Here's our summary of key events overnight that affect New Zealand, with news the global growth engine is being duplicated.
But first in the US, producer prices actually fell in December for the first time in more than a year, a sign inflationary pressures remain modest even though their economy appeared to pick up steam last year. Prices for both goods and services fell, and interestingly, prices for services fell more.
Retail sales in the US are forecast to hit US$5.8 tln in 2018. Demand from the American consumer is what drives the world's economy. Well, that has been the fact for over a century. But new data out recently shows that consumer retail demand in China will match that of the US this year. The world now has two growth engines and we are witnessing an important transition. The US consumer will remain important, but the Chinese consumer is about to take centre stage.
Yesterday we reported strong growth in global airfreight volumes and today we can follow that up with equally strong passenger air travel data for November. International volumes are up +8.1% year-on-year. In the Asia/Pacific region these volumes were up +10.1%.
Europe's strengthening economy has the ECB thinking about when to end their bond-buying. Traders are speculating September 2018. In their December meeting minutes, the ECB Governing Council said there was a "widely shared" view among officials that communication "would need to evolve gradually". This is being taken as a signal that change is underway.
In China, a giant wall of debt repayment obligations loom in 2018 for corporate borrowers. Scheduled is a repayment obligation of more than US$600 bln. Plus there are buy-back options in place for another US$140 bln and analysts say these are likely to be exercised, making the repayment load even higher. These looming obligations are probably what is behind the rising Chinese interest rates.
China’s Premier has revealed their economy grew by +6.9% in 2017, just days before the government is due to officially release the numbers. That is the first rise in their growth rate in seven years and way ahead of the official target of +96.5% set in March. Analysts are saying it will give officials confidence to push ahead with long-promised reforms and economic overhauls, especially in the SOE sector.
China has also taken the unusual step of denying that is about to turn away from buying US Treasuries. They called the reports "false news". China is the world's second largest holder of UST debt (after Japan), holding about 7% of all Treasuries on issue.
The UST 10yr yield has failed to hold and settled back at 2.56% today (-3 bp), supported no doubt by the China statement. In China, the equivalent 10yr sovereign bond is at 3.96% (+3 bp) while the equivalent NZ 10yr sovereign bond is also on the way up and now yielding 2.87% (+2 bps).
Oil prices are up strongly today with the WTI benchmark now just under US$64.50 a barrel, while the Brent benchmark is just under US$70. The combination of strong global growth and producer output cuts are said to be behind the move.
Gold is up +US$2 to US$1,317/oz.
The Kiwi dollar is ½c stronger this morning at just on 72.5 USc. On the cross rates it is at 91.8 AUc, and against the euro it's at 60.2 euro cents. That puts the TWI-5 up at 74.5.
Bitcoin has slipped again over the past 24 hours, by -US$850 to US$13,687, a -5.8% decline. Planned South Korean restrictions, based on "great concerns", are said to be behind the falling sentiment. They are not the only ones concerned.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».