Retail sales up in the US, trade balance worsens; confidence improves in many large countries; Canada faces large deficit; RCEP close to finalising; UST 10y at 0.65%; oil down and gold up; NZ$1 = 65.9 USc; TWI-5 = 69.3

Here's our summary of key economic events overnight that affect New Zealand, with news of improving sentiment in many large countries, even if levels aren't back to pre-pandemic standards.

Last week's American retail sales were lower than the previous week but they were +2.2% higher than the same week a year ago, and this is considered a positive trend.

But that masks major changes in the retail industry as retail bankruptcies, liquidations and store closings reached records in the first half of 2020 as the pandemic accelerated the shift to online shopping.

And their August merchandise trade balance rose to just on -US$85 bln for the month, a new record high, made worse because the July result was revised worse too. Their trade balance with China is now at its worst-ever level. Those tariffs just make American pay more, they are having no impact on the Chinese (as any year one economics student could have told you). American exports fell almost -15%, while their imports fell -5.9%.

But a widely-watched measure of consumer confidence increased sharply in September, after back-to-back monthly declines, but remains nearly -20% lower than year-ago levels. The rise from August is based on the belief the economic impacts of the pandemic may be fading.

In Canada, they say they are heading for a government budget deficit of -15% of Canadian GDP in 2020.

In China, sentiment amongst Chinese firms and households improved in Q3-2020, as their economy returned to a full recovery.

There was some data out of South Korea late yesterday that is instructive. (South Korea is our fifth largest export market and our sixth largest import source.) Their industrial production was -3.0% lower in August than a year ago, and that was slightly worse than expected. Investment intentions declined too. But their retail sales were up +3.0% from year-ago levels and that was an unexpected positive result. Perhaps that is why their business confidence inched up in September and isn't far below year-ago levels now.

And we should report that the RCEP trade deal is in its final stages before agreement. Started in 2012 by China to counterbalance an American-dominated TPP, it now doesn't include India. (And the TPP no longer includes the USA. They are developing a security alliance with Japan, India and Australia, known as the Quad.) And both Japan and Australia are having last-minute second thoughts. But New Zealand is still committed to being in.

In Europe, economic sentiment improved again and for the fifth consecutive month, even if at a slower pace. But it is still -30% below pre-pandemic levels. And remember those were barely positive at the time after a long decline from late 2017.

Wall Street has started today down -0.2% in midday trade, following Europe markets which were down an average of -0.3% overnight. Shanghai closed yesterday up +0.2%, Hong Kong closed down -0.9%, and Tokyo ended its session down -0.1%. The ASX200 closed flat while the NZX50 Capital Index shed -0.6%.

The latest global compilation of COVID-19 data is here. The global tally is 33,444,000 and up +271,000 in one day. The European resurgence isn't abating, nor the one in the US Midwest. Global deaths reported now exceed 1,003,000 but clearly many are going unreported.

The largest number of reported cases globally are still in the US, which is up +45,000 overnight to 7,374,000 back up after their weekend. The number of active cases are stable at 2,535,000 so as many new cases as recoveries and making no real progress. Their death total is now just over 210,000 and rising at +1000 per day. At 634/million population, it is the worst western death rate bar Belgium and Spain.

In Australia, there have now been 27,063 COVID-19 cases reported, and that is only +19 more cases than yesterday. Deaths are up however at 882 (+7). Their recovery rate is now almost 91%.

The UST 10yr yield has retreated today, down at 0.645%. Their 2-10 rate curve is unchanged at +53 bps, their 1-5 curve is also unchanged at +15 bps, while their 3m-10 year curve is still at +58 bps. The Australian Govt 10 year yield is up +1 bp unchanged 0.84%. The China Govt 10 year yield is down -1 bp at 3.14%. And the New Zealand Govt 10 year yield is unchanged at 0.46%.

The price of gold is back up at US$1895/oz and a +US$21 jump, and on top of yesterday's +US$14 gain. And silver has made another outsized daily gain, up more than +2% for a second day.

Oil prices are sharply lower today, down by more than -US$2 to just under US$38.50/bbl in the US, while the international price is equally lower at just over US$40.50/bbl.

The Kiwi dollar starts today at 65.9 USc and nearly a +½c rise from this time yesterday. But against the Australian dollar we have lost some more ground and are now at 92.5 AUc. Against the euro we are soft at 56.1 euro cents. But that means our TWI-5 has risen to 69.3.

The bitcoin price is much lower this morning, and now at US$10,686 and a +1.9% decline. The bitcoin rate is charted in the exchange rate set below.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».