Here's our summary of key economic events overnight that affect New Zealand with news financial markets are now expecting a -50 bps rate cut from the US Fed later in the week.
But first up in the US, the next regional factory survey came in surprisingly strong. The NY Empire State Manufacturing Index unexpectedly jumped sharply in September to its highest since April 2022. A key driver was new order growth.
Also coming in better than expected was Canada's July manufacturing levels. Oil and coal production drove that. Also probably helping was an unexpected rise in Canadian vehicle sales. But that monthly gain only limited the retreat from a year ago to -1.1%.
As regular readers will know, Canada has had longstanding housing affordability issues. Today it loosened some eligibility rules for first-home buyer access to 'insured mortgages'. But this is a demand side move. So these changes are likely to have the unintended consequence of adding more competitive pressures to already stressed markets.
In China, the typhoon that hit Shanghai yesterday has come at a tricky time for China and its financial capital. Delayed and cancelled transport connections will have undermined their Mid Autumn Festival holiday spending in the region.
In Australia, the ASX200 closed at an all-time high yesterday, fueled by bets the US Fed would cut interest rates by -50 bps on Thursday (NZT).
But the same financial market 'bets' are pushing the USD lower, along with benchmark interest rates. Falling rates are having a global effect, except perhaps in Australia where there is widespread acknowledgement that the RBA hasn't tamed inflation yet. But they may be able to hold on with unchanged policy rates as the gap with others widens over the next few months.
Interestingly, financial markets are also betting heavier that the next RBNZ rate change, on October 9, will also be -50 bps.
The UST 10yr yield is now at just on 3.63% and down -3 bps from this time yesterday. The key 2-10 yield curve is still +7 bps positive. Their 1-5 curve inversion is less at -57 bps. And their 3 mth-10yr curve inversion is still at -138 bps. The Australian 10 year bond yield starts today at 3.85% and up +3 bps. The China 10 year bond rate is at 2.07%, and unchanged. The NZ Government 10 year bond rate is now just on 4.10% and down 0-3 bps from yesterday.
Wall Street has opened its week with the S&P500 unchanged and much more tame than the earlier futures trading suggested. Overnight, European markets were similarly subdued with Lindon up +0.1% but Frankfurt down -.04%. Tokyo ended its Monday trade down -0.7%. Shanghai did trade due to the typhoon, and will be closed again today for a public holiday. Hong Kong was up +0.3%. Singapore was up +0.2%. The ASX200 ended its Monday trade up +0.3% but the NZX50 took a hit of -1.0%, probably related to the impacts expected from the outsized AIA capital raising.
The price of gold will start today at US$2581/oz and up +US$3 from yesterday's high.
Oil prices are up +US$2 at US$70.50/bbl in the US while the international Brent price is now just under US$73/bbl.
The Kiwi dollar starts today at 61.9 USc and up +30 bps from yesterday. Against the Aussie we unchanged at 91.8 AUc. Against the euro we are up +10 bps at 55.7 euro cents. That all means our TWI-5 starts today at 69.5, and up +20 bps from yesterday.
The bitcoin price starts today at US$57,987 and down -3.0% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.3%.
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51 Comments
Agreed, 50 BPS is way too much. Unlikely here too, RBNZ is going to want to do one more drop and then hold-off until the new year to see if our indicators start going backwards. I don't think they will (does anyone feel like going out and splurging this Xmas?) but it seems like something you'd be happy putting money on.
You'd have to see some pretty big drops in the markets which are still being kept reasonably bouyant by cheap energy. Could change quickly but at the moment there's no sudden pain on the horizon to justify a 0.5% drop.
Agreed, 50 BPS is way too much
US Senators have sent a letter to Powell asking for a 75bps cut. That's 50% higher than your 'way too much.'
https://www.warren.senate.gov/imo/media/doc/warren_hickenlooper_whiteho…
We're looking at a synchronized global recession, and the big rate hikes are just as likely to serve the role of stimulus ammo moreso than being a solely inflationary related move.
Hard to say if this is the point bad enough to spam the 50 basis points button yet.
We don't often agree, but there we do.
Trump is a narcissistic, rambling/decaying maverick, but folk have been hammered by the neocons to the point they don't have faith. So a maverick - any maverick - is worth a crack. Same went/goes for Moseley, Mussolini, Farage, Le Pen...
But Trump sort-of gets the end of growth; the fact that the hegemony is in decline, the inability to repay debt, and the need to reduce population. It's incoherent, but it's sort-of there. And that is anathema to the deep-state (neocons, Chicago-school, Cato etc) who keep putting up front-puppets like Clinton/Harris.
Interesting times. In terms of 5-Eyes, we may regret not placing an each-way bet...
So, Kiwis are jumping the ditch to Aussie, to escape the cost of living crisis.
Turns out, Aussies are ditching Aussie to escape the cost of living crisis, and heading to.....
South East Asia
https://www.youtube.com/watch?v=hDeTwgvkNCw&ab_channel=Mitch%27sOnTheHo…
I dunno man, I move around the world a lot, and it's super rare to rock up to any other developed Western country and be amazed by how much cheaper anything is.
Deli meats and fancy cheeses in Europe maybe. Oh, and Tobacco, but only because they don't tax the arse off it there.
Naivety is thinking our situation is in any way unique.
How about here compared to Aus, North America?
how about our mortgage rates? My brother in Sweden has been whingeing with rates of around 5%
Fuel is much cheaper in Aus and North America. It’s not in Europe, but they have far better public transport. And usually cheaper. I pay $11 each day for a round train trip now
don’t we still have ‘world leading’ (lol) house price to income ratios?
I've been to the States on and off for quite some time (have family there). In my younger years, I felt it was quite a bit cheaper, especially consumer items. My last couple of trips, I've gone to the supermarket and everything's about the same in USD as it is in NZ in NZD. Even things like clothing and electronics aren't much cheaper, we live in a world now of global pricing in many categories. Maybe if you went to a depressed backwood in the rust belt it'd be cheaper.
Interest rates are a floating amount so hard to bring that into consideration. Fuel also a difficult comparison given the variances in taxation, gas is a bit cheaper in the states, but have an accident and get seriously injured, and if you don't have private health insurance, you could be stuffed.
We likely aren't the cheapest in much, but your point is around the margins, and mines that the dynamics of the system at play is fairly consistent anywhere you go.
If you want to live in a large popular city in any of these places, unless you're a super high income earner, they're set up to extract almost every dollar you earn, just to stand still.
Hence, the people there, complain about the exact same things people complain about here.
You keep using words like "big" and "massive" to define things which are often only single digit percentage points of variation.
So what, you're saying other developed nations are affordable, the locals are lying and it's economies of scale that have tipped us uniquely over the edge?
You are putting words in my mouth!
- I didn’t say other developed nations are ‘affordable’. But I am saying they are more affordable than NZ on many counts. I think that’s undeniable, not just anecdotally but in terms of official data. And no, I am not going to waste any time providing that data, it’s all well established. Even if I do provide, you will find a way to argue against it, for the sake of it.
- no I didn’t say it’s lack of economies of scale that have tipped us over the edge. But it’s a big factor in the costs of many things. 100%. I don’t think thats debatable at all. Linked to the lack of economies of scale is the lack of competition
Work on your comprehension!
I said the structural differences are big, not the price variations.
Nonetheless, some price variations are certainly big indeed.
Anyway, I can’t be bothered trying to have a ‘discussion’ with a pathological contrarian who never gives anything in any discussion, and is always ‘right’….
House Mouse, before you envoke Godwins law it's probably best that you call it a day.
If you think the grass is really that much greener and NZ is the worst in the developed world which is what you're saying then I believe you're sadly mistaken. There is mass migration the world over as everyone are facing the same issues and looking to improve ones lot. Those that are 'ahead' or are well fed and watered will remain ahead of the curve for the time being but rest assured everyone is feeling it. The world has changed in terms of cost which is what Painter has stated.
Growing global demand due to population bulge and globalisation increasing accessibility, more abundant and easily accessible resources to draw down from cheaply (e.g native timber for state housing) as well as to pilfer form less developed nations, and the war was not long gone so people were more focused on helping each other and the community, instead of screwing each other over as in todays world is more prevalent. Add less regulation and consumerism, or less things to spend on.
"In Australia, the ASX200 closed at an all-time high yesterday, fueled by bets the US Fed would cut interest rates by -50 bps on Thursday (NZT)."
Damn... and my Milford funds Australian fund is down 1.5% since April. Did they buy Australian NFTs or something?
Damn... and my Milford funds Australian fund is down 1.5% since April. Did they buy Australian NFTs or something?
50% of Aussie stocks' market are concentrated in the top 10 - the miners and the bankers. BHP and Forty having howlers for the obvious reasons. Down up to 40%.
But the banks are flying You're looking at 20%+ gains on CBA, ANZ. The Ponzi reigns supreme.
The millionaires factory Macquarie quite similar to the banks.
Interesting to see what sectors are driving the ASX.
Yup, the Greens have a lot to say about landlords and housing costs at a governmental level but their Wellington councillors seem to have extremely flakey email services and keep missing the memo.
At a low-enough level, it's all self interest, no matter what hat it's wearing.
.... "Canada's July manufacturing levels. Oil and coal production drove that."....
What? Never new Canadian coal was that big to share a seat in the Canadian economy. Here we have the Labour and Greens trying to shoot down anything that sniffs of coal except for Huntly of course as that would have required rolling blackouts. Load shedding is a nicer phrase.
At least Shane Jones has his head if not his heart in the right place. I'll be surprised if Fonterra can remain economically competitive if they have to stop using coal. ETS may force them to use electricity. This will reduce their competitiveness in the world for their dairy products and slowly destroy probably the biggest exporter in the country impacting our balance of payment deficits and its attendant consequences.
"Inland Revenue giving thousands of taxpayers' details to social media platforms for ad campaigns"
https://www.rnz.co.nz/news/business/527419/inland-revenue-giving-thousa…
The Taxpayers union have now created a submission tool to request IRD to advise if they have provided your info to social media companies
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