Here's our summary of key economic events overnight that affect New Zealand with news China is still pulling its policy levers, but it remains uncertain consumers are responding in the way they need.
US durable goods orders slipped slightly in September from August, but by less than analysts had expected. But that takes them -2.9% lower than a year ago. Capital goods orders retreated -6.5% year-on-year, but non-defense capital goods orders other than aircraft were higher (although only by +0.6%).
The University of Michigan consumer sentiment index was revised up in October from their earlier 'flash' result, marking a third consecutive month of rises and reaching the highest level in six months. And this same survey found little concern about future inflation, with expectations at 2.7% hitting its lowest level in almost four years.
In Canada, retail sales rose again in August mainly on the back of more optimistic car buying. While the overall gain is still low, it is a third month in a row they have reported a year-on-year rise.
In China, officials are getting desperate about the falling birth rate, actively and repeatedly calling women with one question: “Are you pregnant yet?” Apparently they don't get a good response from these calls.
The People’s Bank of China injected a total of ¥700 bln into financial institutions via a one-year medium-term lending facility (MLF) on Friday at an unchanged rate of 2.0%.
Foreign direct investment into China for the year to September slumped -30% from the previous year although on the year-to-date basis they favour that was a slight easing from the -31.5% fall in August. For the month of September, the inflow was +NZ$14.2 bln and that is very much lower than the +NZ$540 bln that flowed in in September 2023. But at lease it is positive.
Leading Chinese economist Zhang Yu has raised the alarm over falling consumption in the Chinese domestic economy. Consumption is under pressure even though Beijing seems to be making big efforts to boost it. In Q3-2024, retail growth came in at just +2.5%, while in the mega-cities of Beijing and Shanghai it turned negative in the months of July and August. He points out that domestic consumption's economic contribution ratio dropped to 49.9% for the first three quarters of 2024, as compared to 60.5% for the first half. That is a very rapid shift. Export have held their growth level up so far, but that isn't continuing. The shrivelling consumption puts China's economy in peril and Beijing seems to have no answers so far. They have used half of their support measures already. Hopefully the next half will work better.
Bloomberg is reporting that defaults in an opaque corner of China’s local debt market have surged to a record high, ensnaring investors who’d assumed the securities had an implicit guarantee from the state. Failures of so-called non-standard products, which are fixed-income investments that aren’t publicly traded, surged to record levels. While there is no official tally of the size of the sector, analysts estimate it to be around NZ$1.3 tln. It is mainly small investors being caught by this.
China's more traditional local government debt is Beijing guaranteed. It has risen very fast, making up for the dive in local authority land sales. And they are about to release NZ$1.4 tln more of it. But the reputation damage from the bad bits will cause it to pay more than it otherwise would have.
In Russia, their central bank raised its key policy rate by +200% to 21% as their war economy distorts activity sharply. A +100 bps rise was expected, so this is a surprise. Markets reacted badly with the ruble falling and equity prices there retreating sharply.
In Australia, today is election day in the state of Queensland. They have had a Labor Government for 23 of the past 26 years, and earlier a change to a Liberal/National Party Coalition Government was widely expected, maybe by a landslide. But oddly, after some awful campaigning by the challengers (channeling Abbott/Credlin), and some effective campaigning by the incumbents, it is neck-in-neck at the finish. We will know the result tomorrow.
In New Zealand we are hearing that the Government has signed off on allowing a private contractor to issue building consents nationally, do inspections, and issue code compliance certificates. Councils won't lose their current powers, but will now have to compete with this private alternative. (The company involved has been doing subcontracting work in this area for Councils for some time.) It will be major change for not only the residential construction industry, but Councils as well. Official notification of the change is expected next week. To date, only Kainga Ora has had these independent rights.
The UST 10yr yield is now at just on 4.25% and up +6 bps from this time yesterday but down -14 bps for the week. The key 2-10 yield curve is positive, at +14 bps. Their 1-5 curve inversion is still inverted by -25 bps. And their 3 mth-10yr curve inversion is little-changed at -53 bps. The Australian 10 year bond yield starts today at 4.46% and down -4 bps. The China 10 year bond rate is at 2.16% and up +1 bp. The NZ Government 10 year bond rate is just under 4.45%, down -7 bps from yesterday but little net change for the week.
Wall Street is little-changed today with the S&P500 barely higher in Friday trade as early session gains leak away. It is down -0.8% for the week. Overnight, European markets were also just marginally changed, mostly down a small tick or so. Tokyo ended yesterday down -0.6% to end its week -2.7% lower. Hong Kong was up +0.5% on Friday but down -0.7% for the week. Shanghai rose +0.6% on Friday to be +0.7% higher for the week. Singapore fell -0.3%. The ASX200 ended its Friday session up a minor +0.1% but down -0.9% for the week. And the NZX50 was down -0.3% on Friday in changeable trade for a weekly retreat of -0.4%.
The Fear & Greed Index ends the week having moved more cautious and now only just in the 'greed' range. Overall markets are still comfortable with their risk appetite and have been for more than a month now. But doubts krept in today.
The price of gold will start today at US$2745/oz and up +US$13 from yesterday. That is +US$28 higher than a week ago. In between it hit an all-time record high of US$2758/oz.
Oil prices are +US$1.50 higher at just on US$71.50/bbl in the US while the international Brent price is now just under US$76/bbl. These levels atr up +US$2 for the week.
The Kiwi dollar starts today at 59.8 USc and down -30 bps from this time yesterday. That is down -90 bps from a week ago. Against the Aussie we are down -10 bps at 90.5 AUc. Against the euro we are down -20 bps at 55.4 euro cents. That all means our TWI-5 starts today at just on 68.7, and down -20 bps from yesterday at this time, down -50 bps for the week.
The bitcoin price starts today at US$66,267 and down -1.9% from this time yesterday. A week ago it was at US$68,847 so that is a -2.9% fall since then. Volatility over the past 24 hours has been moderate at just on +/- 2.1%.
Remember, this is the long Labour Day weekend holiday. The Breakfast Briefing will return on Tuesday.
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