Here’s our summary of key economic events overnight that affect New Zealand, with news financial markets are still prepared to look through the economic pain about to hit from China.
The number of cases the coronavirus is still rising, up a sharp +15% in a day and now over 28,000 and the death toll rose similarly. But most are still in Hubei Province and it is becoming clear that the Chinese strategy is to sacrifice that province to save the rest of China, and the world. It is fearsomely ugly at ground zero with a complete shutdown.
The streets may be deserted in some large regional Chinese cities, but retail commerce continues online. Online payment transactions are almost +50% higher than the same time last year.
Although international airfreight ended 2019 with a -3.3% contraction and for the full year the Asia-Pacific region shrank -6.4%, the passenger air travel market wasn’t so depressed in December. It is still growing even if the 2019 growth was the slowest since the GFC. And the December rise in international travel was +3.8% year-on-year.
Australian retail sales data was unexpectedly weak in December, but that was more because consumer buying patterns shifted with more of a peak in November. For the full final 2019 quarter, sales were up +2.7% year-on-year and that is considered a good result.
The Australian trade balance (for both goods and services) came in high for a December but lower than expected. The December balance was up mainly because import growth is lagging. Whether mineral export growth will continue into 2020 is now highly dubious.
Seafreight markets remain very low, with the Baltic Dry index slipping further and some key components near record lows. The iron ore price, which was at over US$92/tonne a week ago, has opened after the Chinese New Year at just on US$80/tonne, a sharp drop of more than -12% and back to levels last seen in November.
Signals from Singapore reveal they are getting ready to devalue their currency in response to the trade hit they are taking from the Chinese coronavirus. This comes after Hong Kong revealed its economy contracted sharply in 2019.
China has announced that it will half tariffs on about US$75 bln of goods from next week. But its capacity to buy more is seriously undermined by its virus emergency, so the practical impact will be low in the immediate term.
In mid-day trade, the S&P500 is up +0.3% today, following European markets that were up as much as +0.9% (Paris) or as low as +0.3% (London). Yesterday, Tokyo leapt +2.4%, Hong Kong joining in the frenzy, up +2.6%, and Shanghai was enthusiastic too, up+1.7%. Locally, the ASX200 rose +1% while the NZX was closed, of course.
Elsewhere, there is an American non-farm payrolls report out tomorrow and yesterday the precursor ADP employment report was released, and it showed strong jobs gains. Most (81%) of these gains were in their service sector. If this holds, it will be the largest monthly gain since December 2014. But we should note that last month the ADP Report signaled a +202,000 gain that wasn’t reflected in the non-farm payrolls report (+145,000).
In Germany, data for December factory orders shrank sharply, down almost -9% compared with the same month in 2018. For an economy the size of Germany, that is a huge decrease.
The UST 10yr yield will start at just under 1.65% and similar to this time yesterday. Their 2-10 curve is holding at +20 bps. Their 1-5 curve is still negative at -4 bps. Their 3m-10yr curve is positive, now at +10 bps. The Aussie Govt 10yr is little-changed at 1.08%. The China Govt 10yr now at 2.88% and also littel-changed. And the NZ Govt 10 yr has confirms the stable mood at 1.33% after yesterday’s strong rise.
Gold has risen again today, up another +US$8 to US$1,566/oz.
US oil prices are a little lower today at just under US$51/bbl. The Brent benchmark has also slipped to just under US$55/bbl.
The Kiwi dollar is a little soft this morning at 64.6 USc. On the cross rates we are lower at just on 95.9 AUc. Against the euro we are holding at 58.8 euro cents. That takes our TWI-5 a little lower to 70.2.
Bitcoin is still rising, up +2.5% at US$9,550. That takes it above NZ$15,000 and its highest level since October 2019. The bitcoin 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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