Here's our summary of key events over night that affect New Zealand, with news that the next big risk in China won't come from trade but rather from local government debt.
Firstly however, today's dairy auction was a bit of a non-event. Prices were virtually unchanged, dipping a mere -0.3% in USD terms and even less in NZD terms. There was a chunky 42,000 tonnes sold, the same as two weeks ago, and the highest volume since August 2015. If anything is of note it is the +2.4% rise in the butter price, ending a continuous fall since May. Overall prices are now -14% lower than this time last year. But today's event will not be changing any payout forecasts.
In the US, new data shows that industrial production increased for a fourth straight month in September, led by small gains in factory and mining output, but the growth momentum has slowed sharply.
And American employers had more than seven million unfilled jobs for the first time on record, reflecting a historically tight labour market that is causing some businesses to struggle to find workers. (The number of worker in their labour force as unemployed is at about six million. And more than 5 million more are not in the formal labour force but want a job.)
Wall Street is up strongly today, gaining almost +2% in late trade. And that follows good gains in Europe overnight. All this is in sharp contrast to Shanghai yesterday which lost the tick end of -1%, continuing its downward track. That has now compounded to -10% from the start of October. Rescue plans are being drawn up.
In China, ratings agency S&P is warning of "titanic risks" in their bond markets. Local authorities have almost US$6 tln in off-balance sheet debt. That is the equivalent of half China's GDP. Defaults on that pile are growing. Much of the build-up relates to local government financing vehicles, which don’t necessarily have the full financial backing of local governments themselves.
The EU's trade surplus came in much larger than expected in August. The 2018 surplus with the US swelled +20% compared with the same period in 2017.
In Germany however, business sentiment is falling quite quickly now. It was negative in September but has sharply deteriorated in October in an influential survey.
And in Brussels, EU policy makers are resisting UK attempts to wring special advantages for the UK in the Brexit negotiations. They are also signaling that they will reject the proposed Italian budget.
In Australia, the minutes of the RBA October 2 meeting showed they expect the weak Australian dollar to hold up domestic economic growth. They indicated that the next move in official interest rates is more likely to be an increase than a decrease, although they do not see a near-term change. They also are showing some concerns over sharp credit tightening as a result of the Haynes Commission report.
The UST 10yr yield is unchanged at 3.16%. But their 2-10 curve has slipped to just on +29 bps. The Aussie Govt 10yr is at 2.72% (up +2 bps from this time yesterday), the China Govt 10yr is at 3.61% and down -1 bp, while the NZ Govt 10 yr is at 2.72% which is up +5 bps.
Gold is up +US$2/oz and now at US$1,228/oz.
US oil prices are a little higher today at just over US$72/bbl. The Brent benchmark is now just on US$81.50/bbl.
The Kiwi dollar is again today firmer at 65.9 USc, its highest in two weeks and bolstered by the strong CPI data yesterday. On the cross rates we are also up at 92.3 AUc, and at 56.9 euro cents. That puts the TWI-5 at 69.9 and also a two week high.
Bitcoin is little changed today at US$6.495. This rate is charted in the exchange rate set below.
This chart is animated here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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