2019 ending without a Santa rally

Kia ora,

Merry Christmas and welcome to Tuesday's Economy Watch where we follow the economic events and trends that affect New Zealand.

I'm David Chaston and this is the International edition from Interest.co.nz.

Today we lead news the year is winding down without a Santa rally this year. 

First in the US, there has been an unfortunate and sharp drop in durable goods orders in November, down a startling -5.7% on an actual basis year-on-year.

American capital goods orders actually fell an even more startling -13% year-on-year, while the more widely reported non-defence component was down -9.2%.

New home sales data delivered much better data, up almost +17% year-on-year, even if this aspect of their housing market is only 12% of their overall housing market. (The existing home-market was up +2.7% in November year-on-year.)

Also turning positive was the Chicago Fed's National Activity Index and that was up a bit more than expected.

The Atlanta Fed's GDPNow model is showing that American GDP growth probably inched up in the fourth quarter of 2019 to +2.3% and that is slightly above more analysts' estimates. (For comparison, Massey's GDPLive model shows New Zealand's Q4 growth at +2.4% although weakening a little.)

In Canada, they report GDP growth monthly, and in October it was running at a weaker +1.2% and well below the +1.6% in September.

In China, they announced lower imports tariffs on more than 850 products ranging from frozen pork, hi-tech components and vital medicines next year, as Beijing looks to boost imports amid a slowing economy and a trade war with the United States. They are adopting temporary import tariffs, which are lower than the most-favoured-nation tariffs, on 859 products, according to a statement released by their Ministry of Finance.

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Overnight, equity markets were pretty stable with only minor gains or losses in most of the major ones. However the exception was Shanghai which dropped -1.4% yesterday in a move not matched elsewhere in Asia and probably related to the tariff drop. Locally, the ASX200 dipped -0.4% while the NZX50 was up +0.6% and both of these were among the larger movers globally.

And although there is no Santa rally this year, we should note that the equity market bull run, which started in March 2009, looks like it will continue well into 2020. The S&P500 is up +250% in those almost 11 years, and that is equivalent to an annual gain of +9%. Of course, the rise hasn't been smooth as most readers will know.

In Australia yesterday, the release of private sector credit data showed some large negative moves in the 'personal' category. This is where you see Buy Now, Pay Later schemes eating into traditional consumer credit, and the Aussie moves are large (and larger than in New Zealand). For the year to November, this category fell almost -5% taking a toll on traditional credit card and store credit transactions.

The UST 10yr yield is unchanged at 1.92%. 

Gold is at US$1,483/oz and up another +US$5 overnight.

US oil prices marginally firmer at just on US$60.50/bbl and the Brent benchmark is now just under US$66.50/bbl.

The Kiwi dollar will open firmer today at 66.3 USc. On the cross rates we are also firm at 95.8 AUc. Against the euro we are likewise firmer at 59.8 euro cents. That puts our TWI-5 at just on 71.4 and that is a six-month high.

Bitcoin is up +2.5% today, now at US$7,346. The bitcoin rate is charted in the exchange rate set below.

You can find links to the articles mentioned today in our show notes.

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