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 have a quick news wrap-up so you can get back to your 'time-off'.

First, American inflation has proved more sticky than markets had hoped, up to 3.4% in December, a rise from a five-month low of 3.1% in November. Market had expected a 3.2% rate. Energy prices went down at a slower pace as did food prices and rents. Core inflation came in only marginally lower than the prior month at 3.9% when a fall to 3.8% from the prior 4.0% was expected.

US equities retreated in the news and bond yields rose marginally, with investors less certain a US Fed rate cut is coming soon.

Meanwhile the signals from their labour market remain strong. US jobless claims fell last week from the low seasonal level the prior week. This data is still not revealing the long-expected labour market stress market bears have been warning about.

Meanwhile we should note that Hertz is selling down its EV rental fleet in the US, reverting to ICE cars. Hertz previously set a target for 25% of its fleet to be electric by the end of 2024 but high operating costs mainly related to collision damage, and very weak resale values have them reassessing the move. They will take a -US$250 mln witeoff related to the move.

The latest US 30 yr bond auction brought a median yield of 4.16%, down from the prior 4.28% a month ago. Both were well supported with competitive bidding.

In China, December vehicle sales data for December is out revealing a record high 3.15 mln units sold in the month, and taking the annual total to just over 30 mln and also a new record high. NEVs accounted for 9.5 mln units for the year (no, China is not an all-electric market yet). Even for December NEVs sold almost 1.2 mln but that was only just over a third. (You may recall, New Zealand NEV car sales in December were more than 80%.)

We will get China's December CPI inflation rate today at 3pm. Expect deflation again of -0.4% for the year after a -0.5% retreat in November.

In Norway, with an 80:20 approving vote, their parliament pushed ahead with commercial plans to open the Arctic Ocean to seabed mineral exploration. That was despite environmental groups and the fishing industry’s warnings that the move would put the biodiversity of vulnerable ecosystems at risk.

Globally, containerised shipping freight rates rose again last week to be +15% higher than the surge the prior week, again all about the Red Sea risks. China to Europe rates were up almost +25%. Transpacific rates to the US barely changed. Going the other way, bulk cargo rates retreated rather sharply this week.

Australian exports rose to AU$46.3 bln in November, +1.7% higher than October but -8.2% lower than a year ago. Meanwhile imports slipped rather sharply, down almost -8% from October, so their trade surplus got a boost to +AU$11.4 for the month.

Locally we should note that the new head of the Insurance Council is Kris Faafoi, replacing retiring Tim Grafton. Faafoi is an ex-minister in the previous Labour Government. He will start in the role in April.

The UST 10yr yield starts today at 4.03% and up +3 bps from this time yesterday. 

The price of gold will start today down another -US$9/oz at just on US$2017/oz.

Oil prices have risen +US$1 to be now just over US$73/bbl in the US. The international Brent price is now just over US$78/bbl.

The Kiwi dollar starts today at 62.1 USc and -10 bps softer from yesterday. Against the Aussie we are little-changed at 93.3 AUc. Against the euro we are marginally softer at 56.7 euro cents. That all means our TWI-5 starts today still just under 70.7.

The bitcoin price starts today slightly firmer, now at US$46,017 and up +1.1% from this time yesterday. Volatility over the past 24 hours however has been very high at +/-4.3%. At one point bitcoin got up to US$49,000 but has retreated most of that since. In a 3-2 split vote, the SEC has approved the establishment of Bitcoin exchange traded funds. Now rather than storing Bitcoin in online wallets, speculators in Bitcoin ETFs would own shares in funds containing the digital currency.

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.