Fear & uncertainty to the fore as 2024 ends

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.

And today we lead with news 2024 has brought some huge and surprising changes. But in other sectors, not as much change as you might have expected. And through it all profits and wealth growth have been strong.

But first in the US and based on a rise in new orders, the Dallas Fed's Texas manufacturing indexmoved up into positive territory in December, its first positive reading since April 2022. Forward sentiment was positive in that state for a second month in a row.

Also driven by new order inflows, but the lack of them in this case, the Chicago PMI fell further in December from November and missing market forecasts. This is their 13th consecutive month of retreats, recording its steepest decline since May.

US pending home sales in November grew a strong +6.9% from a year ago, their best rise since May 2021. To be fair however, it is off a weak base, but it is the fourth straight month of gains in sales volumes. Sellers seem to be capitulating on price expectations, and it has become a buyers market, according to the peak US realtor group.

In China, a Reuters poll suggests factory activity there expanded in December, capping a three month gain.

In Japan, their 10-year government bond yield edged up to around 1.11%, its highest since 2011, as investors continued to assess their latest inflation data.

South Korean retail sales rose more than expected. Even so the gain was minimal. Korean industrial production undershot in November. But it is their political crisis that is hurting their currency, falling to its lowest against the USD since 2009.

Other countries are depreciating too against the US dollar. The Turkish lira is at a record, all-time low. Ditto the Russian ruble. And the Chinese yuan is almost its lowest since 2007.

The US dollar index is ending the year its highest since 2022, and prior to that, its strongest since 2002.

Back on Wall Street, the Wall Street Journal is reporting the investment in exchange traded funds now exceeds US$10 tln, with a 2024 rise in these investment vehicles up +30% from 2023 or up +US$2½ tln in 2024.

The UST 10yr yield is now at just on 4.55%, and down -8 bps from yesterday. 

The price of gold will start today at US$2298/oz and down -US$22 from yesterday. We started the year with this price at just on US$2,050/oz, so a +27% net rise for 2024.

Oil prices are a bit more than +50 USc firmer at just over US$71/bbl in the US while the international Brent price is still just over US$74. We are ending 2024 almost exactly where we started.

The Kiwi dollar starts today just on 56.4 USc and unchanged from yesterday. We started the year at 63.4 USc, peaked at 63.6 USc at the end of September, but the net devaluation until now has been -11.1% in USD terms. Against the Aussie we are up +10 bps at 90.7 AUc. Against the euro we are up +20 bps at 54.3 euro cents. That all means our TWI-5 starts today at just over 67 to be little-changed from yesterday. The TWI-5 started the year at 71.1, (it peaked at 71.4 mid February) for an overall devaluation of -5.8%.

The bitcoin price starts today at US$91,907 and down -2.0% from this time on Saturday. Volatility over the past 24 hours has been modest at +/- 1.5%. It started the year at US$44,204 and rose to US$73,095 by mid-March. It was still at just US$69,391 just prior to the US election, and has risen since that result. It peaked by closing at US$106,169 on December 18, 2024.

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, January 6.

Happy New Year everyone !