Wall Street optimism fades

Kia ora,


Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.


I'm David Chaston and this is the international edition from Interest.co.nz.


Today we start with news the US Fed is struggling with its diverging views ahead of tomorrow's catch up non-farm payrolls report. Wall Street is dipping in anticipation. The oil price is falling on concerns demand is weakening.


Overnight, two Fed speakers were out delivering different views. Trump insert Stephen Miran (https://www.federalreserve.gov/newsev...) essentially called affordability concerns overblown and reckoned the data doesn't show an affordability problem. Whereas NY Fed boss John Williams (https://www.newyorkfed.org/newsevents...) sees 'resilience' and on-going price pressures.


Meanwhile, the latest regional Fed factory survey (https://www.newyorkfed.org/medialibra...) is from the New York region and it turned into a contraction in December after two months of expansion. It was an unexpected turn lower. New orders held steady, and inflation pressures eased, but activity declined noticeably.


On the home building front, the widely watched national survey of home builders (https://www.nahb.org/news-and-economi...) remained glum, even if it did improve marginally. This measure stayed in contraction for the 20th consecutive month. Builders are contending with higher construction costs, economic and tariff risks, and muted demand from buyers who cite affordability concerns.


In Canada, their CPI inflation (https://www150.statcan.gc.ca/n1/daily...) came in at 2.2% in the year to November, unchanged from October. However, food prices rose 4.2%. Meanwhile, Canadian housing starts rose (https://www.cmhc-schl.gc.ca/professio...) in November, consistent with the building permit trend we have noted before. But there are questions about whether that will last because November real estate sales were lower on volume and lower in price.


In Japan, a series of Q4-2025 business sentiment surveys (https://www.boj.or.jp/en/statistics/t...) show good or rising confidence levels, now up to a four year high. This is true for large firms (recall our reports of how they are winning against the Trump tariff-taxes), the local services sector, and now a good jump for small businesses.


In China, new home prices (https://www.stats.gov.cn/sj/zxfbhjd/2...) across their 70 major cities dropped -2.4% in November from a year ago, deepening from a 2.2% decline in the previous two months. The latest results are the 29th consecutive month of price drops and the steepest pace since August. Beijing is involved in a long struggle to overcome the seemingly endless weakness in their property sector. The price declines for housing resales are deeper, but not more sharp, even if they are just relentless.


China's retail sales (https://www.stats.gov.cn/sj/zxfbhjd/2...) were notably weak in November, rising just +1.3% from a year ago and far below the expected +2.9% (with some expecting a +3.3% gain). This is a real cold-water moment for the Chinese economy and will undoubtedly bring emergency actions from Beijing. One reason for the weakness may have been the end of consumer goods subsidies, and the widespread expectation that they would be reinstated. Such subsidies are a trap on public finances.


Chinese industrial production (https://www.stats.gov.cn/sj/zxfbhjd/2...) rose +4.8% in November, below the expected +5.0% rise and near the lowest growth level since late 2023. Despite its lowish level, there are reasons to be sceptical of even this level. (See next item.)


But November electricity production (https://www.stats.gov.cn/sj/zxfbhjd/2...) in China was up only +2.7% from the same month a year ago, showing up the October year-on-year surge as an outlier.


In India, their November exports rose while their imports fell, delivering a much smaller trade deficit (https://www.commerce.gov.in/trade-sta...) for the month than was expected; in fact their lowest since June. And the November shifts were true for both goods and services.


The UST 10yr yield is now at 4.18%, down -2 bps from this time yesterday.


The price of gold (http://www.interest.co.nz/charts/comm...) will start today at US$4295/oz, and down -US$4 from yesterday. And we should note that silver is up +US$1 at just over US$62/oz.


American oil prices are down another -US$1 at just on U...