Kia ora,

Welcome to Tuesday'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 about just how hard international investment flows have been hit.

A UN agency is reporting that foreign direct investment "collapsed" in 2020, falling by more than -40%. It was a sharp pullback by US investors that is a stark feature. In fact, the US made less foreign investment in 2020 than did China, a first time that has happened. Investment out of the UK fell to zero. For the EU it was worse than that with a shrinkage.

In the US, the Chicago Fed's National Activity Index points to an uptick in economic growth in December.

And in January, the Dallas Fed's regional factory survey showed Texas factory activity continued to expand in January, but at a markedly slower pace, and especially for new orders.

In China, there are definite signs that commodity prices have reached their top and may be starting to trend lower. Prices for rice, palm oil, corn and hogs are definitely lower this week. Prices for coal and iron ore are showing small dips too.

In Taiwan, industrial production picked up slightly in December and is in a healthy rising trend. But their retail sales growth turned lower.

In Germany, sentiment among business managers has deteriorated. Companies assessed their current situation as worse than last month. Their expectations were also more pessimistic. The second pandemic wave has brought the recovery of the German economy to a halt for now.

Today is Australia Day (or in some circles, Invasion Day). Markets there are closed today. They were pretty quiet yesterday too as it has become an effective long weekend over the ditch.

The Australian December merchandise trade surplus of AU$9 bln was released yesterday, and a significant increase, up +AU$7.4 bn from the November surplus. Exports of iron ore and cereals are the strongest in history, resulting in the fourth highest goods trade surplus ever recorded there. Their strong surplus is heavily influenced by trade with China. Imports from China fell -7% in December, while exports to China increased +21%. Australia’s goods trade surplus with China alone stands at +AU$5.2 bn for December. Despite Beijing's attempt to use trade to punish Australia, it just isn't working.

Last night, the Australian Securities and Investments Commission said it was hit by “cyber security incident affecting a server used by ASIC”. This is the exact same vulnerability that caught out the RBNZ, the same third-party vendor. Clearly the risks are continuing. The result is that banks now have no effective way to transfer large amounts of data to their regulators.

Equity markets have opened in New York drifting down -0.2% for the S&P500. Overnight, European markets were much harder hit, mostly down about -1.5%. Yesterday, things were much more positive in Asian markets with Shanghai up +0.5%, Hong Kong was up a very impressive +2.4% while the very large Tokyo market was up +0.7%. In Australia, their Monday session managed to post a +0.4% gain in very light volumes, while the NZX50 Capital Index managed a +0.5% rise.

The latest global compilation of COVID-19 data is here. The global tally is rising faster, now at 99,346,000 and up +422,000 in one day.

The UST 10yr yield will start today down -4 bps at just under 1.05%.

The price of gold will start virtually unchanged today at US$1856/oz.

Oil prices are firmer by +US$1 at just under US$53/bbl in the US while the international price is now just under US$56/bbl.

And the Kiwi dollar will open marginally firmer at just under 71.9 USc. Against the Australian dollar we are also firmer at 93.4 AUc. Against the euro we are now at 59.2 euro cents. That means our TWI-5 is up a tad at 73.3.

The bitcoin price has recovered further and is now at US$33,834 and up +6.0% since this time yesterday.

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.