US inflation expectations high. China property woes extend. South Korea wants in to CPTPP. German wholesale prices jump. Lithium jumps.
Kia ora,
Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the International edition from Interest.co.nz.
Today we lead with news investors are holding back at the start of this week, waiting for a deluge to data to pass first.
US consumer inflation expectations for the year ahead edged up to a fresh record of 6% in November from 5.7% in October in a Fed survey that goes back to 2013. Uncertainty rose among those surveyed, but they do see inflation three years ahead being slightly lower at 4.0% that when they were last surveyed in October.
With inflation running hot, investors are seeking effective hedges, and in the US buying farmland is becoming popular for that. It might become a rush, as bond investors are facing steep losses.
Markets are in a sort of pause, awaiting the US Fed's December decisions which will come on Thursday NZT. The Fed is expected to accelerate tapering and signal that it will raise interest rates next year. There could be a lot to unpick when their documents are released, so uncertainty is high.
In China, a growing set of property developers are seeking to have their bonds not rated anymore, to avoid the odour the sector is suffering from. Stalled projects are unravelling their ability to sell off the plans, as buyers recoil from the risks they are taking with contracts like that.
In Japan, machinery orders rose with a bit more momentum in October from September, and are forecast to rise quite substantially in the October to December quarter.
South Korea now says it wants to join the CPTPP.
Indian CPI inflation was up +4.9% in the year to November, although this was a smaller increase than they had earlier in the year and lower than the +5.1% expected. This was solely due to food prices, and future rises are expected to be sharp as base effects wash through.
However, wholesale prices in Germany jumped +16.6% year-on-year in November and even higher than the +15.2% rise in the previous month. Worse, it is a record in a series that goes back 60 years.
None of this will be helped by a renewed jump in lithium prices. Nor will German inflation be helped by delaying the Russian gas pipeline project, Nordstream2.
In England, their central bank says it is planning to scrap mortgage 'floor' rates, the requirement that mortgage borrowers must be able to afford a 3 percentage-point increase in interest rates, in a move which could help home-buyers constrained by tough debt-to-income restrictions.
The UST 10yr yield opens today at 1.41% and down -7 bps from this time yesterday.
The price of gold will start today at US$1789/oz and up +US$6 from this time yesterday.
And oil prices start today -US$1 lower at just over US$71/bbl in the US, while the international Brent price is now just under US$74.50/bbl.
The Kiwi dollar opens today softer at 67.6 USc. Against the Australian dollar however we are little-changed at 94.9 AUc. Against the euro we are soft at 59.8 euro cents. That means our TWI-5 starts the today at 72.2 and it’s lowest in four months.
The bitcoin price is sharply lower at US$46,971 and down -5.8% from this time yesterday. Volatility over the past 24 hours has been very high at just over +/- 4.3%.
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 and we’ll do this again tomorrow.