Here's our summary of key economic events overnight 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 index moved 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.
We made a point yesterday that higher yields might hurt commercial property in 2025. Well, it didn't in 2024 in New Zealand. Our eight-company listed property sector index rose +7.8% in 2024 with almost all of that rise in the November/December period. Not great and well below the 2024 NZX50 average. If yields keep falling that sector will still make gains. But recession might hurt its vacancy rate, and higher interest costs will almost certainly affect it.
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 key 2-10 yield curve is still positive by +30 bps. Their 1-5 curve inversion is less positive, now by +21 bps. And their 3 mth-10yr curve is also less positive at +24 bps. The Australian 10 year bond yield starts today at 4.47% and back up +8 bps. The China 10 year bond rate is now at 1.71% and up +1 bp. The NZ Government 10 year bond rate is now at 4.59% and up +7 bps. Remember it started the year at 4.38% so the net change is actually only +21 bps. In between it fell to a low of 4.07% (on September 17) and a high of 4.98% (April 26).
Wall Street is ending its Monday trade down -0.7% on the S&P500. Overnight, European markets all fell about -0.5%. Yesterday Tokyo ended its Monday trade down -1.0%. Hong Kong was down -0.2%. Shanghai rose +0.2%. Singapore rose +0.6%. But the ASX200 slipped -0.3%, although the NZX50 had a good Monday in comparison, up +0.5%.
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.
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8 Comments
I reckon the US now has a choice between, on one hand, carrying on borrowing via QE -type money creation and in consequence higher inflation, and on the other hand controlling liquidity by restraining borrowing and so keeping inflation low but accepting a consequent albeit temporary (eg likely a couple of years) slowdown in economic activity.
The first option would probably need QE because the bond market is starting to look like it's rejecting these high single digit annual 'deficits to the horizon'. If that happened in earnest the only option left prepared to accept palatable yields on state debt would be the state-controlled lender of last resort..
It is taking a while though that's for sure.
Not a fashionable thing to say but the JPY carry trade is responsible for the Anglosphere bubbles, particularly the US stock market. Not the sole driver but very important. Only reaction I've had about this at the BBQs is that Japan is a basket case compared to Aotearoa and the mighty West.
"And through [2024] all profits and wealth growth have been strong."
Undeniably true. Aggregates and averages are fine things.
But they don't tell a meaningful, nor truthful, story that reflects what the majority of people see and feel because the majority haven't been equal recipients of the wealth growth. Worldwide, there are many countries where the majority could suddenly cry "enough". Few will have seen it coming. May you live in interesting times.
DXY has appreciated 7% in 2024. You would have been better off holding SPX or gold. Spookily, both have ended up matching each other in appreciation for 2024. Probably nothing but the conspiracy theorists might infer that the S&P500 gains have been driven by monetary expansion.
XAUNZD up a whopping 43% in 2024.
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