Summary: Air NZ cancelled more than 1,000 flights to Australia overnight because of border uncertainty, Joe Biden gave US markets some certainty by reappointing Jerome Powell as Fed chair, and there are reports of a Russian troop buildup on the Ukrainian border to add to uncertainty in global geopolitics.

Powell stays put US President Joe Biden ended the growing uncertainty over who will run the world’s most important central bank overnight. He appointed Trump-appointee Jerome Powell for a second four-year term. There had been some market fears and progressive political hopes that uber-dove and Democratic candidate Lael Brainard would get the job. Biden instead appointed Brainard as vice-chair.

Loving the Powell Put US stock markets rose about 0.5% in afternoon trade to fresh record highs on the renewed certainty of Powell’s re-appointment. Powell has overseen US$5 trillion of money printing to buy US treasuries and corporate bonds since becoming US Federal Reserve Chair, pumping asset prices to repeated record highs despite the pandemic. 

Dreaming of more However, US short term and long term bond yields rose around five basis points overnight on the news Powell had beaten Brainard to the top job, despite the chair being a Republican and a Trump appointee. Some had expected Brainard to get the job. She was seen as more dovish than Powell, and therefore likely to keep interest rates lower. So her loss saw market interest rates rise a tad. Two year US Treasury yields rose five basis points to 0.55% and the 10 year US Treasury yield also rose five basis points to 1.58%. 

Good news and bad news Holiday makers, pining grandmothers and New Zealanders wanting to flee to higher-paid Australian jobs (with lower rents too), warmer beaches and grandkids will be disappointed. Shareholders, the Treasury and quite a few employers will be relieved. Air NZ announced overnight it was cancelling more than 1,000 flights to Australia to Dec 31, which would affect about 20,000 customers. Air NZ is burning through a government loan facility at an unforecast rate of tens of millions of dollars a month, so the decision will slow the burn somewhat.

‘Welcome in mate’ Employers worried about staff jumping on a plane to Australia may be somewhat relieved about the flight cancellations. It came a day after Australia announced it would remove travel restrictions on over 200,000 migrant workers and students from Dec 1, allowing them to come in to take jobs. Australia is actively recruiting to bring in migrant labour, including from New Zealand, where NZ residents can work easily in Australia.

‘Our hands are tied’ Air NZ said it had no choice because of a lack of clarity from the NZ government over the possible reopening of MIQ-free travel or widespread home isolation. PM Jacinda Ardern reaffirmed this week an easing at the international border was unlikely until the first quarter of next year. “This will be particularly tough news for families and friends who were hoping to catch up over Christmas, but our hands are tied until border restrictions ease, and we receive further clarity from the New Zealand government,” said chief customer & sales officer Leanne Geraghty.

Which missile? Pentagon officials are increasingly worried China may have just had its ‘Sputnik moment’ of beating the United States with the sophistication of its new hypersonic missile. The FT reported overnight China’s missile test in July involved the firing of a second missile mid-flight to another target while travelling at five-times the speed of sound – something no one else has achieved and makes the missile very difficult to defend against.

Which invasion? Nervousness is growing again around Belarus and the Ukraine. Poland warned overnight of more serious incursions on its border and Ukraine warned a full Russian invasion was possible in the New Year. Bloomberg reported overnight US officials had sent intelligence to their European counterparts warning of a Russian troop buildup on the Ukrainian border.

Locked down or rioting Austria locked down the entire population for the fourth time overnight as its covid case numbers exploded to a record-high 17,000 yesterday. That would be the equivalent of 7,900 here, given Austria has a population of 8.9m. There were also fresh riots overnight in Belgium and the Netherlands by anti-vaxx and anti-mandate protestors. Austria’s anti-vaxxers are also protesting at compulsory vaccination for all Austrians from Feb 1. PM Jacinda Ardern said on Monday NZ had absolutely no plans to go down the full compulsion route.

Elsewhere overnight in global markets, corporate news and economic news: 

  • BHP and Woodside confirmed a A$40b merger announced in August; 
  • Ericsson bought Vonage for US$6.2b; 
  • Joe Biden referred allegations of “potentially illegal conduct” over petrol prices charged by oil majors ExxonMobil and Chevron to the Federal Trade Commission; and, 
  • The European Central Bank said more than half of Europe’s banks hadn’t properly assessed their climate risks.

From BusinessDesk’s correspondents today: 

  • Michael Andrew takes a deep dive into the legal challenge to Chris Hipkins’ vaccination mandates;
  • Dan Brunskill profiles the initial listing success of TradeWindow; and,
  • Daniel Dunkley interviews Spark Sport’s head Jeff Latch about its battle with Sky Sport.

In case you missed it from yesterday:

  • The government announced an NZ-wide move into the ‘traffic light’ system of covid controls from Dec 3;
  • Meridian Energy confirmed the sale of its Australian assets for A$729m to Shell and Infrastructure Capital Group;
  • NZ Refinery confirmed it would close the refining parts of the Marsden Point facility from April next year; and,
  • Stocks fell 1% on the NZX on growing talk of higher interest rates.