Here's our summary of key economic events overnight that affect New Zealand with news commodity prices go into reverse as the Chinese post-holiday rally stumbles after only a brief shine. It is an ominous sign.
But first in the US there was a sharp fall in mortgage applications last week, down -5.5% from the prior week. That was because interest rates moved sharply higher after the strong non-farm payrolls report. But current application levels are running +55% higher than a year ago.
Those higher interest rates also showed up in the latest (well supported) US Treasury bond auction, this one for their ten year bond. The median yield came in today at 4.01% and well above the 3.61% at the prior equivalent event a month ago.
Hurricane Milton is about to hit just south of Tampa and Florida more generally. Analysts say it could cause US$60 bln in insurance losses apart from the far greater uninsured damage. Milton and Helene may be trigger events for widespread change in the way insurance cover is offered. Risks are rising fast for those who underpin these coverages.
US Fed minutes for their September 19 (NZT) meeting were released earlier this morning and they show the Fed's -50 bps rate cut was well supported (page 9) and seen as a quicker way to align it with the progress on inflation and their labour market. It suggests this was a one-off move and future moves will be more 'regular'. Remember, the September CPI data for the US will be released tonight and it is expected to slip from 2.5% to 2.3%.
Japanese machine tool orders rose in September from the weak August level but they remain -6.5% lower than year-ago levels - which it should be noted were unusually high at the time.
Taiwanese inflation fell to near its lowest since the pandemic, down much more than expected to a 1.8% rate.
In India, their reserve bank also reviewed its policy rate yesterday and left it unchanged at 6.5%, as expected. They see their economic expansion continuing and inflation broadly in line with the midpoint of their target rate of 4%. Inflation is currently running at 3.65%. However, their commentary does open the door for the next move to be down, which would be their first rate cut since May 2020.
In China yesterday, the Shanghai stock market lost steam rapidly after the post-holiday euphoria. It was down -6.6% on the day as scepticism grew about what Beijing is doing - and not doing - to recover China's expansion mojo. It is a telling signal.
In Australia, they reported Q2 dwelling commencement data yesterday and it continues to retreat as apartment building remains especially weak. Of course, low supply coming onstream isn't helping housing affordability. Rent inflation is still running at over 7% there.
The UST 10yr yield is now at just on 4.07% and up +4 bps from yesterday. The key 2-10 yield curve is still positive, but still only by +6 bps. Their 1-5 curve inversion is now inverted by -35 bps. And their 3 mth-10yr curve inversion is less, now at -74 bps. The Australian 10 year bond yield starts today at 4.24% and down -1 bp. The China 10 year bond rate is at 2.19% and up +4 bps. The NZ Government 10 year bond rate is just under 4.33% and unchanged from this time yesterday.
Wall Street is firmer in its Wednesday session, up +0.5% and at a new all-time high. Overnight European markets ended mostly +0.5% higher, except Frankfurt which was up double that. Yesterday Tokyo ended its Wednesday session recovering +0.9%, but Hong Kong retreated again by -1.4% on the day. Shanghai fell sharply by -6.6%. Singapore was up +0.6%. The ASX200 rose a minor +0.1% but the NZX50 was the strongest of the markets we follow, finishing up +1.8% on the day, very much juiced by the OCR cut.
The price of gold will start today at US$2609/oz and down -US$2 from this time yesterday.
Oil prices are -50 USc lower at just over US$72.50/bbl in the US while the international Brent price is now just over US$76/bbl.
The Kiwi dollar starts today at 60.6 USc and down -60 bps from this time yesterday. Against the Aussie we are also down -60 bps at 90.2 AUc. Against the euro we are down -40 bps at 55.4 euro cents. That all means our TWI-5 starts today now at 68.9, and down -50 bps from yesterday at this time.
The bitcoin price starts today at US$61,782 and down -1.1% from this time yesterday. Volatility over the past 24 hours has been low at just on +/- 0.7%.
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53 Comments
Flood and at-risk maps have been around for a long time. Dunedin, Omaha, Eskdale… it’s not new.
The climate always changes irrespective of if you think we cause it or not, so you should always check what you are buying is not at-risk.
I am unsure as to what she did wrong. She facilitated a submission.
Yup, crawling around the streets today at 30 kmph while not a single child was to be seen as its school holidays, really makes sense. How many children have been killed on suburban roads by cars travelling 50 kmph? Perhaps parents should do some actual parenting instead, and make sure their children are not running out on roads in front of cars, instead of expecting the whole world to revolve around them.
School holidays is exactly when the streets see more kids as they are not in school.
Between 2014 and 2017 the number of deaths and serious injuries (DSI) on Auckland’s roads increased by approximately 78 per cent - more than five times the rate of the growth in vehicle kilometres travelled.
In areas where speed limits were changed on 30 June 2020, monitoring reports show a 30 percent reduction in deaths and 21 percent reductions in serious injuries. In comparison, across all Auckland roads for the time period (24 months), road deaths increased by 9 percent.
Don't be silly. They're all at home in their bedrooms scrolling TikTok on their phones. What century are you still living in?
And I asked specifically about 50 kmph zones - so not including motorway speed changes. And death to children on the roads, not the drivers or passsengers of cars. So get back to me when you can answer the question rather than just quoting irrelevant statistics.
And lastly, try not quoting statistics that only incorporate a time frame when the country was in the Covid lockdown, and the borders were closed to tourists. Crikey, its almost as people have zero ability to cut through the Govt disinformation so routinely rolled out by the previous Labour Govt.
You may well have asked that, I think the DSI figures are the more relevant ones. Get back to me when you have the figures for the time savings for plumbers over the age of 53 that have long red hair will gain from driving at 30 instead of 50 in residential streets.
Yes, definitely the parents that are at fault, not the 2 ton metal boxes regularly used to convey a single individual 800m down the road to the dairy and back for a pack of smokes.
We should put the speed limit up to 100km so there is even less crawling. And maybe to improve the parenting, some fines for any parents who leave their house without their kids on leashes, just to help reduce the chance of any of them stepping on the hallowed ground that is the suburban road and impeding the all important cars. /s
Ah insurance again "Hurricane Milton is about to hit just south of Tampa and Florida more generally. Analysts say it could cause US$60 bln in insurance losses apart from the far greater uninsured damage. Milton and Helene may be trigger events for widespread change in the way insurance cover is offered. Risks are rising fast for those who underpin these coverages."
Insurance companies have been so profitable for years that Warren Buffet invested in IAG. But the raking off of profits rather than holding back unpaid funds against future risks is now coming back to bite, exposing the rip off that insurance has become. A lot more people will choose to be uninsured as it becomes less affordable, and as insurance is usually a requirement of a mortgage, some house sales will not happen. Cascading consequences of greed coming back to bite.
Looks like it been down graded to Cat 4. With Climate Change(TM) I would have expected it to be turned up to Cat 11.
“It’s worth noting though, that the impact to the cat bond and ILS market from hurricane Ian was not significant, despite it being a $50 billion loss event.
…Finally, it’s also worth pointing out that with many cat bond and ILS funds already running with returns year-to-date of close to or in the double-digits, there is a good chance that many cat bond funds and other ILS funds focused on private reinsurance and retro can absorb a relatively meaningful hurricane loss event within their annual earnings.
The cat bond market fell by roughly 10% after hurricane Ian’s landfall in 2022, but already many cat bond funds have delivered a 10% or greater return in 2024, so the buffer against losses is clear.”
https://www.artemis.bm/news/milton-forecast-for-florida-hurricane-landf…
You're cherry picking comments there Profile.
What about "...raising the spectre of potentially meaningful losses for insurance and reinsurance markets, with possible ramifications for the catastrophe bond and insurance-linked securities (ILS) market." or "...with the potential to drive commensurately higher insurance and reinsurance market impacts." Plus "Coming on the heels of Helene, a hurricane Milton landfall at or near major strength threatens a potentially far more significant financial cost for Florida, with the potential to drive commensurately higher insurance and reinsurance market impacts." and finally "Of course, no one wants to lose the returns already made. But this clearly shows why the market needs to hold onto pricing at the levels we see today, given investor returns can be wiped out very quickly by a single major storm event."
This in some respects supports my comments.
My main point was to give some perspective- "Ian was not significant, despite it being a $50 billion loss event." This is reinforced by your quoted "cherry pick" - "But this clearly shows why the market needs to hold onto pricing at the levels we see today" which seems at odds with your earlier comment.
"Milton will make landfall late tonight around 1 am local time as a Category 3 hurricane."
But comments from other articles indicate insurance across the board is becoming unaffordable. What those articles are strongly indicating is that insurance costs need to come down. 'Holding on to pricing levels' is about investor returns, not providing a reasonably priced service.
Completely agree - insurance profiting from chicken littles - also councils and people also need to stop building on flood plains and NIWA/MSM needs to stop air brushing historic events from history to big up climate change and generate clicks. NIWA/MSM telling us the other day worst rainfall in 100 years in Dunedin - when a modicum of googling shows heavier rain in 1929,1968,1980, 2015...
Insurance in NZ is feeling yet another example of the poor subsidising the rich. I'm seeing 2024 insurance premiums rising by 25% in one year, and thats on the back of some significant increases last year, and I'm now seriously thinking of switching to self insurance, how many people are doing this.
It makes sense that some houses will be uninsurable, due to repeated flooding or some other hazard, like top of an eroding cliff, or beach and the price of these properties needs to reflect this.
Thats the only way to shift risk away from the people with mortgages who are subsiding someone else's bad house purchase.
The realisation of the horrific damage done to our societies and economies is starting to sink in.
"Reserve Bank stimulus program did little for the small businesses it was intended to assist through the pandemic and instead helped turbocharge house prices as banks channelled the cash into cheap mortgages."
https://www.smh.com.au/politics/federal/rba-s-200-billion-stimulus-powe…
It's not the amount or price (%) of Debt that was issued that's the problem, but what we used it for. And the same applies for any Debt we issue today. Fix that, and we'll fix our economies.
Recall at the time there was a predetermined almost panic bandied about that the property market would collapse. In reality a homeowner has always been obliged to ride the market up and down, as relative, as if boats on the tide. So the fear can only then have centred on those that own and run property as a business. Said it before, governments long ago, when meddling in property, for instance LAQC’s, should have been making a clear distinction between owner occupied ownership and everything else.
But it's not just the RBNZ. The private banks were the tools used to distribute those funds and they ignored Government direction. (did the RBNZ issue any direction as to the purpose of the funds? ) And when it became apparent that they had done their own thing, in the name of their own profits and at the cost to the economy, neither the Government nor the RBNZ demanded the return of those funds.
In that light it looks a lot like misappropriation (theft) that people in other circumstances have gone to jail for.
An interesting stat would be those that saw fit to enter the property market or increase existing involvement. NZR’s have had a fair share of big losses on equities over the years. JBL, Securitibank, Broadbank, Fortex, Feltex to name a few. As well a blue chip for mum & dads like Telecom’s value being shredded. Property by virtual default has been a safe haven investment. So when TD rates became too low to mean anything, property through cheap mortgages, became as if a magnet to iron filings
"It's not the amount or price (%) of Debt that was issued that's the problem, but what we used it for. And the same applies for any Debt we issue today. Fix that, and we'll fix our economies."
Best thing I've ever read from you, BW.
Agree 200%.
Just as an aside, Central Banks should NOT be doing this sort of thing. Their tools simply do not have the granularity to target specific areas. Even now that our RBNZ has DTis to add to the LVRs, neither of these tools will would do a lot if interest rates were to go absurdly low again. (Unless of course they were set at extremely restrictive levels and the the whole property market would freeze and corruption would take over.)
Central banks have the equivalent WWII carpet bombing at their disposal and should use it extremely judiciously to avoid massive collateral damage. (Yes, I am saying Orr could be likened to Bomber Harris in how the RBNZ dealt with covid.)
Governments, who already have a plethora of tools at a far more granular level, and can enact new / changed ones quickly when the need arises, are far better placed to do provide targeted stimulus when the need arises (as those needs do all the time).
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