Here’s our summary of key events over the weekend that affect New Zealand, with news a new mortgage war is about to break out in Australia,
But before we start, note that today is a public holiday in Auckland and the north of the North Island. There will be no video version.
First, the first estimate of American GDP growth for the December quarter was released on Saturday indicating an expansion at the rate of +2.6%. That makes the overall growth for the US economy in all of calendar 2017 up +2.25%. In 2016 it was +1.50%. Most analysts were pleased with the outcome and said it represented a solid if unspectacular performance. Given that the world economy is growing pretty much everywhere at a faster clip, this result is pretty tame.
But the Americans are still enthusiastic buyers of foreign goods. Their December trade deficit rose to -US$71.6 bln as imports rose +8.6% more in December than the same month a year ago while exports rose only +7.8%. For the full calendar 2017, that takes their trade deficit in goods to -US$808.1 bln or -4.2% of GDP. But don’t forget they run a trade surplus in services of about +US$250 bln or +1.3% of GDP.
December data for American durable goods orders came in much better than expected, up +2.9% over November and +5.8% for 2017 over 2016. But it was largely due to “transportation equipment” (read, aircraft sales). Otherwise it was bang on market expectations.
Inflation in Canada is running at +1.9% in December. That was right at market expectations but down from +2.1% in November.
And in a rebuke to the arbitrary approach to settling trade disputes, the US’s own International Trade Commission has ruled in favour of Canadian Bombardier and against hometown Boeing after the White House slapped punitive duties on the Canadian aircraft manufacturer.
In China, they are reporting sustained growth in industrial probability even as the official campaign to cut overcapacity continues. In fact there was a +21% rise in earnings in 2017 unhurt by restructuring costs and very similar to previous reports. (But stats with long run stability out of China should always be looked at sceptically.)
In Australia, Westpac has launched a 3.59% “two year introductory” floating mortgage rate, its lowest rate in more than 60 years. This signals some impending tough market-share-stealing competition is about to erupt there. One analyst has calculated the four big banks have amassed a AU$600 mln “war chest” available for mortgage rate discounting..
The UST 10yr yield has bounced back to 2.66% (+3 bps). The equivalent 10yr China sovereign bond is off just a little at 3.95% (-1 bp). The equivalent NZ 10yr sovereign bond is also down -1 bp to 2.92%.
Oil prices are up further to be just over US$66 a barrel, while the Brent benchmark is now over US$70.50.
Gold is down -US$12 since Friday and now at US$1,349/oz.
The Kiwi dollar starts the week at 73.5 USc after an uneventful weekend. On the cross rates there is little change either and we are now at 90.7 AUc, and against the euro at 59.2 euro cents. That puts the TWI-5 at 74.1.
Bitcoin is now at US$11,621, +4% higher than where it was at this time on Friday. Keeping prices restrained are worried investors after reports of a massive (NZ$500 mln) theft of bitcoins on one exchange.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».