Here's our summary of key economic events overnight that affect New Zealand with news that while officials cut policy interest rates, markets are bidding up benchmark bond rates.
But first, there was another aggressive fall in the level of American mortgage applications last week, down almost -7% from the prior week, and extending the -17% plunge from that earlier period. But they are +3% higher than year-ago levels. Mortgage interest rates have been rising although they held last week at 6.73%. But they are still well down on the year-ago 7.16% level.
Perhaps the fall in mortgage applications is due to the weak state of their housing demand. Existing-home sales fell -1.0% in September from August to an annual rate of 3.84 mln. That is a -3.5% dip from one year ago. And they are on track for their worst year since 1995. American money isn't 'invested' in housing, it is in financial markets.
There was a well supported US Treasury 20 year bond auction earlier today which delivered a median yield of 4.53%. But that was an outsized hike from the 3.97% at the prior equivalent event only one month ago.
The US Fed released its October Beige Book review of the surveys in all its districts and it was unremarkable, only finding modest improvements.
American petrol prices keep on easing at the pump, now -11.1% lower than year-ago levels.
And as widely anticipated, Canada cut its official interest rate by -50 bps to 3.75% overnight. They signaled that they will continue to chop the rate should their economy develop as expected. The decision increased the pace of rate cuts following three -25 bps reductions, and this aligns with their recent sharp slowdown in Canadian inflation. Some expect another -50 bps cut at their December meeting.
Singapore's core inflation rate rose again but only to 2.8%. This central bank version is different to the normal CPI because it is the one most influential on their rate settings.
Taiwanese retail sales were up +3.2% in the year to September. And their industrial production was up +12.1% on the same basis.
In China, it is still a long way off, but the retail event known as "Singles Day, or "11-11" (November 11) has kicked off early promotions and by some [official] reports is building momentum. It is a world-scale retail event, probably larger than "Black Friday" in the US and elsewhere.
And staying in China, they are raising petrol prices again, their ninth rise of 2024. They blame "rising crude oil prices" which is a bit of a reach given they have fallen -13.3% over the past year.
Consumer confidence in the Euro Area improved in October to its highest since February 2022. This was as expected. However, it remains negative but has now risen back to its long-term average for the first time in 32 months.
The UST 10yr yield is now at just on 4.25% and up +5 bps from this time yesterday. The key 2-10 yield curve is positive, and still +17 bps. Their 1-5 curve inversion is less inverted, now by -24 bps. And their 3 mth-10yr curve inversion is again shallower at -51 bps. The Australian 10 year bond yield starts today at 4.52% and up another +6 bps. The China 10 year bond rate is at 2.15% and up +2 bps. The NZ Government 10 year bond rate is just under 4.54%, up +3 bps from yesterday.
Wall Street is much softer today with the S&P500 down -1.5% in Wednesday trade in a building sell-off. Overnight, European markets were softer too, down almost -0.5%. Tokyo ended yesterday down another -0.8%. Hong Kong was up +1.3% and Shanghai rose another +0.5%. Singapore rose +0.4%. The ASX200 ended its Wednesday session up a minor +0.1% and the NZX50 was down -0.2%.
The price of gold will start today at US$2720/oz and down -US$22 from yesterday.
Oil prices are -US$1.50 lower at just on US$70.50/bbl in the US while the international Brent price is now just over US$74.50/bbl.
The Kiwi dollar starts today at 60 USc and down -40 bps from this time yesterday. Against the Aussie we are unchanged at 90.5 AUc. Against the euro we are back down -20 bps at 55.7 euro cents. That all means our TWI-5 starts today at just on 69, down -10 bps from yesterday at this time.
The bitcoin price starts today at US$65,928 and down -1.5% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.5%. All the optimistic talk about a "seismic shift" for crypto if Trump wins the US election isn't resulting in rising demand or prices. Investors may bet 'play money' in some betting markets, but not so when it involves 'real money'.
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42 Comments
A couple of weeks ago I read an article that suggested a predictor of which side of the divide one will be would be education. The article suggested of all the indicators education had the strongest correlation. It indicated that the higher ones education the more likely they would be voting "social democrat'. I don't recall if they mentioned swing voters. Bottom line smarter people are more likely social democrats than conservatives.
That should get a reaction?
@ Murray - "A couple of weeks ago I read an article"
Well then, if you read it, it must surely be true then eh. As long as it came from a government source or FB it has to be right, right?
Lol Oh Murray, The "socially educated" believe:
We can change the weather if we all pay more taxes
That they're sad about the weather in 30years time, so the answer is to superglue their hands to main highways
That men can be woman, woman cam be men, & one can be both at the exact same time whilst also being neither
That there are 100s of genders, and still counting, new ones miraculously discovered everyday
That basic biology is outdated
That skin colour & origins matter over skills
That feelings matter over facts
That everyone else should have to house them for free
That children need to be exposed to men sexualizing womanhood on stage dry humping furniture because being a woman is now a costume
That men can now get pregnant, have periods & breast feed
That the government has their best interests at heart, & is the single source of truth
That free speech is now actually an act of terrism
That being poor & complaining & expecting everyone else to do something about it is somehow the new rich
That ending the life of a child is justified if the child has yet to be born. Put cute little words to disguise it such as abortion so it doesn't sound as perverted
Peak liberalism - sending your daughters to fight & die in war so that your son can be a cross dressing homosexual
That the unvaccineted should all have passed away, & that the vaccinated should no longer be getting sick
Who say they believe in "the science", & so therefore "You cannot challenge us on what we said today". Until the science is proven wrong, then they say "You cannot hold us accountable for what we said yesterday, the science has changed" They confuse science with paid propoganda.
That conservatives are the racist ones, yet they make every one of their policies about race
Lol And these people are meant to be the " socially smartest" amoungst us? And yet you believe that these are indicators of "the socially educated"? More like the socially indoctrinated, the socially disturbed, the socially decieved, or the morally bankrupt. Smart people are being silenced so that dumbness can prevail.
Those who dissagree with the propoganda, who stops & thinks, adds a little basic common sense & says "This doesn't make any sense at all", is automatically labelled by the indoctrinated as a crazy conspiracy theorist for not believing the idiocracy lol. The term "Conspiracy Theorist" is a comfort blanket that the indoctrinated have been trained to parrot. Once uttered, it allows the incurious mind to slip back into uninformed ignorance.
"The article suggested". Yeah, at this point, the article could suggest dog excrement is good for ones health & the indoctrinated would literally pick it up & eat it & say they loved it, just as they do with any good click bate article that suggest their biased view must be correct because "some study" said so.
"Bottom line smarter people are more likely social democrats than conservatives". Really Murray? You actually believe that? That being indoctrinated is somehow "smarter" than just having a little common sense? You still stuck with Stockholm syndrome from the Ardern years Murray? Take off those rose colored glasses.
Nah Murray, you don't believe domeocrats are really socially smarter than conservatives, how could you, their ideals are insane. You believe what ever your TV tells you, & right now your TV tells you Trump is bad, & that people should be voting Kamala instead, not based on her own merits alone, because off script her babbling is just incoherent & terrible "unburdened by what has been" rubbish, using big words to appear "smart", but advocating to vote for her based on nothing else other than her gender & the colour of her skin.
Think a little more critically Murray, a little less article reading. Fear shuts down critical thinking. You will habe your answer in just under 2 weeks, but it's.unlikely to be the answer you were hoping for.
US mortgage rates are going up because the price that mortgage bonds are trading for is going down. Why? Because when interest rates fall, US mortgagors just refinance with no penalty. So, people holding mortgage bonds just get money back at par. This risk has to be priced in. US Treasuries obvs don't have the same dynamic so you get US Treasury and US mortgage bonds diverging.
"You can expect to pay from 2% to 5% of a loan’s principal in closing costs. Your lender may also require an appraisal of your home, title search and application fees. So, consider carefully whether refinancing is in your best interests. Begin by reviewing your current loan. How much equity have you built? And how is your credit? The answers will determine what kind of loan you can qualify for and whether or not you’ll need to get mortgage insurance. Do you have the ability to pay thousands upfront in closing costs? How long will it take for the savings you get from refinancing to off-set closing costs and fees? This break-even point will be a critical factor in deciding whether or not a refinance is the right move for you right now."
Virtually all mortgages in the US, and all the ones backed by Fannie Mae / Mac, can be refinanced at any time. The closing costs (1% to 3%) are wiped out by the savings. Try the refinance calc here.
US mortgage rates are going up because the price that mortgage bonds are trading for is going down
There is no economic relationship as they are 100% dependent. US mortgage rates are going up because there are more sellers than buyers at the opening price. Prices are backed out of the settlement proceeds and are an afterthought. US bonds are quoted in price, but that's just convention.
US mortgage rates are going up because the price that mortgage bonds are trading for is going down. Why? Because when interest rates fall, US mortgagors just refinance with no penalty.
FWIW Jfoe, the average interest rate on a 30-year mortgage is back above 7%. Since the Fed cut rates, mortgage rates have risen over 50 basis pts. You rarely see this during interest rate cutting cycles.
https://tradingeconomics.com/united-states/30-year-mortgage-rate
Yesterday it was reported EU car sales have never recovered from their covid era drop.
Perhaps something to do with all the cycleways they put in during the covid lockdowns and the extra 2 million bicycles per year they have been selling since then?
https://www.statista.com/statistics/561413/bicycle-sales-in-the-europea…
Don't worry Simeon Brown will show them how it's really done - we'll be blowing out our current account deficit on old ICE cars and petrol for a while yet.
Got to think of all those cafes set up in the middle of nowhere with a business model based on Council-provided parking spaces.
Zeihan predicting 30% chance of oil hitting $300+ in the next few months.
Some people don't learn.
Back when I was first tracking global energy - 2005-8 - I assumed that oil would go to $200/barrel. I assumed scarcity, I assumed an all-else-being-equal 'economy'. Goldman Sachs said the same and I smugly decided I was in good company.
I now know that GS and I were 100% wrong. Beyond a certain point - certainly $120/barrel in 2008 dollars - society can no longer afford itself. The well-connected in the First World, can dodge the bullet in the short term, using debt. Those who run on cash-for-fuel - mostly the Third World - have no such recourse; they're out of the game. Hence the riots/protests in 2008.
The irony is that the First World requires the Third, to supply it with cheap shyte. And real shyte cannot be conjured up by debt - real stuff needs energy and resources (old joke in my circles: put 100 economists in a room for 100 years, they won't produce a ham sandwich...).
So there's an upper limit to oil price, beyond which the 'economy' collapses. And it it well shy of $300/barrel.
Edit - this is likely why China is counter-cyclical; their refineries probably buy low (skewing the pitch).
An additional driver in China is the pile up of electric vehicles - it suits the govt to have less oil used even if more coal is burned short term
I was surprised recently by the electric fleet in Shenzhen - all the scooters (vepsa type) were electric and maybe 35-40% of the cars. I think in less than 10 years all will be electric
and they were waaay cheaper than here in NZ - $400 for the cheapest scooter and appeared to be less than NZ$30k for a car
The big bonus was cleaner air and a much quieter city
?? I was in lots of places in China from 2005 onwards and most of them were already almost completely electric scooters. Late 90s they started to really take off. https://en.wikipedia.org/wiki/History_of_electric_vehicle_industry_in_C…
That intensifying orange/red area in Hawkes Bay is where I live. Only 3.6mm of rain so far this month and I have no idea how the crops are holding on - pivot irrigation isn't viable on my land (also I can't afford it). Promise of rain this weekend is rapidly evaporating, excuse the pun. Could be a bit of a squeeze on vegetables this season.
Very much so - Wattie's was founded here, and McCain's also have facilities in Hastings. There are some very large growers in the area (e.g. Drumpeel Farms near Otane crop 640Ha) but it's not as glamorous so doesn't get the PR.
Many hundreds (likely thousands) of hectares of cropping land went underwater in the cyclone, and some may still not be viable. There was a lot of silt deposited but many turned it in with supplementary lime, and in a few years' time there may be some bumper crops come up.
(Fascinatng fact: Corn is generally considered a cereal/vegetable, even though it's technically a fruit. I'm lumping corn in with vegetables here since that's how everyone thinks of it on their dinner plate.)
Our biggest trading partner is in trouble.
It’s the latest Peter Zeihan video
Treat everything Peter Zeihan says with a healthy dose of scepticism. His views tend to the extreme of any outcomes and he has been predicting the immediate demise of China for about a decade now.
Here's a critic's opinion of him in a Reddit post: Peter Zeihan is not a serious intellectual : r/LessCredibleDefence (with a few other opinions further down the thread).
Because we all know there won't be any NZ citizens looking for work in the coming months:
Under changes announced today, open work rights will be available to partners of Accredited Employer Work Visa (AEWV) holders working in higher-skilled roles who earn at least 80% of the median wage. The changes will take effect from December 2.
The same rights will also be available for partners of AEWV holders working in lower-skilled roles who are on a pathway to residence
Government gives migrant partners work rights, overturning Labour ban
“We saw what happened when our borders were sealed shut. Businesses went to the wall, fruit was left to rot on the ground, the health system struggled to keep up with demand, and families were separated."
Of course, it was nothing to do with the fact people were told to stay at home was it Erica - it was all to do with the shutting of borders that business went to the wall.
“We know that restricting working rights for partners puts people in more financial duress and increases the risk of family violence,” Menéndez March said.
Perhaps we should do these people a favour and not let them come at all to avert such hardships.
I wonder how much financial duress and increased risk of family violence there is from Kiwis who are unable to find jobs who are now competing with an even bigger pool of labour? I guess the downtrodden locals don't actually matter.
With such a big pool of unemployed why do we need any immigrant labour (outside of special areas of work where we simply cannot train/up-skill a Kiwi in a short enough space of time).
All the optimistic talk about a "seismic shift" for crypto if Trump wins the US election isn't resulting in rising demand or price
I think most people know by now you can ignore most things Trump says. Within two weeks he'll either have forgotten about it, or changed his mind.
Like the big lovefest with Kim Jong Un. Whatever came of that?
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