Wall Street closed; Canada turns dovish; China services in surprise rise; Australia growth in surprise fall; airfreight growth rises modestly; UST 10yr at 2.91%; oil up, gold unchanged; NZ$1 = 69.1 USc; TWI-5 = 73.6

Here's our summary of key events overnight that affect New Zealand, with news most markets are turning dovish as growth momentum continues to fade

First, a reminder that Wall Street is closed today for the the Bush funeral. But yesterday it was down a very sharp -3.2% essentially finishing off by wiping out all the 2018 gains. Overnight European markets fell about -1.4%. And they followed Shanghai which was down -0.6% as well. Hong Kong (-1.6%) and Tokyo (-0.6%) rounded out the list of majors all on the down side, and all essentially judging the result of the G20 China-US trade talks. Local markets didn't escape with the ASX down -0.8% and the NZX down -1.0%.

Most American data that was due to be published today has been put back until tomorrow. However the US Fed has released its Beige Book survey results. It continues to show modest to moderate expansion in most Fed districts.

In Canada, their central bank left its policy rate unchanged at 1.75% and as expected. Meanwhile, housing market resales slumped in Toronto, down -15% year-on-year. In Vancouver they hit a ten year low, down a massive -42%. Bond yields have tumbled on the dovish turn in Canadian sentiment.

In Mexico consumer confidence is holding at about a neutral level.

In China, there was an unexpected and encouraging improvement in their services sector PMI, in the survey not run by Beijing. It rose 'significantly' from neutral to being solidly expansionary.

In Australia things went the other way, with an unexpected slip in their GDP growth in the September quarter.  It grew at an annualised rate of just +2.8% which is sharply lower than the +3.4% rate recorded in the June quarter. Markets had expected 3.3% growth. This has pushed the AUD lower. The fear is that with house prices also falling, consumers may start spending less, compounding the growth retreat.

October data on world airfreight was released overnight showing a modest +3.1% gain and a small improvement from September's low +2.5% rise. The international airfreight component was a smaller +3.0% rise year-on-year with the Asia/Pacific region lagging at +2.4%.

Back in the US, Google's Waymo division has launched a significant development in its costly, decade-long quest for autonomous driving: self-driving robo taxis that actually generate fares. The trial is now working in Arizona.

The UST 10yr yield is marginally higher than this time yesterday at 2.91% and embedding its recent fall. Their 2-10 curve has stabilised at just under +12 bps, no doubt holding only because of the unexpected Wall Street holiday. The Aussie Govt 10yr is at 2.51% (down -2 bps), the China Govt 10yr is at 3.35% and unchanged, while the NZ Govt 10 yr is at 2.51% and also down another -3 bps.

Gold is unchanged today at US$1,237/oz.

US oil prices are a little higher again today at US$53.50/bbl. The Brent benchmark is now just on US$62.50/bbl.

The Kiwi dollar is starting today just a little softer at 69.1 USc. On the cross rates we are substantially firmer at 95.1 AUc as the Aussie sinks on its weak Q3 GDP result, and we slipped to 60.8 euro cents. That puts the TWI-5 just marginally down to 73.6 and still close to its eight month highs.

Bitcoin is much lower today, now at US$3,691 which is a chunky -5.7% drop from this time yesterday. We were last at this level in mid-September 2017 on the way up. This rate is charted in the exchange rate set below.

This chart is animated here.

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15 Comments

Australia growth in surprise fall? Just shows how so many of the mainstream economists get it wrong. There are no surprises here.

Exactly. The next move in AU interest rates will be a "surprise" cut. The RBA have adjourned for summer and will be a long way behind the curve by the time they meet in February. They haven't even started softening market expectations yet.
A cut probably isn't going to help but they'll do it.

Time for more speculation about 'when is the Kiwi going to Parity with the Aussie?"
This time, I reckon it will, and storm through the figure with ease, and not because 'we' are doing so well, either....

Right then. I am holding off changing money on your say so bw. Let me know when you think I should convert. Thanks

MTP

1.0218. Convert it all! probably around election time :)

I am off to Perth for Christmas, so here's hoping.

Might be looking at Feb at the earliest before parity. If an RBA cut pans out as suggested above. You can't complain about 95c though. Have a good Christmas.

"" in the survey not run by Beijing"". That says it all about treating China as a modern developed country.

Or two countries, a modern one of 60 to 100 million near the coast and another one of 1.2 billion on $3 a day inland.

What a great advantage they have

Canada has 3% GDP growth and an OCR of 1.75%. What level of growth are they expecting before they get those OCR's up to a reasonable level? I doubt they will be able to before the next recession. I think our reserve bank has the same issue but at least our starting point is higher.

The cash rates are the same , growth can unwind quickly.This quarters growth appears to be underwhelming. In the next recession, importantly we will not have Australia to prop us up. What we will have is an extra large helping of debt attached to housing.

Crap you're right I forgot ours was that low. The problem is that RBNZ can't ramp it up because it will lower inflation further out of band, and government wont want to change RBNZ mandate as it would slow down growth.

Twyford's triumph
From today's Herald

However, National Housing spokeswoman Judith Collins said the latest episode showed New Zealanders were "quickly losing interest in the Government's KiwiBuild policy".

"The ballot closed for the first houses in Wanaka and Te Kauwhata last month. Across these developments only four of the 20 houses sold, a worrying sign given the Minister has agreed to buy almost 400 houses across the two sites," she said.

"The Minister has underwritten around $200 million worth of houses across Wanaka and Te Kauwhata. Given that only four have sold, serious questions need to be asked about the level of due diligence Mr Twyford undertook before agreeing to sign such a contract."

She said that while Twyford had "made a big deal about the 40,000 people who have made an expression of interest in KiwiBuild", fewer than 300 had actually entered a ballot.

Theres so much mis-information being thrown around. It was earlier reported 7 of 10 at Wanaka had sold after the extended ballot. So four out of 20 including Te Kauwhata means most of the Wanaka sales fell over and nothing at Te Kauwhata sold, or Collins is lying.

Same as the 388 prequalified buyers reported earlier, but even now the kiwibuild website is saying only 248 prequalified so far.

Any chance Interest.co.nz wants to try to find the real figures? Perhaps some official information act requests to get the true numbers.