Kia ora,
Welcome to Monday's Economy Watch where we follow the economic events and trends that affect New Zealand.
I'm David Chaston and this is the International edition from Interest.co.nz.
Today we lead with news the world's largest multilateral trade deal has now been signed.
The RCEP, a 15 country trade deal covering a third of global GDP and 2.2 bln people was signed yesterday and is now in force, and New Zealand was one of the signatories. New Zealand exported over $36 bn of goods to RCEP countries and nearly $12 bln of services in 2019. It eliminated 92% of tariffs on traded goods, and eased services trade as well. It is much shallower than the TPP and avoids the pesky environmental, labour and IP protections the TPP does. Therefore China has been active in leading its adoption and it is a big win for them. Still, it is a major trade achievement, especially in the face of Trumpism.
Interestingly, because it involves China and not the US, protesters have been silent on this deal despite there being more to worry about on labour laws, IP, and the environment.
In China, there is drama in their corporate bond market with ripple effects spilling over into other markets. A State-owned coal miner has defaulted on a ¥1 bln bond triggering official investigations and wiping out equity market gains in Shanghai. Regulators have increasing said they will allow companies to fail if their financial situation is untenable. But this is a test of that policy - and many expect the regulators to revert to old habits, cave in and bail out this failure, again. State-owned companies probably can't be allowed to fail by Beijing given the optics of omni-control. All eyes are on Beijing. On that basis, vulture funds are buying up this debt aggressively.
Meanwhile, China's Foreign Ministry has unloaded on Australia in official comments in Beijing yesterday. They are worth reading. China is not backing away from tackling Australia for "repeatedly [having] spoken and acted out of turn on issues concerning China's core interests". And they see it is up to Australia to reverse their positions.
In Australia, ASIC is signaling it will release a report soon on the "harms we continue to see" in the BuyNow, PayLater sector, an unregulated corner exploiting credit regulation.
American consumer sentiment fell rather sharply in early November as consumers judged future economic prospects less favourably, while their assessments of current economic conditions remained largely unchanged. The closeness of the presidential election as well as the resurgence in COVID infections and deaths were responsible for the early November decline.
Also going south was the US monthly budget deficit which at -US284 bln for the month, widened the annual result to -US$3.3 tln in the year to October, easily a new high. That is a massive -15.5% of 2020 nominal GDP. It was twice as large on October 2020 as October 2019. It is just another huge challenge the incoming Biden Administration will face.
The latest global compilation of COVID-19 data is here. The global tally is 54,127,000 and a surge of +1,082,000 rise in the past two days.
The largest number of reported cases globally are still in the US, which rose +345,000 since this time Saturday to 11,237,000.
In Australia, they are not getting any significant resurgence.
The UST 10yr yield will start today marginally up at 0.90%.
The price of gold has changed little over the weekend and now at US$1889/oz.
Oil prices are lower again today and by about -$0.50/bbl so it is at US$40/bbl in the US, while the international price is now just under US$43/bbl.
And the Kiwi dollar is unchanged today to 68.5 USc but it is up more than +65 bps from this time last week. Recall it was up +1½c the prior week. Against the Australian dollar we are also soft at 94.2 AUc. Against the euro we are little-chnaged at 57.9 euro cents. That means our TWI-5 is now at 71.4.
The bitcoin price is -1.4% lower this morning from this time Saturday, now at US$16,018. That makes the weekly gain more than +US700 and that was on top of the pror week's almost +US$2000 huge jump.
You can find links to the articles mentioned today in our show notes.
And get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. We will do this again tomorrow.
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