The S&P has registered a fresh intra-day record high. Equities are supported by solid corporate earnings and a new deal from OpenAI and Microsoft which saw the latter company’s valuation reach US$4 trillion. Details have emerged about the potential US-China trade deal. Under the framework the US will roll back some tariffs if China reduces the exports of the chemicals that produce fentanyl.
The US dollar and treasuries are little changed. Gold prices dipped towards US$3,900 an ounce before making a partial recovery. The largest gold-backed exchange-traded-fund had its biggest one-day outflow on Monday as the positioning driven pullback extended.
Conference Board consumer confidence dipped to 94.6 in October, led by a fall in the expectations index, amid a weak labour market and the elevated cost of living. Although consumers’ mood seems unaffected by the government shutdown, it nonetheless remains downbeat. The expectations index fell to the lowest level since June. The balance of households saying jobs are plentiful relative to those saying they are hard to get improved marginally but is consistent with subdued private payrolls growth.
ADP Research announced it will release US payroll data on a weekly basis. This will help fill the vacuum during the government shutdown while noting that ADP data does not always align with the official labour market report. The weekly figures will be a four-week moving average of the latest total change in private employment. The estimate for the week ending 11 October is a gain of 14k payrolls.
Global government bond markets had little net movement. US treasury yields had a temporary move higher but are now largely unchanged. 10-year yields remained stable at 3.98%.
The yen strengthened against the US dollar in Asian trade after it was reported that US Treasury Secretary Bessent discussed exchange rates with Japanese Finance Minister Katayama. FX markets interpreted the comments as the US would prefer a stronger yen. After the earlier gains, the yen was broadly stable against the dollar in offshore trade along with most G10 currencies. The AUD outperformed within the G10 basket while the pound lost ground against the US dollar.
NZD/USD is little changed compared with the local close yesterday. NZD/AUD slipped towards 0.8780 overnight which is the lowest level in almost two-weeks. NZD/GBP gained towards 0.4350.
NZ Filled jobs increased 0.3% in September though this series is prone to regular downward revisions. Overall, the data was consistent with our forecast for a modest 0.1% q/q pickup in employment for Q3. This compares with a flat forecast from the RBNZ. Q3 labour market data is scheduled for Wednesday next week.
The NZ swap curve moved higher and flatter in the local session yesterday. This reflected offshore markets and the move in Australian front-end rates after the comments from RBA Governor Bullock the previous evening. There were limited domestic catalysts. 2-year rates increased 3bp to 2.53% and are now 10bp above the cycle low from the middle of October. 10-year government bonds increased 1bp to 4.01%, and tightened relative to swaps, in a continuation of the recent move.
There is no domestic data of note in the day ahead. RBNZ Governor Hawkesby is speaking this afternoon but is unlikely to be impactful for the monetary policy outlook. Q3 CPI data in Australia is the last major release ahead of central bank meeting next week. The consensus expects a 0.8% quarterly increase in the trimmed mean measure which is above the RBA’s 0.6% forecast from August. The market has trimmed expectations for easing at the 4 November meeting to ~10bp after Governor Bullocks comments on Monday night.
The Bank of Canada is widely expected to cut rates by 25bp to 2.25%. Market pricing indicates around ~21bp of easing with 7 of the 27 economists surveyed by Bloomberg expecting rates to be left unchanged. Pending home sales for September is the only US data scheduled.
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Jason Wong is the Senior Markets Strategist at BNZ Markets.
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