Markets refocus on data after easing tensions

Kia ora,

Welcome to Friday'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 the relaxation of geo-political tensions is helping markets.

Today, all eyes are on tomorrow's US non-farm payrolls report and markets expect it to rise by +160,000. But the number of Americans on unemployment rolls surged to more than a 1½ year high at the end of 2019 to over 1.7 mln.

The easing of Middle East tensions is helping Wall Street post another modest +0.5% gain today. Overnight European markets posted slighty larger gains especially in Frankfurt. Yesterday, Asian markets had large rallies, with Shanghai up +0.9%, Hong Kong up +1.7% and Tokyo up +2.3% on the day.

The US Federal Reserve is reporting that consumer debt in the US rose +3.6% pa in November, staying high after the +5.5% rise in October.

Canadian housing starts unexpectedly fell in December and building permits shrank in November, casting a downer on Canadian economic prospects.

China's consumer inflation rate rose to 4.5% and an eight year high in December although that was slightly less than what was expected. It is all driven by the food price. On the producer price front, the deflationary period is ending with only a -0.5% drop in December, a far cry from the -1.6% drop in October.

And China, the world's largest car market, sold 21 miln vehicles in 2019 but that was a decrease from 2018. In the US, their vehicle sales also fell, to 16.7 mln units.

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The World Bank says that emerging economies now owe US$55 tln in external debt, climbing from 54% to 168% of GDP since the debt binge began in 2010.

Australia has posted another blockbuster trade surplus, +AU$5.8 bln for both goods and services in November 2019, a record for a November and taking its annual surplus to +AU$67.1 bln, also a record high. However, slowing imports are pointing to worries over consumption levels - they were down almost -3% year-on-year in November.

With NSW water storage falling at a fast pace, their State government has committed to double the expansion of its Kurnell desalinisation plant output to deliver about 30% of Sydney's fresh water requirements. Plus, it is to establish a new desal plant to supply Newcastle with some capacity. 

The UST 10yr yield will start today higher at 1.87% and a rise of another +1 bp. 

The price of gold is down further today, down another -US$10 and now at US$1,549/oz.

US oil prices have fallen again today to be just on US$59.50/bbl while the Brent benchmark is unchanged at just under US$65.50/bbl.

The Kiwi dollar will start today lower at 66.1 USc. On the cross rates we are also lower at 96.4 AUc. Against the euro we are down to 59.5 euro cents. That puts our TWI-5 back at 71.3.

And bitcoin is lower as well today, down +3.4% to US$7,820.

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

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