Equity markets down sharply; US retail sales solid; US & Europe PMIs weaken, hold in Japan; Hong Kong & China homeowners jittery; UST 10yr 2.88%; oil and gold down; NZ$1 = 68.1 USc; TWI-5 = 73

Equity markets down sharply; US retail sales solid; US & Europe PMIs weaken, hold in Japan; Hong Kong & China homeowners jittery; UST 10yr 2.88%; oil and gold down; NZ$1 = 68.1 USc; TWI-5 = 73

Here's our summary of key events overnight that affect New Zealand, with news China data is triggering investor fears.

Firstly, equity markets are taking a beating today. It started in Shanghai with them closing down -1.5% yesterday. That has compounded to a -23% loss for the year and well into a bear market. Hong Kong was down -1.6% yesterday, Tokyo down more than -2%. That was influential overnight in Europe where stocks fell about -0.7% on average across all markets. The DAX is now down more than -15% so far in 2018. That weakness is flowing on to Wall Street today with the S&P500 down -1.6% so far in early afternoon trade. This key index is now down more than -3% for the year and it seems unlikely it will end the year at a better level.

American retail sales data for November has come in flat compared with October and up +4.2% year-on-year. This matched analysts expectations and is seen as a good sign heading into the heart of the holiday shopping season..

US industrial production recovered slightly from a poor October, and the gains in November were average.

It doesn't seem that December will be better however. The early December US PMI readings show the manufacturing sector expanding at its slowest rate in 13 months and the service sector is slowest rate in 11 months. It's a picture on slowing momentum

Momentum is leaking away faster in the Eurozone, and in Japan it is holding at a modestly positive level.

In China, most of the data released late yesterday indicated growing weakness, data that may be behind the stock market reversals today. Nominal retail sales rose +8.1% year-on-year and the slowest such growth rate in 15 years. Data for industrial production was down to +5.4% year-on-year and well below analysts estimates. Electricity production grew at only +3.6% pa (although to be fair that was higher than the November 2017 rise of +2.4% pa). But, oc course, there's this to consider.

American exports at their biggest trans-Pacific trade gateway ports plunged last month, in an apparent sign of the impact of China’s retaliatory tariffs. Outbound container volume at the neighboring ports of Los Angeles (-14%) and Long Beach (-8%) fell -12% in November from the same month last year, the first decline after seven straight months of export growth. Imports were down too. This may pick up however as China has signaled that it will reverse tariffs hikes on corn and cars.

Japan is trimming its official growth forecast to +1.3% pa in 2019, from +1.5%.

In Hong Kong, home owners are turning jittery as house price falls now exceed -20%.

And there are reports that economic fears in China are reigniting the rush to buy overseas property. Sydney and Melbourne get a special mention, as does New Zealand's new unavailability.

The UST 10yr yield is ending the week at 2.88% and a +3 bps rise for the week. Their 2-10 curve has risen overnight to just under +16 bps. The Aussie Govt 10yr is at 2.45% (and unchanged for the week), the China Govt 10yr is at 3.37% and up +6 bps for the week, while the NZ Govt 10 yr is at 2.51%, up +3 bps the week. New Zealand swap rates ended the week very little changed from where we started although the curve flattened somewhat with the 2-10 curve ending at +70 bps and its flattest in more than two years.

The VIX is still high but is little changed this week at just under 22. That is still well above its average over the past year, of 15. The Fear & Greed index has gotten more extreme on the fear side in the past few days. It has been at the extreme 'fear' level for a month.

Gold is slipping today and is now at US$1,237, a -US$7/oz fall over the past 24 hours and a -$10 fall over the week.

US oil prices are down sharply today by more than -US$1.30/bbl to just over US$51/bbl. The Brent benchmark is now just over US$60/bbl. The US rig count is still holding at its 200 week high despite these very low prices.

The Kiwi dollar is ending the week softer at 68.1 USc and down -½c for the week. On the cross rates we are marginally softer at 94.9 AUc, and little changed at 60.2 euro cents. That puts the TWI-5 at up to 73.

Bitcoin is now at US$3,177 which is only a small -2.4% loss for the week. It is a disappointing end for the crypto because at one point it was up +4.5%. But it was brief and couldn't be sustained. It is now at a 15 month low. This rate is charted in the exchange rate set below.

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

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Source: CoinDesk

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16 Comments

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Behind a paywall. Is AFR worth the subscription cost? Do they do decent original reporting?

Do you use an ad blocker? I have Privacy Badger running and have no problem accessing the AFR paywall stuff. I think it recognises NZ as different to Oz and lets you in. Just a thought.

I use Outline
https://www.outline.com/PHvH9E

it gets around most of the problems

https://www.outline.com/

Brilliant, thanks, and you too bw.

Sci-hub is a must for reading sci journals too.

So you bludge
Sci-Hub is a website that provides free access to millions of paywalled and open-access research papers and books. Sci-Hub obtains paywalled papers by presenting compromised university usernames and ...
Created by: Alexandra Elbakyan
Available in: : English; Russian;

Since most wealth is held in housing, just about everywhere... Higher real rates relative to housing are likely to be a significant problem.
I to appreciate your posts Andrew. Thanks.

Yes
Too much time spent blogging by young farmers

Just in time to follow closely upon yesterday’s European circus, IHS Markit piles on with more of the same forward-looking indications looking forward the wrong way. Mario Draghi says the ECB is ending QE, good for him. The central bank will do this despite balanced risks rebalancing in a different place. The more bad news and numbers stack up the more “they” say it’s nothing just transitory roughness.

Globally synchronized growth is dead, that much is for certain. There wasn’t much decoupling anywhere in between. In between what? This is how it always goes, each and every time."

https://www.alhambrapartners.com/2018/12/14/just-in-time-for-the-circus/

The English language headline for China’s National Bureau of Statistics’ press release on November 2018’s Big 3 was, National Economy Maintained Stable and Sound Momentum of Development in November. For those who, as noted yesterday, are wishing China’s economy bad news so as to lead to the supposed good news of a coordinated “stimulus” response this was itself a bad news/good news situation.

If the Communist State Council is to be flustered into action, the title of the release might suggest maybe not. Then again, there isn’t a month that goes by where the NBS writers don’t write pretty much the same thing. In a Communist country, any wording less than “sound momentum” is surely frowned upon especially when there is no momentum

https://www.alhambrapartners.com/2018/12/14/the-word-is-decline/

How quickly hope can sour. That is, if it is based on suspect assumptions and a misreading of the general situation. It would then be more like irrational pleading than derived from solid analysis.

One year ago, thereabouts, President Trump delivered upon one campaign pledge. He pushed a tax reform bill through Congress aiming to offer benefits to both the supply and demand sides of the economy, workers and businesses alike.

https://www.alhambrapartners.com/2018/12/14/retail-sales-the-more-immedi...

https://asia.nikkei.com/Economy/China-sparks-suspicion-as-it-holds-relea...

Markets See the Gathering Downside That Powell Does Not

https://www.realclearmarkets.com/articles/2018/12/14/markets_see_the_gat...

The SCMP story about Chinese money looking to escape into foreign property markets is a little dated (I'd seen it before). Not sure why David Chaston thought it necessary to drag thet out. Regardless, the whole idea of Chinese buying suburban houses in Elglish-speaking countries for a kings' ransom is alluring when govts are open to enabling immigration and "investment" from China. And ulimately this say something bad about the wider economic environment: 1. Wealthy Chnese don't really buy into the "miracle" that likelt drove their own pesonal wealth; and 2. the Anglo-Saxon brotherhood seems unable to decouple from bubble economics that effectively service younger people and future generations a shit sandwich.

The SCMP story about Chinese money looking to escape into foreign property markets is a little dated (I'd seen it before). Not sure why David Chaston thought it necessary to drag thet out. Regardless, the whole idea of Chinese buying suburban houses in Elglish-speaking countries for a kings' ransom is alluring when govts are open to enabling immigration and "investment" from China. And ulimately this say something bad about the wider economic environment: 1. Wealthy Chnese don't really buy into the "miracle" that likelt drove their own pesonal wealth; and 2. the Anglo-Saxon brotherhood seems unable to decouple from bubble economics that effectively service younger people and future generations a shit sandwich.

China equities battling but iron ore and logs seem to tracking ok suggesting wheels haven't fallen off as yet.