US deficits widen; OECD jobless rate falls; a Brexit deal on the table; RCEP pushed back; China & US in confusing trade talks; UST 10yr at 3.16%; oil slumps and gold down; NZ$1 = 67.6 USc; TWI-5 = 72.3

Here's our summary of key events overnight that affect New Zealand, with news OPEC is jittery after another massive slump in the crude oil price overnight.

But first, the US Federal government announced a deficit for October of -US$100.5 bln after finishing its last budget year with a massive -US$779 bln deficit (-3.8% of US GDP and up from -3.3% the previous year). That data will be released officially at 8am NZT and we will update this item then, but if it comes in as expected, it will be on the way to a -US$1 tln deficit in the 2018/19 year (-4.8% of GDP). US Federal public debt outstanding is now US$15.7 tln or 77.8% of GDP, and that is actually -US$1.1 tln more than a year ago. You would be right to ask why the debt is rising faster than what is reported in the annual deficit. Dodgy accounting.

The OECD reported that the group's overall jobless rate was down to 5.2% in September and the lowest it has been since when they started collating this data in 2008. It is a rate that is only really held high by Eurozone countries.

Germany reported its October CPI was stable at +2.5%. And a separate survey in Germany economic sentiment remains firmly negative and slipped slightly again in November.

It is being reported that EU and UK negotiators have reached a draft Brexit deal. But it is still an open question as to whether the UK politicians will approve it once they see the final terms. Markets are ignoring the potential of this agreement, staying in a sideways mood today on Wall Street.

Yesterday, Shanghai clawed back morning losses to finish the day almost +1% higher.

Meanwhile China's equivalent TPP trade deal, the RCEP (without the TPP's pesky labout and environmental conditions) is struggling. After a fruitless meeting on Monday, trade ministers from Asean’s member countries and the bloc’s six dialogue partners – Australia, China, India, Japan, South Korea, and New Zealand – pushed back further talks on the Regional Comprehensive Economic Partnership until next year. India is a key stumbling block, resisting opening up its markets "particularly to Chinese firms".

The Americans and China have resumed contact "at all levels" a White House spokesperson confirms. A problem however is that those talks are being held with the Treasury Secretary whom the President sees as soft on China. But a top Chinese negotiator, will probably visit Washington shortly to advance some informal talks on advance of the Xi-Trump upcoming meeting at the G-20 summit at the end of the month, another cabinet secretary said. Progress on restarting dialog is as fractured as the rest of American foreign policy with officials floating various efforts to see which one the President pushes back on.

The UST 10yr yield are lower at 3.16%, a fall of -3 bps. Their 2-10 curve is still just below +26 bps. The Aussie Govt 10yr is at 2.73%, down -1 bp, the China Govt 10yr is at 3.50% and unchanged, while the NZ Govt 10 yr is at 2.82% and that was down -1 bps overnight.

Gold is marginally lower at US$1,202/oz, a -US$1 trim overnight.

US oil prices fell sharply again today, down -US$3.50/bbl and now just on US$57.50/bbl. The Brent benchmark is now over US$67.50/bbl. Opec's latest review signals that a production cut is a clear option to stem these price falls. The last time crude oil was at US$67.50/bbl our discounted pump price was NZ$1.96/L.

The Kiwi dollar will start today at 67.6 USc and a little firmer than this time yesterday. On the cross rates we are also firmer at 93.7 AUc, and at 59.9 euro cents. That puts the TWI-5 up to 72.3 and a new five month high.

Bitcoin is now at US$6,301 and down -1% overnight. This rate is charted in the exchange rate set below.

This chart is animated here.

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

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22 Comments

this morning news came we are going into pike river.
my question , why did solid energy buy pike river? where they instructed to by the government of the day?
what has it cost us as a country to own this mine?
this smells so Baaad i would like to see an independent enquiry set up to see why we ended up here and why, who made the decisions and the cost
pity we have no real investigator reporters to dig into this muck

Sharetrader... I dont think you need to look any further than the , then, CEO..Don Elder.
A fancy education does not give one wisdom, prudence nor understanding...
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=108...

but they were already in trouble before they brought pike river, so why buy a mine that you know can not be opened when you already have money issues?

Wasn't China buying coal by the bucket load leading up to the mines establishment?

Perhaps the markets, media and people are at Brexit_drama_saturation_point? Bread and circuses were only ever an occasional thing.
Brexit was heralded as one of the horseman of the apocalypse, but nothing remotely that exciting has happened.

Apocalypse for the EU, that is. They are about to tell their biggest customer to bugger off. Hubris comes before a fall. Of course the Brits are probably so weak and pathetic they will agree to bow down before the Empire, but it makes little difference to the outcome. Brits with get up and go have got up and gone.

The EU is a much more important market to the UK than the UK is to the EU. ~44% of UK exports go to the EU, whereas ~8% of EU exports go to the UK. Regardless of whether the UK is able to quickly negotiate free trade deals with more distant countries, any reduction in trade with the EU will be very painful.

The UK is one of Germany's largest export customers. They are more important than you might think.

Not saying the EU will be unaffected, just that the UK will bear the brunt of it if a decent deal isn't negotiated.

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To be fair, the horseman hasn't actually arrived yet. We're still negotiating exactly what kind of cloak he will wear and the design of the scythe.

Nice one. The UK is the only country with an effective military, apart from France. There will be revolt in Eastern Europe when the Brits withdraw their tanks cos they can't afford to keep them there. The Poles have seen the Germans try to partition Ukraine and are livid. The EU is not the happy family they portray. It worked when France could boss West Germany around, but since Germany became too big there is an inbalance of power. The Germans are terrified of their history and don't know what to do, they are frozen in the headlights. Snafu all round.

Trump affect with a dire warning to Saudis. What Trump wants, Trump gets.....and most likely the reason he's not pushing Kkashoggi investigation.

WTI SETTLES 7.1% LOWER, BIGGEST DROP SINCE SEPT. 1, 2015

I follow Chris Cook, I know this is Sputnik but it's Chris Cook a master on oil, informative.

https://sputniknews.com/radio_double_down/201811131069763807-brent-crude...

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Interesting times. US government deficit is hoovering up all the funny money created by the deluded central bankers in Japan, Europe and China and, gasp, spending it. Result; US booming, US interest rates up; Japan, Europe and China up shit creek. Methinks someone had a cunning plan, and he or she maybe isn't called Baldrick and doesn't have red "hair".

Seriously, the US has re-created the conditions that led to the fall of the USSR, the bursting of the Japanese "miracle", and Tianamen Square. No wonder the CCP are centralising power under Mr Xi.

IMF World Bank: What the economic outlook holds for Asia
https://www.bbc.com/news/business-45859698

Now if we had a proper functioning open and competitive fuel market , we would see the pump price drop by now .

Given most oil is bought on futures markets , there is significant "smoothing " of the input cost by the major oil companies , so there is no reason for the price NOT to come down as quickly as it goes up .

Agreed. Just like the banks. Up in a flash, decline in a crawl. Who owns big oil and finance again?

Oil is crashing!!!!

Down $4.50 or 6.5% so far today

Crude at US$55.50
Brent at US$65.50

The following article explains why the oil price has fallen. The short version is Trump. The longer version is OPEC boosting supply in anticipation of sanctions which have been deferred. Also OPEC do not control the US supply which is a large volume right now.
https://www.cnbc.com/2018/11/13/why-oil-prices-tumbled-from-four-year-hi...