Dairy prices rise; global PMIs expand faster; Hong Kong retail falls; RBA changes its tune on inflation; OECD sees improvements ahead; UST 10y at 0.92%; oil dips and gold up ; NZ$1 = 70.6 USc; TWI-5 = 72.9

Here's our summary of key economic events overnight that affect New Zealand, with news that factories globally are chugging along nicely at present despite the pandemic risks.

But first, there was another dairy auction overnight and it was very positive. Overall prices were up +4.3% in US dollars, and despite the ever-rising Kiwi dollar, they rose in local currency by +1.9%. This result was built on a +5.0% rise for WMP, and overall prices are back to where they were at the start of 2020 although in local currency we are still -7% lower as the ever-rising Kiwi dollar undermines the long-term gains. Today's result won't hurt farmgate payout forecasts however.

In the US, a bipartisan group of lawmakers unveiled a $900 bln COVID-19 relief bill aimed at breaking a deadlock between Democrats and Republicans over new emergency assistance for small businesses and other industries. Perhaps some bipartisan action can now finally move them forward. But still no similar action for the jobless yet.

Internationally, there were a raft of PMIs released overnight. The internationally benchmarked US factory PMI brought its steepest improvement since 2014 with that growth supported by faster upturns in output and new orders amid stronger domestic and foreign client demand. Having said that, it was almost exactly as analysts expected. The more widely-watched local version recorded a higher level, but one that was lower than for the prior month. It also has new orders and exports expanding.

Globally, manufacturing expanded at one of its fastest rates in almost a decade during November. But it should be remembered that these improvements will face challenges from second and third pandemic waves before the vaccines start to be effective.

Canada also turned in a good factory result, holding on to its prior month recovery.

In Europe, their expansion was slower, but still marked, with gains in output and new orders. But job losses continued there. Germany stayed strong, France was weak. The UK was aided by 'Brexit-buying'.

In China, their official factory PMIs were eclipsed by the private, internationally-benchmarked version indicating a good expansion there.

In Hong Kong, retail sales were down almost -9% year-on-year in October and their September result was revised lower.

In Australia, their central bank has left its policy rate unchanged at +0.1%. But it did change its language around inflation, moving more to the US Fed view that they want to see actual inflation bed in, rather than just inflation expectations rise, before they move again with policy changes.

Another regulator there, APRA has moved against 'material breaches of prudential liquidity standards' by Westpac, including in relation to Westpac NZ. More here.

There were PMI releases for Australia as well. The AIGroup one fell back from a strong expansion in October to a weak one in November. But the Markit one moved to a stronger expansion from an already good level and now at a three year high.

And in more Australian data, building consents for houses rose for the fourth consecutive month in October and are at the highest recorded level since February 2000. Their balance of payments on goods and services was a surplus in the September quarter of +AU$13.6 bln, lower than the +AU$22.3 bln June quarter surplus, but better than expected. Exports fell -6% and imports rose +3%.

Overall, the OECD sees a brighter future for the world's main economies even if the recovery will be gradual. And although New Zealand took a bigger initial economic hit in the pandemic, it has bounced back faster and is in a better situation now, they say.

In equity markets, Wall Street is starting the new month with a +1.3% rise in Tuesday trade for the S&P500. Overnight European markets rose about +1% although London did a bit of catchup gaining +1.9%. Yesterday, Tokyo ended up +1.3%, Hong Kong was up +0.9% and Shanghai rose +1.8% on the day. The ASX closed up +1.1%, but the NZX50 Capital index was the outlier, falling -0.3% on the day.

The latest global compilation of COVID-19 data is here. The global tally is 63,478,000 and a +554,000 rise overnight. It is still very grim in Russia, the UK, Brazil and Italy with great stress on their hospital systems. It does seem to be easing further in Belgium, France and Spain. Global deaths reported now exceed 1,473,000 and up +10,000 in one day.

The largest number of reported cases globally are still in the US, which rose +174,000 overnight to 13,934,000. The US remains the global epicenter of the virus. The number of active cases is surging however at 5,429,000 and that level is up +52,000 in one day, so many more new cases more than recoveries. Hospitalisations have pushed up well above 100,000. Their death total now exceeds 275,000. The US now has a COVID death rate of 828/mln and the seventh highest in the world.

In Australia, they are not getting any major resurgence. There have now been 27,912 COVID-19 cases reported, and that is just +8 more cases yesterday. Now 60 of their cases are 'active' (-1). Reported deaths are unchanged at 908.

The UST 10yr yield will start today up sharply at 0.92% and a +8 bps rise. Their 2-10 rate curve is much steeper at +75 bps, their 1-5 curve is steeper at +30 bps, with their 3m-10 year curve is also much steeper at +84 bps. The Australian Govt 10 year yield is also higher, up +5 bps at 0.97%. The China Govt 10 year yield is up +2 bps at 3.32%, but the New Zealand Govt 10 year yield is unchanged at 0.85%.

The price of gold has recovered sharply today, up +US$27 to US$1811/oz.

Oil prices are again a little softer today, and now under US$45/bbl in the US, while the international price is now just on US$47.50/bbl.

And the Kiwi dollar has mover slightly higher, up to 70.6 USc this morning and that is its highest since April 2018 or a 30 month high. Against the Australian dollar we are much firmer too at 96 AUc and a +½c rise. Against the euro we are also holding at 58.6 euro cents. That means our TWI-5 will start today at 72.9 and a 20 month high.

The bitcoin price has settled back today, now at US$18,836 and a -2.0% fall from this time yesterday. The bitcoin rate is charted in the exchange rate set below.

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