Here's our summary of key economic events overnight that affect New Zealand with news we are into Q4 now and it is starting out modestly in most places, despite an eye-popping rise on the Shanghai stock exchange.
First in the US, the Chicago PMI improved marginally in September although the gain was probably insignificant.
Meanwhile the Dallas Fed factory survey for the US oil patch in September eased further, although again, not a significant change.
But in October, this may all be affected by a looming East Coast and Gulf waterfront strike. And there is similar strike action underway in Canada. Workers are reacting to productivity changes from a new automation push.
China's National Day Golden Week holiday period starts today, kicking off one of the year's busiest travel periods as the country marks the 75th anniversary of its founding as a communist state. But their tourism industry is bracing for sluggish activity with bookings down -20%, even as regional governments begin to distribute cash vouchers to boost flagging consumer spending.
It is not only discretionary travel that is soft. The official Chinese factory PMI contracted at a lesser pace in September. And the companion Caixin factory PMI slipped from a minor expansion into a minor contraction.
Further, the official services PMI expansion ended in September with their lowest reading since December 2022.
But not everyone is looking ahead with trepidation there. Investors in Shanghai drove their equity markets up a remarkable +8.1% yesterday. After that exchange touched its lowest level in a decade on September 13, it has now suddenly shot up to its highest since April 2023. It is all about how Beijing is rolling out its stimulus - essentially guaranteeing investors that they won't lose (the Beijing 'put'). And they are all-in, filling their boots.
Much of this is driven by a belief that Chinese construction will be getting a big boost. The steel rebar price rebound shows that.
In the EU, the German CPI inflation rate fell to just 1.6% in September, its lowest since February 2021 when it was about to go on a tear, peaking at 8.8% in October 2022.
In Australia, they are claiming its 'first back‑to‑back surpluses in nearly two decades'.
The UST 10yr yield is now at just on 3.78% and up +2 bps from yesterday. The key 2-10 yield curve is still +18 bps positive. Their 1-5 curve inversion is still inverted by -45 bps. And their 3 mth-10yr curve inversion is still at -103 bps. The Australian 10 year bond yield starts today at 3.99% and up +3 bps. The China 10 year bond rate is at 2.18% and unchanged. The NZ Government 10 year bond rate is now just on 4.28% and up +2 bps from yesterday.
Wall Street has started its week little-changed on the S&P500 as end-of-quarter squareups take place. But European equity markets were all about -1.0% lower, except Paris which dropped -2.0%. Tokyo finished yesterday down a very sharp -4.8%. Hong Kong however was up +2.4% and Shanghai was positively frothy, up +8.1% on the Beijing put. Singapore was more level-headed, up +0.3%. The ASX200 ended its Monday up +0.7%. But the NZX50 fell -0.3%.
The price of gold will start today at US$2638/oz and down -US$20 from yesterday.
Oil prices are +50 USc firmer at just over US$68.50/bbl in the US while the international Brent price is still just on US$72/bbl.
The Kiwi dollar starts today at 63.7 USc and up +30 bps from this time yesterday. Against the Aussie we are little-changed at 91.8 AUc. Against the euro we have risen +30 bps to 57.1 euro cents. That all means our TWI-5 starts today at just under 70.9, and up almost +30 bps from yesterday.
The bitcoin price starts today at US$63,502 and down -3.3% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.2%.
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11 Comments
Australian central govt sector has run their second consecutive surplus (taxed more from the private sector than they gave them). A quick look at the stats confirms that this has been made possible by:
- Business credit growth running at around 8% (NZ 2.5%)
- Housing credit growth at over 5% (NZ 3.2%)
- State govts taking on some big debt as they invest in real things
- A moderate current account deficit of a bit over 1% of GDP (NZ is well over 6%)
Anyone who thinks NZ can get anywhere near a surplus in the next few years will need to explain the maths to me.
Oil executives active in the U.S. shale belt are arguing that production has peaked, with further major production gains unlikely without a significant price increase.
The US was the largest producer on Earth in H2-24 by a huge margin, averaging 13.4 million barrels a day. Oil producers expect medium-term WTI prices above $100/barrel to make new oil wells economically viable for drilling.
Herald Premium but will be useful information for some and worth sharing, Jeff Fahrensohn, Auckland Council Building Inspection Manager reports 3722 (roughly 25%) of cladding inspections on new homes failed in the last year. He first posted about it on LinkedIn and there is a video there of the failures of the cladding on one house.
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