A lot of US
economic data was released night, most of it weaker than expected. Durable goods
orders were particularly awful, falling by 6.2% against expectations of -3%.
When so many data readings are actually worse than expected, this tells us that
the market has not fully priced in the adverse economic conditions, a necessary
condition for a sustained turnaround in the markets. In spite of this, the Dow
has maintained its recent strength above the key 8000, this morning at 8520.
mild positive sentiment continued for the third day, and overnight action,
while uneventful, saw it reach a high of 0.5516. It is currently unchanged from
that level, but all eyes will be on the merchandise trade release this morning
and the NBNZ business confidence number this afternoon. Both have the potential
to affect the NZD today.
65 cents late in the US session, to
a high of 0.6517, confirms the positive short-term tone to this currency.
Yesterdayâ€™s news that third quarter construction work done was much higher than
expected supports the mood.
the EUR fell on market pessimism over the adequacy
of a European stimulus package released last night; it is worth EUR200 billion,
equivalent to 1.5% of GDP. From an early high of 1.3028, EUR stepped downwards
to its current 1.2870. Japanese fund managers were seen aggressively selling
EUR/JPY late in the US session.
locked in a narrow 94.6 to 95.6 range. China cutting its
rates by 100 basis points yesterday limited any JPY rallies, given JPYâ€™s role
as a weak proxy for the CNY.
personal income and spending reports showed an increasingly cautious consumer. Income
rose by a stronger than expected 0.3% in October, while the 1% fall in spending
was the largest drop since September 2001, but was in line with expectations.
The surprise was that only about half of the drop could be attributed to
prices, with gasoline prices tumbling through October; the remainder points to
a sharp pullback in sales volumes.
durable goods orders fell 6.2% in Oct, more than expected. The 11.1% drop
in transportation orders had been flagged by a sharp drop in plane orders from
Boeing, but the 4.4% drop in ex-transport orders points to broad-based weakness
in the industrial sectors.
The Chicago PMI
fell further to 33.8 in November, the lowest level since 1982. Production picked
up slightly but new orders continued to slump, reaching 27.2 compared to 60.2
just three months earlier. As in other region factory surveys, the employment
component slid further, from 41.5 to 33.4 â€“ more confirmation that the official
payrolls figures are about to get even worse.
initial jobless claims fell by 14k to 529k last week. The previous
week may have been distorted by the Veteranâ€™s Day holiday, but the overall
picture is a steep uptrend in recent months. Continuing claims also pulled back
from 4016k to 3962k in the previous week.
new home sales fell 5.3% in Oct, in line with expectations. Sales of existing
homes continue to cannibalise new home sales, and the drop in mortgage rates
after the mortgage agencies Fannie Mae and Freddie Mac were nationalised in
September proved to be shortlived. The median sale price fell 1.7% to $218k,
leaving an annual rate of decline of 7%.
NovUniversity of Michigan
sentiment index for was revised down to 55.3, a new low for this
cycle. The current conditions index also reached a new cycle low of 57.5, while
expectations fell to 53.9 but held above the June low of 49.2. Inflation
expectations a year ahead fell from 3.9% to 2.9%, reflecting the drop in
inflation fell sharply from 2.4% to 1.4% in the first estimate for November.
Falling fuel prices, and base effects as large monthly gains from a year ago
drop out of the annual figures, will see a sharp pullback in annual inflation
across the euro area, putting more pressure on the ECB to ease interest rates.
European Commission announced a fiscal stimulus plan for member states
totaling around EUR200bn, or 1.5% of GDP. Each member will develop their own
plans for how the stimulus will be provided.
central bank cut its benchmark lending rate by 108 bps to 5.58%, the fourth
cut since September and the largest in 11 years. Reserve requirements were
reduced from 17% to 16 for the largest banks, and from 16% to 14% for the
others. The move reflects a rapid shift in stance by policy makers, from
containing inflation to avoiding a severe slowdown (GDP growth below 8%, as a
rule of thumb).
tone in NZD should continue over the next day, although todayâ€™s US Thanksgiving
holiday will reduce market liquidity and potentially increase volatility. A
range of 55 cents to 56 cents should suffice for the day, with the caveat
Release Last Forecast
Merchandise Trade NZDm â€“1,183 â€“1,000
Business Confidence â€“42.3% â€“
Aus Q3 Capex
CAPEX Intentions, AUDbn 99.8 â€“
Monetary Policy Meeting Minutes
Money Supply M3 %yr 8.6% 8.3%
PMI 44.3 â€“
Climate Index â€“1.34 â€“1.40
Sentiment â€“24 â€“24
Confidence 80.4 79.5
Unemployment Change â€“26k 0k
â€¢ NZ Weekly
Forex Outlook (24 November)
â€¢ NZ Weekly
Forex Outlook (17 November)
â€¢ NZ Q3
Retail Sales Review (13 November)
Economic Overview November 2008 (11 November)
â€¢ NZ Weekly
Forex Outlook (11 November)
papers/publications are available on Online Research on Westpac
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Mon 10 Sep 2018 AA 08:30 GB- GDP, Trade, Output Tue 11 Sep 2018 AA 08:30 GB- Employment Decision A 09:00 DE- ZEW Survey Wed 12 Sep 2018 A 12:30 US- PPI A 14:30 US- EIA Crude A 18:00 US- Beige Book Thu 13 Sep 2018 A 1:30 AU- Employment AA 11:00 GB- Bank of England Decision AA 11:45 EZ- European Central Bank Decision A 12:30 US- Weekly Jobless AA 12:30 US- CPI Fri 14 Sep 2018 A 08:30 GB- GDP AA 12:30 US- Retail Sales A 13:15 US- Industrial Production AA 14:00 US- prelim University of Michigan
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