The Kiwi dollar is marginally softer this morning at just on 71.7 USc on a stronger greenback, and on the cross rates it is at 91.7 AUc, and against the euro it's higher at 60.1 euro cents. That puts the TWI-5 unchanged at 74.1.

Bitcoin has held over the past 24 hours, up just +US$100 to US$14,907.

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

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USD 
NZD
End of day NY time
Source: CoinDesk

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8 Comments

Small business confidence is the highest for years in the USA
https://www.nfib.com/content/press-release/economy/average-monthly-optim...

Japan has been tapering for some time. They may be past the inflection point now with a smaller increase that the previous. There's still too much money being printed but at least ECM, BoJ and the Fed are toning down their activities.

It's still not enough to expose fraudulent businesses and I'm wondering what will be the next Enron/Bernie Madoff/MBS disaster.

"Japan has been money-printing since 2001"

Clearly a huge success then?

If it is worth doing it must be worth doing for 17 years?

ADB prices NZ$500 million five-year Kauri bond Read more

More NZD looking to be swapped with NZ bank foreign borrowings for local lending?

Y'day, I gave an example of a Japanese stock--non-ferrous metal mining company, Sumitomo Metal--that has seen its stock price appreciate approx 150% in 18 months. Is there another established mining company in the world that has seen this kind of price movement at the present time? And it is is really related to commodity prices and industrlal output? It's unfortunate that people don't pay more attention to Japan as opposed to say cryptocurrencies.

Yeah, who on earth wants a 400% return in 30 days after putting money on DOGE coin (like I did) when they can have 150% over 18 months............. Out of interest are you a Baby Boomer?

No, I'm not a baby boomer. Of course everyone wants a 400% return in 30 days. And that's why the sheeple are diving into or considering cryptocurrencies. Very few of them would even be aware of SMM. They know what Bitcoin is though...or at least they've heard of it.

Anyway, what is the driver of the SMM stock price? Wouldn't the smart money be in cryptocurencies?

So are you not "diving" into Crypto because you don't understand it or because you are scared of the market? I couldn't care less about SMM 150% over 18 months is terrible return.