Here's our summary of key economic events overnight that affect New Zealand with news all eyes are turning to an upcoming briefing by Chinese Ministry of Finance officials of the next stage of their economic support program. Markets have treated the previous announcements so far with growing scepticism.
But first today, American producer prices hardly rose in September. US factory gate prices were flat in the month from August and missing expectations of a 0.1% rise. On an annual basis, PPI inflation eased to a 7-month low of 1.8%.
US consumer sentiment was little-changed in October according to the University of Michigan survey, holding at a level it was broadly been at since May. There was a slight dip from the prior month, something that is probably just related to election uncertainties.
For those who follow such things, we can report no surprises in the October update of the USDA WASDE report. But they did raise their beef import forecasts marginally again, and lowered their US milk production forecasts, again.
The UST 30yr bond auction yesterday was again well supported, delivering a median yield of 4.32%. That was up from 3.95% at the prior equivalent event a month ago.
It might be worth noting that the Tesla share price took a tumble today, down -8% on the day that it launched it Robotaxi to underwhelming reviews. That share price is down -11% for the week, and down -46% since its peak in 2021. SpaceX may be Musk's last good business. He has lost his midas touch at X/Twitter and Tesla.
Canada reported a good +47,000 rise in employment in September, almost double what was expected. Better still, full-time jobs rose +112,000 while part-time roles shrank -65,000. Their jobless rate slipped to 6.5% when a rise was anticipated
China's Ministry of Finance will hold a public briefing at about 2 pm today (NZT) and markets expect them to announce a ¥2 tln yuan boost in fresh fiscal stimulus (money printing via a huge bond issue program). Tomorrow (Sunday) they will release their normal data set for September lending activity and it is expected to be quite ho-hum.
New data shows China's giant car market barely expanding, up +2% in September from the same month a year ago. They are making a very big deal about the growth of NEVs (up +51%), but the overall expansion is quite weak. And they are getting gains in a segment (NEVs) where resale values are awful, essential a use-and-throw-away segment. Worse, the gains are only coming as a result of vehicle trade-in policies and car scrapping allowances.
In South Korea, they have started cutting their policy rates too, although not as aggressively as New Zealand. The Bank of Korea policy rate is now 3.25% after its first rate cut (-25 bps) since May 2020. That came after data showed their GDP shrank in Q2-2024 and their September inflation slowed to 1.6%, the lowest since February 2021.
India's industrial production took a surprise drop in August from a year ago, its first retreat since October 2022. Few saw that coming. And they downwardly revised the +4.7% rise in July.
Interestingly, the Indian currency is under pressure, and outflow levels have been high. The Indian rupee has hit a record low against the US Dollar, (but against the NZD it has been pretty flat since 2020).
The UST 10yr yield is now at just on 4.07% and down -3 bps from yesterday. A week ago it was at 3.99% so up +8 bps since then. The key 2-10 yield curve is more positive, now by +13 bps. Their 1-5 curve inversion is now inverted by -31 bps. And their 3 mth-10yr curve inversion is less, now at -77 bps. The Australian 10 year bond yield starts today at 4.30% and up +2 bps. The China 10 year bond rate is at 2.15% and down -3 bps. The NZ Government 10 year bond rate is just under 4.43% and up +4 bps from this time yesterday, but up +14 bps from a week ago.
Wall Street is firmer in its Friday session, up +0.5% to be up +1.3% for the week and at yet another all-time high. Overnight European markets ended mostly +0.5% higher as well. Yesterday Tokyo ended its Friday session up +0.6%, to be up +0.9% for the week.Hong Kong was closed for a holiday and ended its week down -6.5%. Shanghai fell -2.5% yesterday to end the week up +0.7%. Singapore was down -0.3%. The ASX200 slipped -0.1% on Friday to be up +0.8% for the week. And the NZX50 was up +0.7% on Friday and was up +1.8% for the week and the best of the markets we follow.
The Fear & Greed Index ends the week hard over on the 'greed' range, just kike last week. Overall markets are comfortable with their risk appetite.
The price of gold will start today at US$2660/oz and up +US$29 from this time yesterday. That is up +US11 from a week ago.
Oil prices are -50 USc softer at just under US$75.50/bbl in the US while the international Brent price is still at US$79/bbl. A week ago these prices were at these same levels, so no-change in a week.
The Kiwi dollar starts today at 61.2 USc and up +40 bps from this time yesterday but -40 bps lower than at this time last week. Against the Aussie we are up +10 bps at 90.5 AUc. Against the euro we are up +20 bps at 55.9 euro cents. That all means our TWI-5 starts today now at 69.3, and up +20 bps from yesterday at this time. But that is -40 bps lower than a week ago.
The bitcoin price starts today at US$62,279 and up +3.1% from this time yesterday. A week ago it was at US$62,254, so virtually no change since then. Volatility over the past 24 hours has been high at just on +/- 3.0%.
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11 Comments
Yep... the ship will hit the fan sooner or later.....bluridge having reliability probs as well... 'Row row row your boat gently down the stream....merrily merrily merrily , life is but a dream'...unless you need to get your product or vehicle somewhere in NZ....lol
I talked to a guy close to the build of the new ferries a few weekends ago. He was saying all the electrics were delivered, but because NZ uses 240v and is fairly unique, it all just got thrown away. The ship building service there is now booked up for like 6 years or something now too.
What an abysmal failure of leadership to cancel a project we were getting for cheap and will be replaced with something half as good, but likely the same price or more expensive. Remember anything they announce now has to be less than $2.5b, given thats what we have spent cancelling already... its likely the ships will be around $1-1.5b themselves, despite just being "corollas" and being much less capable than what we were going to get.
Like I said before, Luxon is holding up the rug, Willis is furiously sweeping.
"Canada reported a good +47,000 rise in employment in September, almost double what was expected. Better still, full-time jobs rose +112,000 while part-time roles shrank -65,000. Their jobless rate slipped to 6.5% when a rise was anticipated"
One should note the Canada's central bank hit peak-rate (i.e. maximum contraction) of 5% on July 12, 2023 and made their first cut on June 5, 2024. That's just 11 months.
Meanwhile, our RBNZ hit peak-rate in May 23 at 5.5% and made their first cut Aug 24. That's 15 months at peak, with the longest ever tightening cycle which lasted from Oct '21 to Aug 24.
And, the RBNZ's first cut was 6 months after Canada's first cut.
You can compare both banks here by typing "Canada Interest Rate" into the 'Compare+' box.
I'm not too sure it's the longest ever? The OCR was 4.75% in Nov 2001 and kept being ramped up until it hit 8.25% in July 07. Arguably it could have gone even higher, but then the GFC hit, and we did what we always do when a financial crisis threatens the notional wealth of the few - cut rates to protect asset prices.
Also a 20 year tightening cycle mid 1960’s - 1980’s.
And it’s possible the current tightening cycle may not be over yet - some indicators (core inflation/latest PPI data) showing inflation maybe rising again in the US and longer term bonds went up not down when the Fed cut last month.
Yes, I've been watching this too. As the war machines start revving up, the recent FED cut looks more and more akin to election year timing than anything. Post election, will they live to regret it and resume tightening? As for those like us who are cutting, it could leave us in a worsening situation. The risks are clearly rising.
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