US President Trump added another milestone to his resume being the only US President in history to be impeached twice, with a single article for "incitement of insurrection" passing the US House by 232 votes to 197. The US Senate vote is unlikely to occur ahead of Biden's inauguration on January 20, and two thirds of votes would still be needed to impeach Trump. If the Senate convicted Trump for the first time, he could be barred from holding the presidency again.
Markets have taken great advantage of the Trump impeachment. With sentiment buoyed on reports Biden will introduce a circa USD2 trillion COVID-19 relief package. The package will include sizable direct payments to American families and significant state and local funding, including for coronavirus vaccine distribution and other emergency spending measures. However, COVID-19 continues to cast a shadow. Media reports suggest that more than 32.4m vaccines have been given worldwide. However, confirmed global cases of COVID-19 are approaching 93m with the death toll nearing 2m.
Global equity markets were supported by the prospect of more policy stimulus. The major US stock indices traded near record highs overnight, with energy, industrial and financials pushing the S&P500 modestly higher, with small gains for the Dow and Nasdaq. European stocks also edged higher, with widespread gains in the major Asian indices. Oil and commodity prices in general were firmer.
Central bank policymaker reiterated the importance of proving continued policy support. FOMC Chair Powell noted that the Fed will not raise rates until it sees troubling signs of inflation, and that the time to raise rates “is no time soon”. According to Powell, it would be appropriate to keep rates near zero until inflation has risen to its 2% target and was on track to moderately exceed that level. The ECB Minutes did not give much away but linked the rate of bond purchases to market conditions and whether this would keep financial conditions favourable.
US initial jobless claims were considerably weaker than expected, rising to 965k, a 2-month high (mkt: 789k, prior 787k), with continuing claims rising to 5,271k (mkt: 5,000k, prior 5,072k). Boosted by strong exports, the Chinese December trade surplus was a larger than expected $78.2bn in December, with the 2020 surplus (USD535bn) the highest since 2015 ,and with the annual surplus with the US widening to USD317bn, the highest since September 2019. Preliminary estimates showed the German economy contracting by 5% over 2020, the largest fall since 2009.
NZ residential building consent issuance for the November 2020 year rose to 38,604 consents, the highest annual total since 1974. Auckland issuance (16,293) was the highest on record. Strong construction activity and slowing population due to the border restrictions should act to bring the housing market more into balance and help cool house prices. NZ total paid jobs climbed 65k in the 4 weeks to December 6, hitting a record 2.3 million and illustrating the resilience of the NZ economy.
FX: The USD index initially firmed on hopes of larger US fiscal stimulus, but has eased over the last few hours with the USD one of the weaker performers on the G10 currencies overnight, whilst the AUD and NZD were amongst the strongest . The NZD has made gains over the last few hours and is currently towards the top of its 0.7175 to 0.7240 USD range overnight, but is becalmed at around 0.928 AUD. We remain constructive on the NZD, which should remain well supported given NZ's success in containing COVID-19, a positive outlook for export commodities and improving risk appetite.