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 many more Chinese companies are reporting bond, liquidity and leverage stress.

But first, Wall Street is up at another new record high with a +1.0% gain so far today by the S&P500. Good trial results by another drug company with a vaccine drove this rise. It is not the near-term benefits the markets are cheering, it is that the two new vaccines represent a new more powerful way to fight pandemics. The rollout of both will be slow however. Overnight, European markets rose a similar amount. Yesterday, Shanghai closed up +1.1%, Hong Kong was up +0.9% and Tokyo ended up +2.1%. But the ASX exchange stayed frozen all day, but booked a +1.2% rise in early trade. The NZX50 Capital Index was up +0.4% at its [normal] close.

With the oil price, the NZD has risen from this global risk rally.

In the US, there has been a marked slowing in factory activity in the New York region in early November, the next regional Fed survey to report.

In China, although officials are claiming house prices have moved little between September and October, in fact the year-on-year rise in key cities like Beijing and Shanghai are up +4.2% and +4.4% respectively, and prices in Shenzhen are up +5.2% and embedding the lure of "investing in housing". Nationally the rise was +4.3% and marginally lower than September's +4.6% gain.

The woes of the Chinese bond market are spreading, with now both a regional bank, and a major aluminium producer caught in their own liquidity traps. The negative power of leverage is coming home to roost.

China's October retail sales were up +4.3% year-on-year, higher than the +3.3% September rise but still well below the expected +4.9%. They will be disappointed, especially as the Golden Week holiday was supposed to bring a surge in spending. They will be wondering whether the Singles Day/Double-11 retail event and its lead-up is just cannibalising's their consumer demand improvements.

China's electricity production was up +4.6% in October, the second month in a row growth has slipped, and more importantly, the second consecutive month production of electricity itself has retreated.

But one area China is performing well is its industrial production, up +6.9% in October from the same month a year ago, and back to its pre-pandemic growth levels. Drugs, metals and transport equipment manufacturing were all sectors that performed very well. Laggards were electronics, and mining.

Another area they will be pleased with is foreign direct investment. This rose a very healthy +6.4% in October, and well above recent trends.

In Japan, they recorded a stronger-than-expected Q3 GDP recovery, and that data was bolstered by a good month-on-month rise in industrial production. Export orders drove both sets of data.

The latest global compilation of COVID-19 data is here. The global tally is 54,563,000 and a +436,000 rise from yesterday.

The largest number of reported cases globally are still in the US, which rose +154,000 since this time yesterday to 11,391,000.

In Australia, they are not getting any significant resurgence.

The UST 10yr yield will start today little-changed at 0.90%.

The price of gold has risen +US$7 this morning and now at US$1896/oz.

Oil prices are higher today and by about +$1.50/bbl so it is at US$41.50/bbl in the US, while the international price is now just over US$44/bbl.

And the Kiwi dollar is +½c firmer today to 69 USc. Against the Australian dollar we are unchanged at 94.2 AUc. Against the euro we are firmer at 58.3 euro cents. That means our TWI-5 is now up at 71.8.

The bitcoin price is +3.5% higher this morning from this time yesterday, now at US$16,578.

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.