Here’s our recap of key overnight economic events affecting New Zealand with news of more central banks raising rates in response to surging inflation.
But first in China, they reported that tax revenues continue to decline, and falling more rapidly with a fifth consecutive month of decline in tax revenues, especially from the private sector and SMEs.
And it comes after China revised downwards its GDP growth in 2020 to 2.2%. Some now believe that 2021 growth will have the chance to reach 5%.
In the meantime, S&P has become the last rating agency to to declare Evergrande at fault.
In China, foreign direct investment increased by nearly + 16% in November compared to the same month in 2020, reaching NZ $ 235 billion during the month. But most of that now comes from âpartnersâ in their Belt & Road initiative, rather than first world investments. These dizzying increases are slowing down, going from + 20% in September to + 18% in October to + 16% in November.
In Germany, business confidence as measured by the very Ifo survey fell for a sixth month in December and to its lowest level since February. It was a bigger fall than expected. Confidence in the near-term economic outlook is weakening amid new restrictions aimed at curbing the country’s fourth wave of pandemic as the effects of supply bottlenecks persist.
But there are signs that inflationary pressures from factories are moderating. Although producer prices increase by + 19.2% compared to a year ago, the level of December came out with a much smaller increase than expected compared to November (+ 0.8% against + 1.4% expected). It might not mean much if subsequent data picks up the climb, or it could be an early indication of a leveling off. However, it is difficult to see how + 19% cost increase can be tolerated, even though most of it comes from high cost Russian energy.
In Russia, these same energy increases are causing indigestion in their economy. They increased their official interest rate by + 1% overnight at 8.5% and back to 2017 levels to contain their inflation surge. They also said that more hikes are coming as even more inflation is likely to come.
In Turkey, the situation is go from very bad to much worse. Their currency’s sharp fall again after the recent drop in interest rates (and the sale of foreign exchange reserves to support it turned into a vast waste of money) has resulted in trading on the main exchange shutting down. Even after their 50% increase in the minimum wage a few days ago, raging inflation means affected workers are even worse off than a year ago. The situation is now so bad that what is needed to sort out the gigantic mess will probably be just as painful.
Mexico also raised rates overnight, up +50 basis points to 5.50% and also tackling ingrained inflation here. It was their fifth consecutive climb.
The Bank of Japan left interest rates unchanged, but decided to end its support for the pandemic. they did to say let them see it as a good economic recovery and let private spending start growing as they wish.
An American regulator noted he was investigating the immediate redemption and late payment industry with a survey of the largest operators there, which includes two of Australia’s largest (AfterPay and Zip). Shares of both fell sharply after the announcement. The US regulator is concerned about debt accumulation, regulatory arbitrage and data collection in a consumer credit market that is already evolving rapidly with technology.
In Australia, pandemic case in victoria were 1503 reported yesterday. There are now 12,578 active cases in the state – and there have been 7 more deaths. In NSW there was 2213 new community cases reported yesterday, and another big jump, with 9,569 active cases acquired locally, but only one death. Queensland is report seven new cases. ACT has 20 new cases. Overall in Australia, 89.8% of eligible Australians are fully vaccinated, and 3.9% have had only one injection so far.
The 10-year UST yield opens today at 1.39% and a -4 basis points slide from this hour yesterday after signals from the US Fed. This is a decrease of -10 basis points from a week ago. The UST 2-10 yield curve starts flatter today at +76 bps. Their 1-5 curve is flatter at +91 bps, while their 3m-10 year curve is flatter at +135 bps. The ten-year Australian government benchmark rate changed little at 1.57%. The ten-year Chinese government bond is unchanged at 2.87%. The ten-year New Zealand government is down -3 basis points to 2.27%.
Wall Street opened its Friday session with the S & P500 down -0.7% in afternoon trading and heading towards a weekly retreat of -1.6%. The day-to-day European markets were very contrasted with London up + 0.1% and Paris down -1.1%. Yesterday Tokyo closed down -1.8%, Hong Kong closed down -1.2% and Shanghai also closed down -1.2% on the day. The ASX200 finished at + 0.1% for a weekly loss of -1.0%, while the NZX50 fell further -0.5% for a weekly loss of -0.7%.
The price of gold will start today at US $ 1,805 / oz and up to an additional US $ 7 from this time yesterday. And that’s a gain of + US $ 20 in one week.
And oil prices today start at -1.50 US $ to just under US $ 71 / bbl in the US, while the international price of Brent is now just below US $ 73.50 / bbl.
The Kiwi dollar opened firmer today at 67.5 USc and was down -Â½c from yesterday. Against the Australian dollar we are weak at 94.5 AUc. Against the euro, we are down to 59.9 euro cents. That means our TWI-5 starts today down -40 basis points to 72.2 and is back to its four-month lows.
The price of bitcoin is lower at US $ 46,933 and down -3.2% from yesterday. We ended the week down -0.3% from where we started. Volatility over the past 24 hours has been high at only +/- 3.2%.
The easiest way to stay on top of the risks of events today is to follow our Economic calendar here Â».