Equities follow bonds in a risk-off retreat; leading US data positive; Japan juices its recovery; Taiwan export orders impress; China scrambles to prevent slowdown; UST 10yr 1.40%; oil and gold lower again; NZ$1 = 67.2 USc; TWI-5 = 71.8

Here's our summary of key economic events overnight that affect New Zealand with news the 2021 Santa rally seems to have been snuffed out with the rise of Omicron.

The NZD is falling in a sharp risk-off mood that is gripping markets to end the year.

Global investors are dumping shares as concerns about the Omicron variant build. Investors are watching its rapid spread and case numbers explode in Europe and the US. Hopes that it would be milder than the Delta variant seem to be questioned by early surveys, and hospitals fill up with unvaccinated sufferers. Vaccination only seems to reduce the severity of symptoms and likelihood of contracting it, rather than eliminating the risks.

Further, the US seems to be hamstrung by a key Senator refusing to support any expansion of the frayed American social safety net, suggesting the economic impacts of this Omicron resurgence may seriously reduce consumer economic activity in 2022. As US consumer spending is the key engine of global economic activity, investor fears are now worldwide.

However, a widely-watched leading indicator series from the US Conference Board is very positive in December, indicating growing gains and "suggesting the current economic expansion will continue into the first half of 2022". Obviously markets are ignoring this data today.

In Japan, they have just approved a US$320 bln "supplementary budget" for the 2021/22 year aimed at keeping their economy juiced up and supporting the good recovery there that seem to be building.

Taiwanese export orders continued to impress in November, coming in with year-on-year growth of +13.2%. And while that was smaller than the October percentage gains, it didn't show the moderation analysts were expecting. In fact, at US$65.5 bln worth of orders in one month, that is the largest for any month ever and easily topping the prior record in September.

In Hong Kong, they had a sham 'election' over the weekend where the pro-Beijing party swept to power after Beijing banned almost all opponents. Voters responded with a voting boycott. As few as 1000 votes could get you elected if Beijing let you put your name forward. The result was that the most unpopular governor of the territory of all time 'won' almost all the votes cast. 'Democracy' with Chinese characteristics "for the new Era".

Meanwhile, China cut -5 bps from its 1 year prime loan rate today, but left its 5 year rate unchanged. That is expected to save companies about NZ$20 bln in interest cost over a year, and is part of Beijing's promise to help its struggling SMEs. (See chart at the bottom of this page.)

The situation is getting tougher in the property sector, with the overnight failure of restructuring efforts for Evergrande resulting in a further wipeout of share values in the property development sector. That has triggered Beijing to instruct banks to lend urgently to keep these companies functioning.

And now, with pandemic restrictions biting in China too, airlines are struggling with sharply reduced traffic.

Facing a building slowdown, markets now expect Beijing to relax or even abandon its clean air and other environmental or climate positions. That means steel mills are anticipating significant new infrastructure stimulus, and in turn, the iron ore price is rising, now approaching a four month high.

In Australia, auction clearance rates slumped over the past week after a rush of properties for sale. But at least there, more are still selling than not - unlike in Auckland.

And neither Australian nor New Zealand consumers have gotten the Omicron memo; retail sales activity in both countries is strong going into the last week of the holiday shopping season.

In Australia, pandemic cases in Victoria were 1302 reported today. There are now 123,175 active cases in the state - but there were no deaths today. In NSW there were 2501 new community cases reported today, and another big jump, with 16,225 active locally acquired cases, but also no deaths. Queensland is reporting 49 new cases. The ACT has 13 new cases. Overall in Australia, 89.4% of eligible Aussies are fully vaccinated, plus 3.5% have now had one shot so far. 

Wall Street has opened its Monday session with the S&P500 down a sharpish -1.9%. Overnight, European markets all retreated in the range of Paris down -0.8% and Frankfurt down -1.9%. Yesterday Tokyo set the scene for the week with a -2.1% fall. Hong Kong was down -1.9% and Shanghai was down -1.1%. The ASX200 lots -0.2%, and believe it or not, the NZX50 was a complete outlier, gaining +0.4%.

The UST 10yr yield opens today at 1.40% and a -1 bp retreat since this time yesterday. The UST 2-10 rate curve starts today unchanged at +77 bps. Their 1-5 curve is flatter +89 bps, while their 3m-10 year curve is marginally flatter at +136 bps. The Australian Govt ten year benchmark rate is down +1 bp at 1.58%. The China Govt ten year bond is unchanged at 2.87%. The New Zealand Govt ten year is also down -3 bps at 2.24%.

The price of gold will start today at US$1796/oz and down -US$3 from this time yesterday.

And oil prices start today -US$3 lower at just under US$67/bbl in the US, while the international Brent price is now just under US$70/bbl. 

The Kiwi dollar opens today softer at just under 67.2 USc and that is its lowest in 14 months. Against the Australian dollar we are marginally softer at 94.4 AUc. Against the euro we are down at 59.4 euro cents. That means our TWI-5 starts the today down at 71.8 and below the 72-74 range of the past 14 months.

The bitcoin price is lower at US$46,189 and down -2.1% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.1%.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».