Global factories turn positive
Welcome to Wednesday'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 that factories globally are chugging along nicely at present despite the pandemic risks.
But first, there was another dairy auction overnight and it was very positive. Overall prices were up +4.3% in US dollars, and despite the ever-rising Kiwi dollar, they rose in local currency by +1.9%. This result was built on a +5.0% rise for WMP, and overall prices are back to where they were at the start of 2020 although in local currency we are still -7% lower as the ever-rising Kiwi dollar undermines the long-term gains. Today's result won't hurt farmgate payout forecasts however.
In the US, a bipartisan group of lawmakers unveiled a $900 bln COVID-19 relief bill aimed at breaking a deadlock between Democrats and Republicans over new emergency assistance for small businesses and other industries. Perhaps some bipartisan action can now finally move them forward. But still no similar action for the jobless yet.
Internationally, there were a raft of PMIs released overnight. The internationally benchmarked US factory PMI brought its steepest improvement since 2014 with that growth supported by faster upturns in output and new orders amid stronger domestic and foreign client demand. Having said that, it was almost exactly as analysts expected. The more widely-watched local version recorded a higher level, but one that was lower than for the prior month. It also has new orders and exports expanding.
Globally, manufacturing expanded at one of its fastest rates in almost a decade during November. But it should be remembered that these improvements will face challenges from second and third pandemic waves before the vaccines start to be effective.
Canada also turned in a good factory result, holding on to its prior month recovery.
In Europe, their expansion was slower, but still marked, with gains in output and new orders. But job losses continued there. Germany stayed strong, France was weak. The UK was aided by 'Brexit-buying'.
In China, their official factory PMIs were eclipsed by the private, internationally-benchmarked version indicating a good expansion there.
In Hong Kong, retail sales were down almost -9% year-on-year in October and their September result was revised lower.
In Australia, their central bank has left its policy rate unchanged at +0.1%. But it did change its language around inflation, moving more to the US Fed view that they want to see actual inflation bed in, rather than just inflation expectations rise, before they move again with policy changes.
There were PMI releases for Australia as well. The AIGroup one fell back from a strong expansion in October to a weak one in November. But the Markit one moved to a stronger expansion from an already good level and now at a three year high.
And in more Australian data, building consents for houses rose for the fourth consecutive month in October and are at the highest recorded level since February 2000. Their balance of payments on goods and services was a surplus in the September quarter of +AU$13.6 bln, lower than the +AU$22.3 bln June quarter surplus, but better than expected. Exports fell -6% and imports rose +3%.
Overall, the OECD sees a brighter future for the world's main economies even if the recovery will be gradual. And although New Zealand took a bigger initial economic hit in the pandemic, it has bounced back faster and is in a better situation now, they say.
In equity markets, Wall Street is starting the new month with a +1.3% rise in Tuesday trade for the S&P500. Overnight European markets rose about +1% although London did a bit of catchup gaining +1.9%. Yesterday, Tokyo ended up +1.3%, Hong Kong was up +0.9% and Shanghai rose +1.8% on the day. The ASX closed up +1.1%, but the NZX50 Capital index was the outlier, falling -0.3% on the day.
The latest global compilation of COVID-19 data is here. The global tally is 63,478,000 and a +554,000 rise overnight.
The largest number of reported cases globally are still in the US, which rose +174,000 overnight to 13,934,000.
In Australia, they are not getting any major resurgence.
The UST 10yr yield will start today up sharply at 0.92% and a +8 bps rise.
The price of gold has recovered sharply today, up +US$27 to US$1811/oz.
Oil prices are again a little softer today, and now under US$45/bbl in the US, while the international price is now just on US$47.50/bbl.
And the Kiwi dollar has mover slightly higher, up to 70.6 USc this morning and that is its highest since April 2018 or a 30 month high. Against the Australian dollar we are much firmer too at 96 AUc and a +½c rise. Against the euro we are also holding at 58.6 euro cents. That means our TWI-5 will start today at 72.9 and a 20 month high.
The bitcoin price has settled back today, now at US$18,836 and a -2.0% fall from this time yesterday.
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.