Here's our summary of key economic events overnight affecting New Zealand, with news financial markets are all awaiting the New Zealand Q3-2022 inflation data, due out at 10:45am NZT today. This will set the scene for where fixed home loan rates are headed, and upcoming policy moves by the RBNZ.
But first, overnight the factory survey in the State of New York showed business activity declined "modestly" in October. New orders, unfilled orders, and shipments were all little changed from last month. Delivery times held steady, and inventories inched higher. Their labour market indicators pointed to a small increase in employment and the average workweek. Input price increases picked up, while the pace of selling price increases held steady. Looking ahead, firms there do not expect business conditions to improve over the next six months.
Freight shipments across the whole of the US rose +4.8% in September from a year ago but fell -2.9% from August. Having said that, road freight activity is still quite high in the US, certainly higher than pre-pandemic levels. This data supports the contention that the general US economy is expanding with building activity. After a volatile recovery phase following the pandemic shock, growth metrics are now starting to settle down. The Atlanta Fed's GDP Now tracker has their Q3 expansion at +2.8%. More traditional models have it lower at half that level. US Q3 data will be released on October 28, NZT, a week from Friday.
China is in full hagiographic mode these days as their Party Congress dominates everything. But people in the West shouldn't be too smug about that. It was only weeks ago that the UK was also in full hagiographic mode over their monarch. Both are uncritical worshiping, worthy of some religious cults. Both 'opium of the people'.
In China, their new policy direction is setting back their economic "opening up" drives, probably by decades. Companies assess the political risks now outweigh the economic gains. The Russian experience isn't helping. International trade as a glue between political systems is losing its adhesion. The old adage 'security trumps economics every time' is being proven again when stresses are elevated.
In Japan, industrial production came in stronger than anticipated in August, a boost they weren't expecting.
In Australia, spreading flooding is quickly turning their positive grain outlook darker. It may take the top off what was going to be a record harvest.
The UST 10yr yield starts today at 4.01%, down -1 bp from this time yesterday. The UST 2-10 rate curve is slightly less inverted at -46 bps. And their 1-5 curve is slightly more inverted at -26 bps. And their 30 day-10yr curve is marginally flatter at +77 bps. The Australian ten year bond is down -8 bps at 3.98%. The China Govt ten year bond is little-changed at 2.72%. The New Zealand Govt ten year will start today at 4.53% and also little-changed ahead of this morning's Q3 CPI release.
Wall Street has started this week with a roar, up +2.8% and defying the bears. Better-than-expected earnings reports are behind the enthusiasm. Overnight, European markets all rose +1.8%, except London which gained a lesser +0.9% as questions remain after their policy u-turns. Yesterday Tokyo fell -1.2% in its Monday session. Hong Kong rose a minor +0.2%, and Shanghai also a minor +0.4% in their Monday trade. The ASX200 fell -1.4% while the NZX50 fell -0.8% to start their respective weeks.
The price of gold will open today at US$1657/oz. This is up +US$12 from this time yesterday.
And oil prices start today up +US$1 from this time yesterday at just under US$85.50/bbl in the US while the international Brent price is just under US$91.50/bbl. Soft demand and record production saw natural gas prices fall today. The softer demand seems to relate to autumn temperatures being warmer than expected. That will also mean more will be exported to Europe to back up their requirements. Germany is now more certain it will get through this winter pretty much unscathed from the Russian gas cutoff.
The Kiwi dollar will open today at 56.4 USc and up more than +¾c since this time yesterday. Against the Australian dollar we are still at 89.5 AUc. Against the euro we are little-changed at 57.3 euro cents. That all means our TWI-5 starts today at 66.9 and up +40 bps.
The bitcoin price is now at US$19,512 and up +1.9% from this time yesterday. Volatility over the past 24 hours has however been modest at just +/- 1.4%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Daily exchange rates
Select chart tabs
66 Comments
What happens when you like to virtue signal with an EV - but are too squeamish to actually open a mine.
“In 2015, 40% of the cost of a lithium ion battery was raw materials. In 2022, the dynamics have shifted: raw materials now account for upwards of 80% of the cost of a lithium ion battery.
Since January 2020, Benchmark’s lithium prices have increased by over 700%, nickel by 250%, cobalt and manganese by 100%, and graphite by over 25%.
While upwards of $500bn has flowed into building the 285 gigafactories around the world – and $150bn last year alone – critical mineral mines and mid stream processing plants have not seen anywhere like this type of investment.”
https://www.interest.co.nz/business/118048/ny-factories-slow-us-freight…
Is virtue signalling a hypocrisy?
Accusing someone of virtue signalling is to accuse them of a kind of hypocrisy. The accused person claims to be deeply concerned about some moral issue but their main concern is – so the argument goes – with themselves.
Like the folk who yell "woke" at every opportunity.
Which is why fossil fuels will make a comeback. Cheap, abundant, great energy, efficient, reliable, higher standard of living. I can't think of anything better!
You seem to have accidentally over stated the positives while also leaving off the significant negatives.
Well, like housing, the idea is to live it up now while foisting the costs on following generations...
I am so sick of people labeling anything progressive as 'woke' or 'virtue signaling'. It's lazy thinking. Think critically about each issue FFS.
I like my EV because its whizzy and cheap to run.
Mine is very quiet and is awesome for the Doof Doof music yar
Didn't know you were old enough to get a drivers license.
Your 2 year test must be coming up Carlos?
Last I worked it out mine was about 12 bucks for a full 500km charge at home.
Even my motorcycle costs mid 30s for a tank of 98.
To be fair you aren't paying to build and maintain the roads you are driving on so of course it will be cheaper.
Not paying.....for now. Diesel used to be way cheaper than petrol and what happened to that ? The government will start whacking EV owners and sooner or later it will be no cheaper to drive one.
Yes sooner or later electric will probably pay road user charges, but it will still be cheaper than petrol or diesel. But the purchase price needs to come down for it to be cheaper overall.
And EV owners also need to understand that they are pushing up the cost of electricity for everyone - so virtual signalling at its best - and also I'm alright jack
There are many flaws with EVs but this is not a significant one of them.
And making petrol and diesel cheaper for everyone else?
Not so sure about that - I also have solar which sells back 10x my EV usage during higher demand hours while I charge between 11pm and 7am when there are lots of spare, cheap electrons
Grattawy: I see you worry re EV electricity demand and rising prices as a result.
I accept in advance your gratitude for my sending lots of my solar production out the gate.
Given that EVs will pay the same RUCs as light diesels, that's just nonsense. Electricity prices would need to 5x to get anywhere near it for people that charge off peak at home, which should be the majority.
Leaf owner here, more than happy to pay my share, bring it on. Even if the energy cost rises to match diesel I'll still be driving it in preference to lining the pockets of the Middle East.
Jeremy Hunt says ‘eye-watering’ decisions on tax and spending need to be made.
Quite right. And here, there and everywhere, and not just in the UK.
The days of easily available, cheap debt have surely come to an end.
(NB: I note Cameron Bagrie, correctly, muttered something along those lines this morning.)
The escalating cost of private debt is a massive threat to many countries. The cost Govt debt is basically irrelevant though - it is a function of central bank policy (including desired exchange rates).
The Tories in the UK are pivoting to their next favourite thing bar tax cuts - austerity.
Looks like it.
But Liz Truss has unwittingly done the UK, and possibly the whole World, a massive service.
She's woken 'us' all up to the potential disaster facing us if we don't get a grip.
Whatever leadership change happens in the UK will now come along with a willingness to embrace what Jeremy Hunt has started.
There will be no complaint there now about 'what has to be done', and in all likelihood that's what everyone else will now recognise -
"There, but for the Grace of God, go I"
Aye, likely she will soon be heading out the back door but she has certainly though, first ushered the elephant in through the front door. Wonder how much furniture it will bust up before they can get it sedated?
Interesting, stocks now more volatile than crypto.
BTC and ETH up 1-3%. But coinbase up 9.22% Lots of other big 5-7% moves in Tesla, Netflix, Blok and others.
Although one of my cryptos is up 21% so I can't complain
End of cheap money sounds death knell for music’s golden oldies. Song catalogues have been changing hands for huge amounts of money....
Anyone who wanted to get their money out of any overvalued asset did so a while back. Now the lucky new owners have a new interest rate environment to deal with.
https://www.cnbc.com/2022/09/28/cnbc-transcript-duquesne-family-office-…
Worth a read - A few weeks old but a good interview with Druckenmiller - this guy rarely speaks, but has never had a down year in 30 years and is considered one of the greatest macro investors ever.
Stan is the man who famously made Soros a billion by selling the pound short in 92.
... you're 100 % right : Brilliant read ... sobering , wow ! ... thanks for that .
Another suckers rally on Wall Street.
by HouseMouse | 18th Oct 22, 8:47am
Another suckers rally on Wall Street.
Just looked at the TD rates this morning. I can now get an after-tax return on TDs that is higher than my current mortgage rate. Happy days...?
Interesting to see David Chaston much more opinionated in his breakfast briefings lately
‘Interesting’ and illuminating but not in a positive way.
Well it's a definite change from earlier, more "neutral" articles.
I don't mind DC expressing his opinion more, I respect him, but I wonder at which point it will go too far and wether journalism should be impartial at all cost?
There's way too much opinion in journalism as it is. It leads to the media organising itself into political camps as people stop reading material that has opinions they disagree with.
Everyone is entitled to their opinion.
Her Late Majesty was genuinely loved and commanded a lot of dignified respect.
Quite a different kettle of fish to a genocidal autocrat that rules by fear and violence.
What you call interesting, I'd call tiresome & unwelcome. Granted that this is his rag, and he can do what he wants with it, though I wonder whether he is considering the strong negative reaction such op ed is generating in a portion of his readership.
I've always appreciated the ability to come here & engage with other kiwis from across the political spectrum on issues which go beyond petty concerns like those he seems recently fixated on. Watching this site devolve into just another forum for people to spew their agenda into the void would be truly sad - given that those same people often have valuable insight & a lot to contribute, when they can manage to bite their tongue.
I was always taught that a gentleman doesn't bring religion or politics to the dinner table. Is it too much to ask of you Mr Chaston, that you bring the same decorum to this website?
China is in full hagiographic mode
Interest.co.nz - expand your financial knowledge and your vocabulary!
Had to look that one up, very fitting.
I first learned of it when Ardern became PM. Very fitting. Worst PM and Government in living memory but some are in full deflection mode.
Sit down Statler
Yawn
William Shakespeare's mother was Mary Ardern ...
... which may explain why our PM is much ado about nothing ...
Arden
Just for fun, your CPI predictions for today and 1 year from now.
I'll go first: 7.1% today and 4.9% next year
Today: 7.0%. Next Year: 8.4%
Today 6.5%. One year from now 3.8%
While you are all in full guess mode,do we have tomorrows lotto numbers?
... 10 ... 16 ... 23 ... 27 ... 29 ... 37 ...
Ummmm ... for those of us who don't know , its 6 numbers , between 1 & 40 ?
Today: 6.1%. Next year: 4.2%
Cameron Bagrie on RNZ with Karen Hay last night said it could be alot slower , up to 3 years maybe , to bring inflation back into the 1-3 % band ...
... buckle up for the long haul ...
What were his predictions one year ago? Things can change very rapidly...
X.9% and X.9%
So is that 6.9% or 5.9% today?
“100% probability of a [US] recession:” Quite a statement from the Bloomberg economic modeling team. If indeed valid, the implications would extend well beyond the #economy, encompassing also financial, political, social and institutional credibility issues in the US and beyond.
https://twitter.com/elerianm/status/1582089428637724672?s=20&t=rQqYe5m1…
It is quite a statement, it says that they understand absolutely nothing about modelling! How can any future prediction be 100%? Did they think that Sri Lanka were 100% likely to beat Namibia in the cricket World cup this week too?
"An independent #FederalReserve is critical to the well-being of the US #economy. Having said that, it is getting harder to justify such independence when four big operational errors (of analysis, forecasts, actions and communication) are accompanied by a lack of accountability"
https://twitter.com/elerianm/status/1582094699484966912?s=20&t=rQqYe5m1…
"Mass protests are happening across Europe against high food and energy prices and the sanctions on Russia that are crippling European economies. Yet the media continues to turn a blind eye to this."
https://twitter.com/JamesMelville/status/1581919137017696256?s=20&t=rQq…
They can protest all they like but the Russian gas won't get turned back on. Someone was way ahead of them.
Russell Napier: The world will experience a capex boom (themarket.ch)
People are already talking about stagflation today.
That’s utter nonsense. They see high inflation and a slowing economy and think that’s stagflation. This is wrong. Stagflation is the combination of high inflation and high unemployment. That’s not what we have today, as we have record low unemployment. You get stagflation after years of badly misallocated capital, which tends to happen when the government interferes for too long in the allocation of capital. When the UK government did this in the 1950s and 60s, they allocated a lot of capital into coal mining, automobile production and the Concorde. It turned out that the UK didn’t have a future in any of those industries, so it was wasted and we ended up with high unemployment.
So the endgame will be a 1970s style stagflation, but we’re not there yet?
No, not by a long shot. First comes the seemingly benign part, which is driven by a boom in capital investment and high growth in nominal GDP. Many people will like that. Only much later, when we get high inflation and high unemployment, when the scale of misallocated capital manifests itself in a high misery index, will people vote to change the system again. In 1979 and 1980 they voted for Thatcher and Reagan, and they accepted the hard monetary policy of Paul Volcker. But there is a journey to be travelled to get to that point. And don’t forget, by the time Thatcher and Reagan came in, debt to GDP had already come down to new lows. That enabled them to introduce their free market policies, which would probably not have been possible if debt to GDP were much higher. So that’s why we’re in for a long social and political journey. What you have learned in market economics in the past forty years will be useless in the new world. For the next twenty years, you need to get familiar with the concepts of political economy.
Russell Napier: The world will experience a capex boom (themarket.ch)
Yeah I am sick of hearing about stagflation. Not saying it won't happen, but at the moment our inflation is largely caused by our very low unemployment rate, and if unemployment were to increase it is likely that inflation will disappear. I am not sure why we keep trying to tell ourselves that low unemployment is such a bad thing!
It's fine except for the people who get chucked under the bus, and suffer unemployment for the benefit of everyone else.
At the same time as being labelled lazy dole bludgers and having to beg for the pittance they get given.
So, is Jeremy Hunt the new de-facto UK PM now?
... apparently there's only enough room for Liz Truss to hide under the table ... someone's gotta front up ...
https://www.reuters.com/business/finance/credit-suisse-approached-middl…
ZURICH, Oct 17 (Reuters) - Credit Suisse Group AG (CSGN.S) has approached at least one Middle Eastern sovereign wealth fund for a capital injection, a source said, while some funds are looking at the scandal-hit Swiss bank's businesses as potential investment opportunities.
Credit Suisse's investment banking chief, Christian Meissner, will be leaving the bank once it has announced a strategic overhaul on Oct. 27, a source familiar with the situation said.
Analysts have said the company might need as much as 9 billion Swiss francs ($9 billion) as part of a reorganization, some of which may have to come from investors and some from the sale of assets.
https://www.reuters.com/markets/europe/swiss-national-bank-makes-anothe…
Oct 13 (Reuters) - The Swiss National Bank this week drew nearly $6.3 billion from the U.S. Federal Reserve's currency swap line facility, roughly double the amount drawn a week earlier, New York Fed data released on Thursday showed.
The SNB on Wednesday drew $6.27 billion in U.S. currency for a seven-day term at an annualized rate of 3.33%. A week earlier it drew $3.1 billion at the same term and rate.
by Snow | 15th Oct 22, 9:28am
https://www.reuters.com/business/finance/credit-suisse-talks-with-under…
Credit Suisse Group AG (CSGN.S) has held talks with a number of banks about underwriting a potential capital increase in case it needs to shore up its balance sheet, Bloomberg Law reported on Friday, citing people familiar with the matter.
2 weeks ago.....
https://www.reuters.com/business/finance/credit-suisse-has-strong-capit…
ZURICH, Sept 30 (Reuters) - Credit Suisse (CSGN.S) has solid capital and liquidity, Chief Executive Ulrich Koerner told staff in a memo seen by Reuters on Friday and confirmed by a spokesperson for the Swiss bank that is due to announce the outcome of a strategic review next month.
Say it without actually saying it.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.