Market bounce back lacks conviction

Kia ora,

Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

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

Today we lead with news there has been a financial market bounce-back today after yesterday's Omicron drop. But you have to say today's reaction isn't full of conviction. Meanwhile, the New Zealand dollar has fallen right out of favour

But first in the US pending home sales rose in October from a disappointing September but still remain lower than a year ago. Still, this data means that total existing-home sales in 2021 will exceed 6 million, and the highest in 15 years.

The pace of the Dallas Fed factory survey eased back a little with its expansion impulse slowing somewhat. There were good gains in new orders, but a fall in capital investment. Prices paid continue to rise, but prices received aren't, and that squeeze is starting to be noticed.

Also topping out are Canadian producer prices, high but not rising much in October from September.

In Canada, the Port of Vancouver has descended into ‘distress’ as British Columbia flooding severs rail lines and highways. There are now 54 ships waiting to unload but no way to move the goods. Meanwhile vast numbers of empty containers can't move either, breaking the supply-chain system there.

In China, new data shows that housing rents are falling. Average home rents in China’s major cites declined by -1.3% in November from the prior month while transactions in home rental market tumbled by -18%.

China is on a Common Prosperity drive at home, trying to roll back the extreme disparities in wealth that their expansion has generated. They are also on a hunt for resources, concentrated in Africa. It seems that "common prosperity" is only a drive at home - in Africa, they are fueling their expansion with vast amounts of cash corruption.

The economic sentiment indicator in the Euro Area dropped by -1.1 points from a month earlier to 117.5 in November, the lowest for six months but in line with market expectations. There was a marked decline in consumer confidence (-6.8 vs -4.8 in October), as households were concerned about potential new lockdown measures due to rising pandemic cases across the bloc.

The German CPI inflation rate came in at a very high 5.2% in November - in the way they measure it. Using the EU 'harmonised' measure, it was +6.0% higher. Their energy component rose a stunning +22%. This German data probably means EU inflation probably hit a record high when it is reported in about two weeks. And in turn that will put severe pressure on the ECB to respond - probably with rising benchmark interest rates.

The UST 10yr yield opens today at 1.51% and a +3 bps recovery from this time yesterday. 

The price of gold will start today at US$1785/oz and little changed from this time yesterday.

And oil prices have risen today, up by +US$3 to be just under US$71/bbl in the US, while the international Brent price is now over US$74/bbl.

The Kiwi dollar opens today softer again at just under 67.9 USc and a new 1 year low. Against the Australian dollar we are soft at 95.4 AUc. Against the euro we are -1c lower at 60.3 euro cents. That means our TWI-5 starts today at 72.8, and its lowest since the end of September.

The bitcoin price has recovered to now be at US$57,445 and +6.1% above the level at this time yesterday. Volatility over the past 24 hours has been very high at just over +/- 4.6%.

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

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again tomorrow.