Here's our summary of key economic events overnight that affect New Zealand, with news sentiment seems to be ebbing today despite the raft of good economic data this week.
Following yesterday's surprise surge in US economic growth, details released today confirm the sharper than expected rise in consumer spending, up +0.7% in September from the prior month. The appetite for both goods and services rose at about the same rate. Personal income rose at a consistent +0.3% rate on that same basis. Their savings rate eased back marginally.
But behind the consumption rise, there are signs that Americans are avoiding big-ticket items. Firms are reporting softer demand or a preference for less expensive alternatives. It seems the more you have to think about a purchase, the less likely you will make it.
The Wall Street earnings season is developing into a good one, despite some high-profile misses. Of the 245 companies in the S&P 500 that have reported earnings so far, 77% of them beat earnings expectations. Third-quarter earnings are expected to grow +4.3% from a year earlier.
In another setback for GM however (that is, in addition to the UAW strikes), California authorities suspended the Cruise driverless operating authority, saying the safety record isn't as claimed. It's a tough decision because their fleet is far, far safer than human-driven vehicles. It is a decision that only affects GM, and not Waymo. Apparently authorities are looking for perfection in driverless car safety, not just 90%+ better than human-driven vehicles. Pressure from taxi driver representatives is probably behind the move. Waymo may be next.
In China, profits earned by their big industrial firms fell by -9.0% from a year earlier in the first nine months of 2023, amid weak demand at home and abroad and persisting margin pressures. The decrease followed a -11.7 % slump in the prior period, so the situation is easing. Things have turned up smartly in the past two months even if they still lag year-ago levels.
And staying in China, the unexpected death of retired ex-Premier Li Keqiang of a heart attack has brought an unexpected outpouring of grief - maybe one way Chinese netizens have to obliquely criticise Xi Jinping. It is public grief for an era of greater growth and possibility. Li's pro-market reformist wing of the Chinese Communist Party is in full retreat having been sidelined under Xi.
Russia reviewed its monetary policy settings and surprised with a +200 bps hike when a +100 rise was anticipated. That takes their official rate to 15%, and they signaled that monetary policy will remain tight for a prolonged period to fight their high inflation which is now running at 7% in October and much more than they anticipated. Today's decision took the cumulative rate hikes since the start of the bank’s tightening cycle in July to +750 bps.
In Australia, their producer price index rose by +1.8% quarter-on-quarter in September, rising from a +0.5% gain in Q2 (which was the lowest in over two years). The Q3 rise was the 13th straight period of growth and the fastest pace since the third quarter of 2022. They are up +3.8% in a year.
Yesterday we noted that SkyCity is bracing for a large penalty following AML breaches caught at its Adelaide casino. They are not the only casino in regulators crosshairs. The iconic Melbourne Crown casino is having its license reviewed at present and there is a real risk it may not be renewed based on endemic fraud, crime and AML issues. It is a real test of the power of money to influence regulator decisions despite the ongoing documented breaches and failings.
The UST 10yr yield is little-changed from this time yesterday, now at 4.86%. A week ago it was at 4.93%. Their key 2-10 yield curve is less inverted, now by -16 bps. Their 1-5 curve is inverted by -62 bps and little-changed. Their 3 mth-10yr curve inversion is little-changed too at -55 bps. The Australian 10 year bond yield is now at 4.84% and up +1 bp from yesterday. The China 10 year bond rate is unchanged at 2.74%. The NZ Government 10 year bond rate is -1 bps lower at 5.56%. A week ago it was at 5.62%.
Wall Street is lower again; in its Friday trade the S&P500 is down -0.4% and looks like it will end the week down -2.2%. Overnight European markets were all lower with Frankfurt down -0.3% and Paris down -1.4% and the others in between. Yesterday, Tokyo ended its Friday session up +1.3% to end its week down -0.5%. Hong Kong rose 2.1% yesterday to book a +1.6% weekly gain. And Shanghai rose +1.0% yesterday for a +1.6% weekly rise. The ASX200 ended its Friday trade up +0.2% on the day to limit its weekly loss to -1.1%. But the NZX50 fell -0.8% on Friday to crash -3.3% lower for the week.
The Fear & Greed index we follow is still hard over on the 'fear' side but little-changed from this time last week. Or the week before.
The price of gold will start today at US$1986/oz and up +US$2/oz from yesterday at this time. A week ago we were similar at US$1982/oz.
Oil prices have risen +US$1/bbl today to be now at just under US$84.50/bbl in the US. The international Brent price is now just under US$88.50/bbl. But these latest price levels are -US$4 lower than a week ago.
We haven't looked at it for a while, but we should note that the carbon price is stuck at about NZ$70/NZU. This whole market has struggled since the failure at the last two official auctions. But it is not just the local market that has struggled. The EU carbon permit price has atrophied as well, now down to €83.32/tonne. That is down -21% from March. These have become has-been markets.
The Kiwi dollar starts today at 58.2 USc and little-changed from this time yesterday. A week ago it was at 58.3 USc, so not much change. Against the Aussie we are down almost -½c to 91.7 AUc. Against the euro we have slipped to just under 55 euro cents. That all means our TWI-5 starts today slightly softer at just under at 68.2. This time last week it was at 68.4, so again, little change.
We probably should note that Beijing authorities have effectively pegged the yuan to the US dollar again. Since September 15 it has been held in a 7.17-7.19 range to the US dollar, at every day's official fixing. The Americans are probably close to certifying it as currency manipulation.
The bitcoin price starts today at US$33,654 and down -0.5% from this time yesterday. But for the week it is up +14% in a notable move. Volatility over the past 24 hours has been modest at just on +/- 1.2%.
Go the All Blacks! despite the weather.
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20 Comments
I just looked at the NZX.
Down to 2019 levels! An absolute disaster. And that is before you factor in inflation.
The equivalent of Bitcoin falling sub 10k (I wonder what the commentary would be then!)
That said with a change of guards perhaps there is opportunity here? My main issue is that its just as tax efficient to buy say the top 30 or so companies in the ASX.
Pretty much bear market territory now:
https://www.newsroom.co.nz/business-investing-tues-24-october?amp=1
I say bollocks to the notion that you can’t have reasonable success timing the market (provided you are highly informed of course)
In 20 years there wont BE returns on 'investments'.
Or a growth-expecting 'economy'.
Goes with David's 'public grief for an era of greater growth and possibility.' The driver is misidentified; it wasn't the people, or the politics; is was the reduction in resource and energy inputs, both per-head and absolute. More and more people will become 'poorer', and there is nothing politicians can do about it. But we can expect them to be blamed (as DC did Trump, incorrectly-aimed in the same manner) and we may see every-election government-removal in what remains of democracies, for a while.
Until even the complexity of government gets abandoned.
Ford shares fall 12% after earnings underline worries about costs and EV plans
"its customers in North America are no longer willing to pay a premium for an EV vehicle versus a comparable internal-combustion or hybrid alternative."
Been keen on an EV. But now, um.
Battery tech has been under development for about a century with no great leap forward.
PHEV is of more interest now. For us it would be charge at home - good solar here - and use battery only 13 days out of 14.
The Mitshibishi Eclipse is about the right sort, but never been keen on Mitsies
Been seriously thinking about this too, but the battery and performance of eclipse are both rubbish defeating purpose of it. Reckon it's EV range after a few yrs be down to 30/km.. Outlander PHEV on the other hand, 50% bigger battery and notably bigger/heavier yet massively quicker that ICE which any EV (or phev) has no excuse not to be :D
... carbon price is stuck at about NZ$70/NZU.... The EU carbon permit price has atrophied as well, now down to €83.32/tonne....These have become has-been markets.
This is an interesting space. National appear committed to adjusting the Emission Trading Scheme settings (limiting units) so that the price of carbon rises high enough to actually drive changes to business and consumer choices. Yet, the price is on the floor - suggesting that speculators and traders, who own over a quarter of the 160 million stockpiled units, remain unconvinced. That stock pile is 'worth' $11 billion at current prices.
If the NZ Initiative ghouls advising National do get their way and the ETS is finally given teeth, expect two things to happen: Firstly, some people in the know will get very rich. Secondly, National will be walking back the decision sharpish as the tractors and utes advance on the Beehive to protest about diesel prices.
We need the overseas carbon permit prices to come down because we will miss our own NDC commitments by a country mile. Buying overseas carbon units is then the only way to make up for it and save our 100% pure and green face (and keep on having access to some wealthy trading markets!)
To be fair, it was politicians from the National Govt in 2016 that signed up to the Paris Agreement. Then the Labour Govt did sod all to actually reduce emissions... So, if we are going to meet our Paris Agreement obligations then we are going to have to spend many, many billions buying up credits overseas. Oh, and the rules for approving and trading credits are pretty dense and the negotiations between buyers and sellers can take years. Oh, and the body that will oversee such trading is still getting set-up. Apart from all of that, we're all good.
The daftness was in the across-the-board assumption that you can 'make money' from anything.
Unfortunately, money is 100% underwritten by energy. And it's this essential energy we burn the carbon for. So they were on a very simple mathematical hiding-to-nothing.
Maybe when you spend your waking (?) hours in things like 'currency trading' (a zero-sum game; if you extract spending proxy, someone else must have lost some) you lose sight of what is real?
"carbon price is stuck" Yep, taxing the master resource that drives economic growthist dogma, was always going to be a non starter, once it was discovered human exceptionalism wasn't actually the basis of this human assimilation of the planet. It was burning fossil stuff.
Anyone else see food prices down sharply?
Today at PaknSave:
5 avos for $1 (yes you read that right)
10 Oranges for $4
2 telegraph cucumbers for $3 (out of season)
$8 a kilo tomatoes (pretty sure last year when they were out of season they were like $14 a kilo)
2 full cauliflowers for $5
Bok choi $2 a bag
Full celery $4
Cheap apples/mandarins
Cheese seems to have come down by about 20%
Only expensive thing was golden kiwis
Everything else was either same price as a year ago or slightly cheaper.
Am expecting next inflation numbers to be looking low/backwards in the food category. Even prices of
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