China takes second vote drubbing

Kia ora,

Welcome to Monday'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 with news China's bullying style of governing has been soundly rejected again.

In Taiwan, their presidential election ended in a landslide win for the incumbent, anti-Beijing candidate, a strong echo of the Hong Kong democratic vote. Interestingly, it was also a strong repudiation of ham-fisted Beijing social media election interference. Hong Kong had a rare weekend of peace. There was an echo in Europe as well. And we have an election this year, and Chinese behind-the-scenes string-pulling could become an issue here too.

And away from politics in Hong Kong, they are preparing for the launch of a slew of new digital banks. One interesting consequence is that competition for deposits is expected to spike, and raise the offer rates significantly. Current TD rates in Hong Kong are similar to ours but the first of these new banks is offering 6% for a three month TD to selected new customers. Real competition in action.

International air travel rose +3.1% in November with the Asia/Pacific region rising +3.9%. These rates are similar to the growth recorded in previous recent months. Of special concern in January however will be travel in China during the major Golden Week holiday. It has the chance to rapidly spread a new deadly pneumonia virus discovered in central China - a kind of SARS II.

[Advert]

And here is a message from our friends at Hatch.

Exchange-Traded Funds are a relatively easy and inexpensive way to diversify a portfolio without having to have the expertise required to pick individual shares. 

Hatch has more than 500 ETFs on hand, so investors looking to invest in their values and interests close to their hearts are spoiled for choice.

Visit www.hatch.as/investing to learn more about how you can easily diversify your portfolio.

American payrolls grew in December by +145,000 and that was considerably below expectations of a +160,000 gain. They were lucky it wasn't worse. The results for the previous two months were revised down. That caps a year where private sector employment rose by +1.9 mln people (or +1.5%), and far less than the +2.6 mln rise in 2018. In December, factory sector jobs actually shrank by -12,000 jobs and over the whole year grew by less than +0.4%. More analysts are saying the American goods producing sector is now in recession. If it wasn't for a curious +39,000 spike by the retail rag trade over the holiday period, the overall result would have been much worse. And going forward, Boeing's increasing woes won't help either. In fact, a top Treasury official says it could cut -½% from US economic growth this year.

Average weekly earnings rose less than +2.3% in December from a year ago and that is a sharp slowing from the +2.8% rise in November. (For factory pay, the gain was just +1.6%.) In fact, you have to go back almost three years to find a slower wage gain. It is unsure what the Federal Reserve will make of today's jobs report.

In Canada, their jobs market was a lot better in December. They added +35,000 jobs and all of them full-time. Their jobless rate reduced. Average weekly earnings rose +3.7% although that was slightly lower than expected and lower than the +4.5% rise in November.

Back in the US, the Federal Reserve paid to the US Treasury US$55 bln in dividends in 2019, down from US$65 bln in 2018 and a ten year low. It's not as profitable being a central bank as it once was.

Australian retail sales came in better than expected for November, according to official data. They were up +3.2% year on year and that is the best rise since April 2019. Apparently Australians took to the Black Friday event more enthusiastically than expected. Now the question will be, was this at the expense of the traditional Christmas season? In November, Queensland, Tasmania and the ACT all starred, Western Australia was average, Victoria and South Australia were below average, and NSW was weak. Bush fires are unlikely to help December and January in NSW or Victoria.

The UST 10yr yield is now just on 1.82%. 

Gold will start the week up +US$4 at US$1,562/oz.

US oil prices have fallen further today now just over US$59/bbl and the Brent benchmark is down too at US$65/bbl.

The Kiwi dollar is firm and now at 66.3 USc. On the cross rates we are at 96.1 AUc. Against the euro we are at 59.7 euro cents. That puts our TWI-5 at 71.5 and the same level it was this time last week.

Bitcoin is now at US$8,103 and up +10% from this time last week.

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

Get more news affecting the economy in New Zealand from interest.co.nz and subscribe to receive this podcast in your favourite podcast app - we're on Apple Podcasts, Google Podcasts, Spotify or subscribe on our website.

Tell your friends and leave us a review - we welcome feedback.