Here’s my summary of the key events overnight that affect New Zealand, with news the US economy seems to be firing on all cylinders ahead of the holiday season.
However, consumer spending rose only a very modest +0.1% in October from September in the US as households took advantage of rising incomes to boost savings to 5.6%, their highest level in nearly three years and the highest ever in dollar terms. This suggests only moderate American economic growth in the fourth quarter. Impressively, disposable personal income is up +3.9% from the same month a year ago while personal consumption expenditure is up +2.7%. (This data is buried deep in their release.)
Equally impressive, sales of newly built single-family home sales surged in the US October which could allay concerns of a significant slowdown in housing.
And continuing the very positive theme, business spending surged, and durable goods orders soared in October. This is suggesting the worst of the drag from a US strong dollar and deep spending cuts by energy firms is over. It is very hard not to be impressed with this data.
And the trend is reflected in their labour markets. The number of Americans filing for unemployment benefits fell more than expected last week, drifting back to near 42-year lows as their labour market conditions continue to tighten.
All this is ahead of the huge Thanksgiving holiday and shopping weekend that is about to kick off in the US. Financial markets will be closed over this period and trading will be thin and diverted to Frankfurt and London.
In China, and during their big early October sell-off, its biggest brokerage, Citic Securities, overstated its derivative business by US$166 bln (NZ$250 bln) from April to September, according to the country’s securities association. While the ‘error’ has since been corrected, bosses of the firm are ‘under investigation’.
And the flood of money out of China is changing. It is shifting from being from individuals to ‘investors’. Specifically, Chinese insurance companies expect to spend US$73 bln into overseas property over the next five years, mainly commercial property of course.
Yesterday, I suggested that the shooting down of a Russian fighter by Nato-member Turkey would raise risk aversion sentiment. In a surprise to me, it didn’t. The financial world ignored the tensions, brushing them off as an item of only minor interest.
Still, in New York, the UST 10yr yield benchmark slipped again, slightly, to 2.23%. NZ swap rates have held, but risk premiums as measured by CDS spreads are marginally higher, up 5% from the start of the month.
The US benchmark oil price is slightly lower now, just under US$43/barrel, while the Brent benchmark is just under US$46/barrel. Even oil markets ignored the Nato-Russia tension.
And the gold price is softer, now at US$1,072/oz
The New Zealand dollar starts today at 65.7 US¢, at 90.7 AU¢, and at 61.9 euro cents, all at slightly higher levels than yesterday. The TWI-5 is now at 71.4.
If you want to catch up with all the local changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here »