Kia ora,

Welcome to Friday’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.

And today we lead with news global interest rates are on the move.

The big news is the sharp dive in wholesale benchmark interest rates. And American benchmark mortgage interest rates have fallen below 7% for the first time since August.

But first, American jobless claims fell last week and by more than expected, and back to the low end of the range over the past year. There are now less than 1.8 mln people on this support, also a drop from last week but less than expected, but not enough to change the shallow rising trend.

As earlier indicators had suggested, the US holiday season retail impulse was good. Now the official retail sales data for November is out and that confirms the earlier data. Value levels were up +4.1% from a year ago, so there has likely been an expanding retail volume too.

And you can see the impact of that demand on business inventories, which fell - a small slip from October, true, but one that wasn't expected. From a year ago they were up +0.5% in value terms, so clearly falling in volume terms.

In Canada, their housing market sales are retreating, even if the shrinkage is still small.

Taiwan's central bank kept its policy rate at 1.875%.

In Hong Kong, 38% of people polled said they want to quit the City, mainly because of oppressive 'freedom' restrictions. That was up from a 29% in the same poll a year ago.

Overnight the ECB was clear that it will keep its rates at multi-year highs for a long time yet in its battle to get on top of inflation. In contrast to the US Fed signals that softenings are coming in 2024, the ECB was staunch. However Norway's central bank raised its policy rate by +25 bps to 4.5%. But the Swiss National Bank held its rates unchanged, as did the Bank of England which also conveyed a tough line against price pressures. The ECB and English pushbacks had the effect of bolstering their currencies.

And staying in Europe, the EU has "unanimously" agreed to open talks with Ukraine to join the bloc.

Australian inflation expectations fell from 4.9% in November to 4.5% in December, according to the latest update of the Melbourne Institute survey. At these levels, the RBA will also likely remain staunch in its monetary policy positions, even it it is at its lowest level since early 2022.

Although the Aussie jobless rate rose to 3.9% in November, the number of new jobs rose more than expected and most of them were full-time positions. The number of unemployed increased by +18,800 to 572,000. But the labour force rose +61.500 to 14.3 mln of which +57,000 were full-time. Their participation rate edged up.

Global container shipping freight rates rose another +4% last week as the world adjusts to the two big canal pressures, mainly on routes out of China. Meanwhile bulk cargo rates remain high but are coming off their early December peak.

The UST 10yr yield has fallen sharply in the wake of the Fed meeting, now at 3.93% and down -23 bps from yesterday. And the last time we were at this level was in July. 

The price of gold will start today just on US$2037/oz and up a very sharp +US$55/oz from this time yesterday.

Oil prices are up +US$3/bbl from yesterday at just over US$72.50/bbl in the US. The international Brent price is now up at just on US$77/bbl.

The Kiwi dollar starts today at 62.2 USc and up a full +1c from yesterday. Against the Aussie we are -¼c lower at 92.7 AUc. Against the euro we are down -10 bps at 56.6 euro cents. With falls against the Yen and Pound, that all means our TWI-5 starts today just on 70.3, just +10 bps firmer than yesterday at this time.

The bitcoin price starts today at US$42,617 and up +1.8% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.0%.

You can find links to the articles mentioned today in our show notes.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston. And we will do this again on Monday.