Vaccine news catapults the Biden bounce

Kia ora,

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 with news risk is 'on' in a big way today.

First, global financial markets are delivering a strong Biden bounce. Equities are up sharply as are benchmark bond yields. Commodity prices are generally higher, some have jumped a lot. But precious metals have sunk in very big moves.

The Chinese yuan has hit its strongest position in more than two years, as investors bet a Democratic president and a divided Congress could lead to reduced US-China tensions and a weaker dollar.

Helping the adjustment significantly is also news that the Pfizer virus vaccine has delivered very promising results. USFDA approval is now expected for the vaccine in two weeks.

American consumer inflation expectations slipped back from +3.0% in September to +2.8% in October. Most other household financial expectation metrics declined as well. Of course, these results are from a survey taken pre-election.

In China, new car sales rose above the 2 mln/month mark in October and cementing its status as the world's largest car market - and by a significant margin (the US sold 1.3 mln cars in October). A feature of the Chinese result is the sharp growth in electric vehicles, doubling in a year.

And China has brought in new tougher regulations for disinfecting frozen and cold-chain food imports as part of its coronavirus response.

And following China, Taiwan has turned in another very impressive trade result, recording a +US$7.5 bln surplus in October and far above the +US$5 bln expected. Exports rose +11%, imports fell -1%.

The EU said it will impose tariffs on $4 bln of American imports, including Boeing aircraft, as part of a long-running trade dispute initiated by Washington.

In the UK, they are moving to remove special tax breaks for private equity firms. It is a move that could also be mirrored in the US.

Wall Street has reached all-time highs today with the S&P500 up +3.3% in early afternoon trade. Overnight, European markets rose even more than that with Frankfurt up +4.9%, Paris up a massive +7.6% in its Monday session, and London up +4.7%. Yesterday's pre-cursor in Shanghai was modest by comparison, up a still-strong +1.9%. Hong Kong gained +1.2% and the very large Tokyo exchange rose +2.1%. Locally the ASX200 was up +1.9% and the NZX50 Capital Index was up +1.8%.

The latest global compilation of COVID-19 data is here. The global tally is 50,591,000 and up a sharp +539,000 rise in the past day. 

The largest number of reported cases globally are still in the US, which rose +105,000 since this time yesterday to 10,302,000. 

In Australia, they are not getting any resurgence. 

The UST 10yr yield will start today with a very big move, up +14 bps at 0.96%. As a consequence, their rate curves have steepened sharply. 

The price of gold has fallen a massive -US$92/oz from this time yesterday, down to US$1858/oz. That is a -4.7% drop. And if you think that is unusual, the drop for silver is almost twice that level.

Oil prices have jumped higher today by a notable +US$3/bbl and are now at just on US$40.50/bbl in the US, while the international price is now just on US$42.50/bbl.

And the Kiwi dollar is much firmer this morning at 68.1 USc and adding to last week's sharp rise. That takes it to its highest since March 2019. The market's fear of tomorrow's RBNZ policy easing moves isn't strong. Against the Australian dollar we are also much firmer at 93.6 AUc. Against the euro we up more than +½c at 57.6 euro cents. That means our TWI-5 will start today at 71.1 and near its high for the year.

The bitcoin price starts today -2% lower at at US$15,093.

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. We will do this again tomorrow.