Here's our summary of key events overnight that affect New Zealand, with news of floods - of Chinese travelers, and US debt.
First up, however, the US Fed is about to report on its first meeting of 2018 and the last one chaired by Janet Yellen. After this it is to be chaired by Trump appointee Jerome Powell who is regarded as a bit of a rate hawk. We will update the results when they are available after 8am NZT. Markets are expecting the next +25 bps rate hike at their March 22 meeting.
This weekend we will get the next US non-farm payrolls report. And today we got the pre-cursor ADP report which was strongly positive, handily beating market expectations. It showed employment gains in the service sector as particularly strong.
Right on expectations was the December home sales report. Volumes were +0.5% higher than in the same month a year ago. But most of this growth is coming from Southern states; other regions saw volumes declines. Prices are up +5.8%. The latest tax code revision has lowered individual tax incentives for housing.
North of the border, Canada reported stronger economic growth in November. GDP there is up +3.5% and above market forecasts. It is across most of their economy's sectors. A curious pattern is developing where the US's main trading partners are reporting stronger growth than for America which is turning out to be the laggard.
In China, they reported that the expansion of their manufacturing PMI grew less vigorously in January than December. It isn't expanding at a particularly impressive rate anyway so a slowdown will worry them.
But their consumers are in an expansive mood. In a hard-to-believe but eye-catching report, it is claimed that 92% of "Chinese consumers" plan to travel overseas in 2018. That is 154 miln Chinese international travelers, up from 122 mln last year. A real flood is coming to many parts of the world.
In Germany, they will be worried about an unexpected stumble in their retail sales. They were expecting slower growth, but in fact they got a year-on-year decline in December. To be fair, it is data that can be reasonably volatile, but the size of the reported 'real' drop in sales is a concern.
Meanwhile, EU inflation came in slightly higher than expected at +1.3% in January. It might have been higher than expected but it is still at its lowest level in 13 months. Core inflation however did pick up.
Back in the US, the Federal Treasury is hiking the amount of new debt it needs to raise. Basically, that is because it needs to pay for its stimulatory tax cuts. And the new extra debt is not insignificant. Expect a blowout in their overall Federal debt levels. It is only a matter of time before markets see American fiscal policy as irresponsible and that realisation will buffet financial markets for some time. Buyers of that debt will demand higher risk premiums. And don't forget we are just two weeks away from the next budget resolution in Congress (yes, a Budget resolution for October 2017). Given the hardened partisan positions in yesterday's State of the Union speech, it seems they are in for a rocky period again.
Meanwhile, the rest of the world is trucking on. In fact global trade is in a real purple patch with airfreight volumes up +9% in 2017, the highest level ever and the highest growth rate in seven years.
The UST 10yr yield is still firming and is now at 2.74%, a gain of +1 bp in the last 24 hours. The equivalent 10yr China sovereign bond is down however, just a little at 3.94% (-1 bp). The equivalent NZ 10yr sovereign bond is down -3 bps to 2.93%.
Oil prices are down marginally today and still just under US$64.50 a barrel, while the Brent benchmark is now under US$69.
Gold is unchanged and still at US$1,340/oz.
The Kiwi dollar starts today higher however at 73.7 USc. On the cross rates there are also small rises and we are now at 91.4 AUc, and against the euro at 59.4 euro cents. That puts the TWI-5 just on 74.4.
Bitcoin is now just under US$10,000 and unchanged this time yesterday. It is having a hard time deciding which way to go now. South Korea has decided not to ban the trade, but it has uncovered large fraud on some exchanges.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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