Here's our summary of key economic events overnight that affect New Zealand with news China has not announced the new stimulus that investors were expecting, rather just re-hashing existing measures. Equity and commodity markets reacted negatively to the disappointment.
But first, the American retail Redbook index rose marginally last week to be +5.4% above year-ago levels, and well ahead of inflation.
The US SME optimism index rose slightly in September even though uncertainty levels remained high as the US election gets closer, less than a month away now.
Meanwhile the RCM/TIPP optimism index for investors rose to a 19 month high. But again, the change was small.
And the US trade deficit in both goods and services fell in August from July in a better-than-expected result driven by stronger exports that were +5.2% higher than a year ago.
There was yet another very well supported US Treasury bond auction overnight, this one for their 3 year Note. It resulted in a 3.82% median yield, but up sharply from the 3.40% median yield at the prior equivalent event a month ago.
Canada also posted its August trade result and its deficit came in a bit more than expected, mainly on a -1% fall in exports.
In China, the closely anticipated National Development and Reform Commission (NDRC) briefing was a damp squib, essentially not announcing anything new in the way of economic support for their economy. All they did was front-load existing measures. A rally in Chinese stocks on their return from the week-long holiday fizzled quickly as traders questioned Beijing’s resolve to add more effective stimulus.
After rising strongly in anticipation over the past week or so, the iron ore price sank sharply after this briefing.
And China said it will impose tariffs on European bandy in retaliation for EU tariffs on EVs.
German industrial production rose in August from July and by more than expected to be 'only' -2.7% lower than a year ago, it least year-on-year decline in a year and a big improvement from July.
In Australia, business sentiment became less negative in September. The NAB business confidence index 'rose' to -2 from August’s revised -5, amid notable improvements in retail and recreation & personal services.
And the consumer mood is improving too. Australia's Westpac-Melbourne Institute consumer sentiment jumped to a 2½ year high in October, a sharp turnaround from the fall in September. This followed interest rate cuts in other countries and more signs that inflation is easing locally.
We should also note that overnight Pulse dairy auction for just WMP and SMP came in less robust than the minor gains expected. The dips were small and most for SMP, but essentially both products are retaining their recent higher levels even if they are slipping slightly.
On the weather front, Hurricane Milton isn't easing, still a category 5 event and heading straight for Tampa, Florida. Urgent evacuation orders are in place. Expected landfall is in about 24 hours. Even if it does ease somewhat, it will be a powerful event.
The UST 10yr yield is now at just on 4.03% and up +1 bp from yesterday. The key 2-10 yield curve is still positive, but only by +6 bps. Their 1-5 curve inversion is now inverted by -36 bps. And their 3 mth-10yr curve inversion is now at -81 bps. The Australian 10 year bond yield starts today at 4.25% and down -2 bps. The China 10 year bond rate is just under 2.15% and down -1 bp. The NZ Government 10 year bond rate is now just under 4.33% and down -2 bps from this time yesterday.
Wall Street is firmer in its Tuesday session, up +0.8% and ignoring the weakness everywhere else. Overnight European markets ended lower with Frankfurt down -0.2% and London down -1.4%. Yesterday Tokyo ended its Tuesday session down -1.0%, and Hong Kong retreated an outsized -9.4% on the day. Shanghai was on catchup mode and rose +4.6% but this was far less than expected. Singapore was down -0.7%. The ASX200 fell -0.3% and the NZX50 dipped the same amount.
The price of gold will start today at US$2611/oz and down -US$33 from this time yesterday.
Oil prices are sharply lower, down -US$4 at just on US$73/bbl in the US while the international Brent price is now just on US$76.50/bbl.
The Kiwi dollar starts today at 61.2 USc and unchanged from this time yesterday. Against the Aussie we are up +20 bps at 90.8 AUc. Against the euro we are still at 55.8 euro cents. That all means our TWI-5 starts today still just on 69.4, and up a minor +10 bps from yesterday at this time.
The bitcoin price starts today at US$62,417 and down -1.9% from this time yesterday. Volatility over the past 24 hours has remained modest at just on +/- 1.6%.
Join us at 2pm today when we will have full coverage of today's Monetary Policy Review and the expected rate cut to the OCR.
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51 Comments
"... they wouldn't be here in the first place, they'd be on a beach in Majorca or something."
More folksie wisdom.
All the folk I know from big trading firms continue to potter about, trading here and there, while posting their thoughts and commenting on both public & private forums, and providing feedback & insights on university papers. (Same in I.T. but to a lesser extent.)
Using yet more folksie wisdom, the Pa1nter will try and prove me wrong. But every time you feel like quoting someone (e.g. Schiller as I_O did yesterday), check to see how old they are and where they've worked ... And how much they're worth.
edit: And just a note on another bit of classic folksie wisdom from the Pa1nter, when says "If someone here can predict where currencies and monetary rates are going with any degree of accuracy...", would you consider an accuracy rate of just 55% acceptable? No? Well have a read of this: Failure bias. Many traders I know remind me that being "net right" just 5% of the time can be a respectable living. (Many I know are exceeding "net right" by more like 15% ... Just 65% in our expert's vernacular. Oddly, I seem to recall all of them have economics degrees. Funny that.)
I stand corrected. But thanks for proving my point.
Peter Schiff Age: 62. Publishes stuff on public forums everywhere (including - shudders - X). Could be living on a beach in "Majorca or something", but no, lives in New Haven, Connecticut where the winters are damn cold. But he is still working. (And likely having lots of fun.)
Some people make more than enough from trading and don't stop. Do you think there's a good crossover there between those types and the people praising themselves on here for "nailing" the latest GDP report or OCR release?
Your example wasn't great though, Peter Schiff spends a great deal of time sunning himself in Puerto Rico.
Folksie wisdom is your label, not mine. It's a ploy you use to try and elicit some sort of emotional reaction from the other party. They call you a name in turn, you clutch your pearls and take the moral high ground.
Many of the comments on here are opinion, relating to reality. If you want to call everyone else a dumb-dumb and pretend to have the answer, you're not very good at substantiating yourself.
https://www.rnz.co.nz/news/business/530202/banks-prepare-for-home-loans…
Interest rates may be falling - and relatively quickly - but that does not mean the end of New Zealand's mortgage stress, Corelogic is warning.
Property economist Kelvin Davidson said the percentage of "non-performing" loans, which are at least 90 days overdue or considered impaired, had lifted to 0.6 percent of all mortgages.
"After all, the very short-term rates (such as six months at 6.7 percent) remain quite a bit higher than the slightly longer terms (12 months at 6.2 percent) - so for the strategy of taking two consecutive six-month fixes to pay off, that rate basically needs to drop to 5.7 percent or less by April next year.
"Could that happen? Nothing's out of the question, especially given the continued weakness of the economy and an emerging risk that inflation falls much more sharply than has been anticipated; which would likely see the OCR also fall more rapidly, alongside extra downward pressure on mortgage rates.
"But at the same time, there could also be a sense at the moment that some of the potential future falls in the OCR have already been captured by current mortgage rates, meaning that the scope for more declines from here, regardless of the fixed term, could be a bit slower/smaller than what we've seen to date.
Good insight into why people think we've enough homes.
Two-bedrooms are fewer than 20 percent of the new stock and one-bedroom homes are less than 10 percent.
Over the 10 years to 2023, the number of households containing only one person increased by almost 120,000, but there was only a 40,000 increase in the supply of one-bedroom homes.
https://www.rnz.co.nz/news/business/530085/planning-to-downsize-your-ho…
One of the issues around buying one and two bedroom homes in NZ.... is paranoia. They tend to be in a body corp/apartment block. The NZ track record on building high quality in this space is appalling. The new stuff being built at the wynyard quarter looks nice, but again, very pricey for a FHB with a ballistic body corp.
We're very much a culture now that needs to apportion blame.
The facts as they stand is we have an aging population and shrinking house sizes, and haven't done the commensurate planning about the housing situation for that eventuality.
Watching too many oldies lose their minds, the best thing for them is to remain where is familiar for them.
Maintenance as well. I’ve been helping one of the ladies tidy up her section who is selling up to downsize to a retirement 2 bedroom home in a few months and she tells me the going rate for this type of work is $50 an hour.
Most of these 500sqm sections take 2-3hrs a week of maintenance (at a guess over summer - lawns, windows, shrubs, vege gardens etc, roses) so on top of other bills you could be looking at $100+ a week if unable to do the work yourself.
One notes the implicit assumption about oldies downsizing means moving to two or one bedrooms dwellings. (Were they spruiking the plethora of unsold one and two bedroom dwelling? See who the author is.)
Many move to retirement blocks.
While others go "flatting" again with other oldies.
While others move into "granny flats".
All are better an oldies' mental health and safety, than living alone. People need others around - them but also need their own space to escape.
And the vast majority of those 2 bedders are multi-level townhouses, so entirely unsuitable for elderly people looking to downsize. I think we are going to end up with retirement villages being the only option for the elderly who want to downsize but dont want to live in a high rise apartment block surrounded by renters and social housing tenants.
Health NZ begins slashing senior medical jobs at hospitals due to lack of funding: Link
Health NZ also advised GP practices across the country struggling to make ends meet financially.l to open a cafe on its premises and having regular sausage sizzle stands to raise more revenue. Link
No major reason to worry, a 50-75bp OCR cut today will make these problems vanish overnight.
The voluntary redundancies are kicking in now too, adding a sprinkling of chaos throughout the whole system.
Very difficult to get anything done right now that isn't absolute business as usual. Obsolete software and hardware systems are queueing up for scarce resources.
Do some research before commenting FFS. CMO is not a patient-facing role, but definitely a clinical job that can only be filled by qualified and experienced medical practitioners, not someone with a BA in literature.
Here's an example job posting for a CMO: Link
The role of the CMO is to ensure quality of care and provide advice to the clinical expertise. Does that sound like a job we don't want well-resourced? Would you be okay for yourself or a family member to be treated at a hospital with no senior medical officer in-charge of overall operations, just a bunch of business majors or, heaven forbid, economists?
The thing is when i worked in the local DHB the CMO did work with patients but was under pressure to step back and focus more on the overall clinical practice. When he resigned (he gave the CEO some advice she didn't like) and the advertised the role, as non- patient facing, they got no takers at all. Compromise was to appoint a CMA instead who maintained his practice as a Gerontologist.
"And the consumer mood is improving too. Australia's Westpac-Melbourne Institute consumer sentiment jumped to a 2½ year high in October, a sharp turnaround from the fall in September. This followed interest rate cuts in other countries and more signs that inflation is easing locally."
Love the wording, David. (Nothing incorrect in it.) But I wondered ...
Have the media all been told that you must say positive (happy clappy) stuff to lift the nation's mood? I seem to be seeing a whole lot 'positivity' - some of it unjustified - being thrown about in media at the moment.
What am I saying? Well, at the current rate of improvement in WMI Consumer Sentiment Index, it'll be years before we get to back to neutral sentiment levels.
And for the housing obsessed? Once the outlook improves, and banks can be more certain of getting a sale in a mortgagee sale, at a price where the bank doesn't lose, that's usually when mortgagee sales start to pick up. You know, when everyone is looking forward to good times ... and more likely to blame the mortgagor rather than feel sympathy for them.
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