Here's our summary of key events overnight that affect New Zealand, with news the world's largest economy seems to be losing its growth momentum.
New orders for American durable goods fell at a sharp rate in October from the previous month, a decline that analysts weren't expecting. Year-on-year however, the levels are up +8.7%. The monthly decline suggests an economy slowing faster recently than has been assumed. The Atlanta Fed's GDPNow model has the rate of growth pegged back to +2.5% pa in Q4 and way down from the Q3 rate of +3.5%. Momentum seems to be leaking away, and quite quickly.
Telling the same story of a slowing is the latest consumer sentiment survey. And American home buyers filed the fewest applications for mortgages in almost 18 years last week even as mortgage rates drifted lower in step with bond yields.
Perhaps that is not so surprising because existing home sales are still quite low, down in October -5.1% from the same month a year ago.
Wall Street is up today, a bit of a bounce-back from yesterday's sharp fall. The S&P500 is up +1% in early afternoon trade. Whether this is a genuine turn up will depend a lot of holiday season retail results. That equity rise comes after Shanghai managed to close even yesterday.
Closing even is a good result for China. But investment funds are struggling with the previous writedowns in equity valuations. Private funds have had a hard time attracting money this year as China’s financial markets wrestle with a bear market in stocks, tough new asset management rules, and a national campaign to reduce debt. These funds are seeing net outflows.
In the EU, Brussels has pushed back hard against Italy's plan to ignore its debt level commitments. It notes at 131.2% of GDP in 2017, the equivalent of €37,000 per capita, Italy's public debt exceeds the 60% of GDP reference value it committed as part of the EU, and it doesn't want to see Italy go further into a hole it will never get out of.
The OECD has revised down its growth forecasts worldwide. For New Zealand they say economic growth is projected to edge down to 2.6% by 2020, mainly reflecting slowing private consumption as the boost from increased financial support for families passes, net immigration diminishes and housing wealth gains subside.
In Australia, there is a lot of silly posturing going on at the Hayne Royal Commission, some of it by the Commission itself. But one positive thing may come of it all - removing the inherent conflicts from mortgage broking. It looks increasingly likely that mortgage brokers will need to charge their clients directly for their services rather than taking 'commissions' from banks. Brokers claim customers value their services, but the evidence is that they are fundamentally conflicted. Hayne may force a restructuring to do the right thing. Whether this reform ever arrives in New Zealand is uncertain; the regulator here has shown little interest in addressing the inherent conflict of interest by mortgage brokers.
The UST 10yr yield is starting today higher at 3.07%. However their 2-10 curve is still lower at +25 bps. The Aussie Govt 10yr is at 2.70% and unchanged, the China Govt 10yr is at 3.40%, up +1 bp, while the NZ Govt 10 yr is at 2.74% and unchanged.
Gold is up +US$4 to US$1,226/oz.
US oil prices have bounced back up today, recovering a good part of yesterday's big drop. But today they are still at only US$55/bbl. The Brent benchmark is now just over US$64/bbl.
However, the Kiwi dollar is starting today marginally firmer at 68.3 USc. On the cross rates we are unchanged at 94.1 AUc, and at 60 euro cents. That puts the TWI-5 at 72.8.
Bitcoin is lower again today, now at US$4,394 and -2.6% lower than this time yesterday. At one point in the past 24 hours it dropped to US$4,164. 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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