US budget deficit jumps, outlook dims; Japan re-elects Abe; UN embarrasses itself again; Baltic Dry high; bitcoin surges above US$6,000; UST 10yr 2.38%; oil up, gold down; NZ$1 = 69.6 USc, TWI = 72.4

Here’s a special holiday update of some key events and data you may want to know about today.

Locally, interest rates are up in wholesale markets and exchange rates are down. ‘Stagflation’ may be a term we need to refamiliarise ourselves with.

The Americans have recorded their largest annual budget deficit in four years, highlighting the nation’s worsening fiscal trajectory as lawmakers consider a US$1.5 tln tax cut. A Treasury Department report released over the weekend showed that the budget deficit for fiscal 2017 grew by +US$80 bln, to US$666 bln (a number their Bible Belt will notice), as federal spending eclipsed revenues and economic growth remained average. The deficit also edged higher as a share of the economy, rising to -3.5% of gross domestic product from -3.2% last year. The ballooning deficit comes as Republican lawmakers push for deep tax cuts that could turbocharge their national debt, and do little for growth.

In Japan, Prime Minister Shinzo Abe has achieved a big electoral victory, helped by improving economic growth.

Today, there is disbelief in the UN/WHO decision to appoint Robert Mugabe as its Goodwill Ambassador for Africa. The WHO claims Mugabe’s Zimbabwe “places universal health coverage and health promotion at the centre of its policies to provide health care to all”. UN corruption is famous, but this one is more validation that it has completely lost its way.

In Australia, they are about to triple the penalties available to watchdog ASIC to punish companies for wrongdoing. They are also looking to force companies to forfeit the profits from such law breached.

Regular readers will know that we prefer to take the temperature of world trade by reference to airfreight shipments. That replaces the traditional measure, the Baltic Dry Index. However that older index is on the up as well. It climbed to a three-and-half-year high at the end of last week. The Baltic Dry measures the trade in bulk commodities. It ended the week at at 1578 its highest since March 26, 2014. It is a significant rise from its low point of 290 reached in February 2016.

Bitcoin surged to a record high of almost US$6,200 on Saturday, pushing its market capitalisation to US$100 bln at one point, as investors continued to bet on an “asset” that has a limited supply and has paved the way for a whole slew of crypto-currencies. The price is still above US$6,000 this morning. A sudden rush in by big-time investors is driving the surging demand.

In New York, the UST 10yr yield is sharply higher, now at 2.38%.

The US benchmark oil price is marginally higher today and now under US$52 a barrel, while the Brent benchmark is just under US$58.

The gold price is lower by more than -US$9 at US$1,278/oz.

The New Zealand dollar is significantly weaker as part of the election response by markets and now at 69.6 USc. On the cross rates it is down to 89 AU¢, and 59 euro cents. The TWI-5 is now down at 72.4. These are shifts that will definitely require price increase responses for most imported goods.

The easiest place to stay up with event risk over the holiday period is by following our Economic Calendar here »

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