Here's our summary of key economic events overnight that affect New Zealand with news China is making a new push to join the TPP.
First we should note that cereals, dairy prices, and especially prices for vegetable oils have driven global food prices to a ten year high. Meat prices were flat. Cereal prices, especially for wheat, are being driven up by constrained supply from Northern Hemisphere producers. Southern Hemisphere producers are in a golden phase where they have higher output with these higher prices. Australia is a major beneficiary.
In the US jobless claims last week fell to 240,000 and taking the total number of people on these benefits to 1,890,000 and back to pre-pandemic levels
In September, US exports fell and imports rose, so the balance of trade in goods and services was a deficit that rose to a record -US$80.9 from -US$72.8 bln in August. A lot of that worsening came from large falls in exports of gold and oil. Imports rose largely because businesses are buying capital goods. This September result takes the annual deficit to -US835.6 bln or -3.6% of GDP. That is up from -2.7% of GDP in 2019.
The very active US economy has seen labour costs jumped at an +8.3% rate in the third quarter of 2021, more than market forecasts of +7% rise. At this level it is now suddenly undermining productivity progress.
The US Federal administration said that large companies who have Federal contracts with it, have until January 4, 2022 to ensure that their workforces are fully vaccinated or clear using weekly testing, under a sweeping new coronavirus health measure that will cover 84 million private sector workers.
The Canadian trade balance improved to a surplus of +C$1.9 bln in September, but it was on lower exports and imports that fell faster.
In China, another property developer missed a debt repayment deadline. But it is becoming clearer that with pressure from Beijing, many of these stressed companies are finding ways to sort out their financing messes.
Meanwhile, China is making a harder pitch to join the TPP. President Xi has directly said that China is open to negotiations on industrial subsidies and state-owned enterprises in order to meet the TPP criteria. They are racing to try and join before the US has a change of heart. Meanwhile, their RCEP will now formally begin on January 1, 2022. New Zealand is a part of both trade groups.
The cost of shipping container freight is starting to unwind at a faster pace now and dropped almost -5% last week alone. Freight prices out of China are falling even faster than the average. Bulk cargo freight rates are falling faster too.
EU producer prices rose their fastest in at least 26 years since when modern data began, up +2.7% in a month, +16% in the year to September. It will be no surprise that for them it is all driven by energy costs.
Australia still has a very large trade surplus but it reduced in September. It narrowed to +AU$12.2 bln and to about was expected. But exports fell more than expected, and that was offset by falling imports. Iron ore prices have collapsed to under US$100/tonne and down -60% as China reins in steel production and Chinese real estate developers struggle under their mountain of debt. However, analysts believe the end is in sight, with the iron ore market likely to tighten in December.
And staying in Australia Delta cases in Victoria have jumped to 1247 cases reported there yesterday. There are now 17,674 active cases in the state and there were another 9 deaths yesterday. In NSW there were another 308 new community cases reported yesterday with 3,131 active locally acquired cases which is a jump higher too, and they had another 3 deaths yesterday. Queensland is reporting three new cases. The ACT has 13 new cases. Overall in Australia, more than 79% of eligible Aussies are fully vaccinated, plus 10% have now had one shot so far.
The UST 10yr yield opens today at 1.52% and down -7 bps overnight. The US 2-10 rate curve starts today little-changed at +110 bps. And their 1-5 curve is very much flatter at +97 bps, while their 3m-10 year curve is flatter too at +148 bps. The Australian Govt ten year benchmark rate is down -5 bps at 1.79%. The China Govt ten year bond is down -2 bps at 2.94%. The New Zealand Govt ten year is up +4 bps at 2.58%.
On Wall Street, the S&P500 has opened today up a minor +0.2% in the Thursday afternoon trade and a new all-time record high. Overnight, European markets were all higher by about +0.5%. Yesterday, Tokyo rose +0.9%. Hong Kong rose +0.8% and Shanghai ended its session also up +0.8%. The ASX200 ended its Tuesday session up +0.5% while the NZX50 was the odd man out, down -0.4%.
The price of gold will start today at US$1792/oz and recovering all of yesterday's sharp drop with a +US$26 rise from this time yesterday. Silver recovered too.
And oil prices are down another -US$2 at just on US$79.50/bbl in the US, while the international Brent price is now hasn't fallen as much yet and is now under US$81.50/bbl.
The Kiwi dollar opens today lower by about -40 bps to just over 71 US. Against the Australian dollar we are softer at 96 AUc. Against the euro we are little-changed at 61.5 euro cents. That means our TWI-5 starts today -20 bps lower than at this yesterday at just under 74.9, but still well over the top of the 72-74 range of the past eleven months.
The bitcoin price has fallen -1.4% since this time yesterday, and now at US$61,230. Volatility over the past 24 hours has been moderate at just over +/-2.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».