US data good but short-term risks rise fast; China faces it own messy markets; global factories in better shape; Aussie house prices stop rising; UST 10yr at 4.57%; gold and oil rise; NZ$1 = 56 USc; TWI = 66.9

Here's our summary of key economic events over the New Year holiday break with news that with the western new year behind us, we are now counting down to January 29, Chinese new year - and the year of the snake. (Given the US election result, it seems appropriate.)

In the US, they ended the year with another cracker rise in retail sales, up +7.1% last week from the same week a year ago. That was only beaten by the +7.3% rise on this basis during the Thanksgiving weekend sales events. These two surges were the best since early 2023, but better when you realise those 2023 results were off a low base. Prior to the pandemic distortions, you have to go back to 2005 to find as strong as these two latest ones. Bricks & mortar store sales gains like these are clear evidence that employment and income gains are widespread, and not concentrated for just a few.

Confirming this, the regional Dallas Fed services index which started rising in October, put in another very good gain in December, matching November. This is also quite impressive.

But the people at the top of the tree are doing exceptionally well. Bloomberg is reporting that the world’s 500 richest people got vastly richer in 2024, with Elon Musk, Mark Zuckerberg and Jensen Huang (Nvidia) leading the group of billionaires to a new milestone: a combined US$10 trillion net worth. This is a stunning level given the world GDP is about US$110 tln.

But for most others, higher benchmark interest rates have weighed heavily on their home loan market, with mortgage application volumes down a very sharp -12.6% last week, on top of the -10.7% drop the prior week. That puts them at a ten month low.

The news was much better on the initial unemployment claims front however. They rose as was expected seasonally, to +283,000, but only marginally and by very much less than seasonal factors would have expected. That allowed the headline 'seasonally adjusted' level to be reported as a decline. There are now 1.87 mln people on these benefits and very similar to the level at the same time last year.

Mid-January is looking like the focus of some crunch events. The US waterfront issue was resolved a few weeks ago on a pay basis, but it left the 'technology' issue unresolved. They are in a "fight against automation'. A new strike threat looms again over this matter on January 15. And the recent short-term 'fix' of their debt-limit crisis isn't lasting very long. "Treasury currently expects to reach the new limit between January 14 and January 23, at which time it will be necessary for Treasury to start taking extraordinary measures." Mid-January could well be a very messy time in the US, even before the presidential inauguration.

Across the Pacific, markets there are delivering their own messy verdict. China's 10yr Government bond yield has taken another steep dive lower overnight, now down to just 1.63% in a mad scramble for safety. And the shift is driving large gains for holders. A year ago this rate was 2.56%. Four years ago it was at 3.28%. At the same time, the Shanghai stock exchange fell a very sharpish -2.7% yesterday. All this is despite Beijing's warning to traders not to be "irrational". It is their worst start to the year since 2016.

Meanwhile, China's official factory PMI slipped slightly from a marginal expansion, but even after the slip it was still expanding, although barely now. And the private Caixin survey reported a very similar result.

However, the official Chinese services PMI delivered an unexpected very strong result, a sudden surge from barely expanding, to a full-on roaring situation, the best since early 2023 which was helped by a low base. But observers will now wait until it is confirmed, first by the Caixin equivalent, and second by waiting for the January result.

Taiwan’s factory sector ended 2024 on a positive note, and its strongest in five months built on rising new orders.

Singapore reported its advance Q4-2024 GDP growth rate at +4.3%, better than the expected +3.8% but a small downgrade from the Q3-2024 expansion of +5.4%.

It was only a minor rise, and to a level that isn't all that special on an international comparison basis, but the local Singapore PMI is now at its highest level since January 2019. That is based on faster growth in new orders, new exports, factory output and employment.

The Philippines, Indonesia and Thailand all recorded small improvements in their factory sectors, all expanding marginally faster. But Malaysia stood out with a small contraction.

South Korean exports rose +6.6% in December to a 31 month peak, their 15th straight month of increase and the fastest rise since June. Despite than, their overall factory PMI also recorded a minor contraction.

In Japan, here's an odd item. A convenience store chain is hiring remote workers to handle customer check-out duties.

India’s manufacturing activity ended a strong 2024 on a soft note and a slowing trend - and not the improvement expected. This was because the expansion in new orders was the slowest of the year, suggesting weaker growth in 2025.

In Australia, average house prices fell -0.1% in December from November, marking the first negative movement in nearly two years, according to CoreLogic. This shift followed a surprisingly strong period of growth between February 2023 and October 2024, despite high interest rates, cost-of-living pressures, and reduced borrowing capacity. On an annual basis, Australian home values rose by +4.9% in 2024, adding approximately AU$38,000 to the median home value. However, three capital cities saw declines in values over the year: Melbourne (-3.0%), Hobart (-0.6%), and the ACT (-0.4%). Sydney only rose +2.3%. In contrast, mid-sized capitals experienced strong growth, with Perth home values surging +19%, Adelaide increasing by +13%, and Brisbane rising by more than +11%.

And it is not only housing turning lower. Their factory PMI contracted too, on weak new orders.

Globally we should also note that temperatures reached their highest level in 2024 since intensive monitoring started in 1970. The limiting targets are now almost impossible. Insurability of many risks will be a new stress point.

The UST 10yr yield is now at just on 4.57%, and up +2 bps from this time Tuesday. The key 2-10 yield curve is more positive, now by +34 bps. Their 1-5 curve inversion is also more positive, now by +24 bps. And their 3 mth-10yr curve is also more positive at +29 bps. The Australian 10 year bond yield starts today at 4.50% and up +3 bps. The China 10 year bond rate is now at 1.63% and down a very sharp -8 bps. The NZ Government 10 year bond rate is now at 4.59% and unchanged.

Wall Street is ending its Thursday trade down -0.8% on the S&P500 and a reversal from earlier gains. Overnight, European markets were very mixed with London up +1.0%, Frankfurt up +0.5% and Paris up +0.2%. Yesterday Tokyo was closed for the holiday. Hong Kong was down -2.2%. Shanghai fell an even sharper -2.7%. Singapore rose +0.3%. And the ASX200 was up +0.5%, but the NZX50 was closed yesterday. It reopens today.

The price of gold will start today at US$2659/oz and up +US$61 from New Year's eve.

Oil prices are a bit more than +US$2.50 higher that this time Tuesday at just over US$73.50/bbl in the US while the international Brent price is still just under US$76.50.

The Kiwi dollar starts today just on 56 USc and down -40 bps from Tuesday. And that is its lowest level since October 2022, and prior to that, the GFC. Against the Aussie we are down -50 bps at 90.2 AUc. Against the euro we are up +30 bps at 54.6 euro cents. That all means our TWI-5 starts today at just under 66.9 to be only -10 bps lower than this time Tuesday.

The bitcoin price starts today at US$97,158 and up +3.5% from this time on yesterday. Volatility over the past 24 hours has been moderate at +/- 2.0%.

There will be no podcast version today. That will restart on Monday, January 6, 2024.

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