US mortgage rates fall as do UST yields; China dissent rising along with temperature stress; Aussie inflation remains high; UST 10yr 3.84%; gold and oil down; NZ$1 = 62.3 USc; TWI-5 = 70.1

Here's our summary of key economic events overnight that affect New Zealand with news the northern holiday season can still spring a few economic and market surprises.

First in the US, mortgage applications last week were little-changed from a week ago (down -0.5%) and that is despite mortgage rates falling for a fourth consecutive week to 6.44% for their benchmark 30 year fixed loan. That is its lowest level since April 2023, and interestingly is the same rate that applied 30 years ago in October 1993. If you took out one of these loans back then and had to renew it today (!), the rate would be exactly the same.

In their government bond market, the US Treasury had a 5 year bond tender and that was very well supported - again. There was a massive US$100 bln more offered than they accepted. It gave investors a median yield of 3.59%, down from 4.05% at the prior equivalent event a month ago. Their bond rally is extending, so perhaps it is no surprise investors are so enthusiastic. Lower rates also mean the pressure on their Federal deficit is less than it would otherwise be. On average, the US Federal government pays about 3.35% over all its debt, so today's tender is approaching that average again.

The US holiday driving season is coming to an end with one final burst for their Labor Day holiday this coming weekend. Motorists there are paying -12% less for petrol than they did at this time last year, and on their way home they will be paying -4.1% less than they did a month ago. Energy inflation is not a thing there at the moment.

Today will also be a signature day on the US equity markets after Wall Street closes. Nvidia will release its results and investors will then know if their sky-high valuation is reasonable. And Berkshire Hathaway may hit a capitalisation of US$1 tln, putting it in a very small and exclusive club of seven, all the others big tech companies.

In China, the levels of dissent are rising as their economy wavers, although the rises are containable by Beijing. In the year to October, they were up +16% according to detailed monitoring. Most current dissent is in the south in Guangdong province, but the big central provinces that include Beijing are also seeing rises in dissent. The October monthly levels may end up being the highest of the year. Almost half relate to workforce issues, about a fifth relate to homeowner stress.

And in some parts of China, stress is more than citizen protest. In giant Chengdu, the capital of Sichuan province, they are in an extended and crushing heat wave. Electricity is being rationed with many companies halting production after the local government imposed sharp restriction as the power supply buckled.

Australia released their month CPI Indicator yesterday. It rose 3.5% in July from a year ago, down from June's 3.8% but above consensus of 3.4%. It was the lowest figure since March, as electricity prices fell sharply following the extended Energy Bill Relief Fund rebate. Inflation remains outside the RBA’s target range of 2-3% and that electricity component is hiding some of the higher prices elsewhere. Don't expect Aussie rate cuts any time soon. (Their policy rate is 4.35% with financial markets pricing in one -25 bps cut in December but with low conviction; ours 5.25% with markets pricing in -75 bps of cuts over October and November.)

And staying in Australia (and speaking of extremes), their Green Party said its “Robin Hood” reforms would levy an extra AU$514 bln in taxes over 10 years to pay for sweeping social benefit increases. (Chances of enactment are low however, because they only have 4 MPs in the House of Representatives, plus 12 of 76 in their Senate.) The Aussie Green's alignment to the bikie-gang controlled CFMEU union isn't endearing their policies to a wider audience either.

The UST 10yr yield is now at just on 3.84% and unchanged from yesterday. The key 2-10 yield curve inversion is now only -3 bps and its smallest inversion since July 2022. Their 1-5 curve inversion is little-changed however at -73 bps. And their 3 mth-10yr curve inversion is also little-changed at -149 bps. The Australian 10 year bond yield starts today at 3.98% and unchanged from yesterday. The China 10 year bond rate is also unchanged at 2.18%. The NZ Government 10 year bond rate is now at 4.29% and up another +4 bps from yesterday.

Wall Street is down -0.5% on the S&P500 ahead of the Nvidia and Berkshire data. Overnight European markets were mixed with London unchanged but both Paris and Frankfurt positing small rises. Yesterday Tokyo ended its Wednesday session up +0.2%. Hong Kong ended down a full -1.0% however. Shanghai ended down -0.4%. Singapore was down -0.2%. But the ASX200 ended unchanged in its Wednesday session, while the NZX50 was up +0.2%.

The price of gold will start today down -US$13 from yesterday at US$2506/oz.

Oil prices are down -US$1 at US$74.50/bbl in the US while the international Brent price is now just over US$77.50/bbl.

The Kiwi dollar starts today down -20 bps from yesterday at 62.3 USc. Against the Aussie we are unchanged at 92 AUc. Against the euro we are up +20 bps to 56.1 euro cents. That all means our TWI-5 starts today at 70.1 and unchanged from yesterday.

The bitcoin price starts today at US$58,877 and down another -4.7% from this time yesterday. Volatility over the past 24 hours has been high at just on +/- 3.7%.

The easiest place to stay up with event risk is by following our Economic Calendar here ».