Here's our summary of key economic events overnight that affect New Zealand, with news underlying inflation pressures seem to be easing in both the US and Europe.
But first, it looks like the US is heading into a Federal government shutdown after all with partisan rancour paralysing Congress. Markets are skittish, although not primarily from that, although perhaps some of it is priced in. Markets are more worried that interest rates will stay high because inflation isn't beaten yet in most of the major economies, held up by strong labour markets.
However, the American core PCE inflation level came in at 3.9% from a year ago, the lowest since May 2021. And the recent track has it running at an annualised rate well below 2%. So some inflation progress here.
US personal income growth however is running faster than that, picking up in August to be +4.6% higher than a year ago, and a faster pace recently. This is not a sign of stress among most households. Personal expenditure remains strong and is continuing to underpin the global economy.
US wholesale inventory levels are not rising, but retail inventories are although broadly in line with inflation. And the American merchandise trade deficit is falling.
The manufacturing heartland Chicago PMI fell back in September to July levels. The strikes at carmakers won't be helping.
But consumer sentiment held in the month, as measured in the widely-watched UofM survey, and is +16% better than a year ago. This result confirms its earlier 'flash' reading.
In Japan, August retail sales rose +7% from a year earlier, unchanged from an upwardly revised July result. This August increase was much higher than the consensus forecast for +6.6% growth and was the fastest pace since February. Consumption continues to recover solidly after the pandemic-induced retreat. Japan has CPI inflation at 3.2%.
We should keep an eye on this technology; lab meat production costs might be taking a significant step lower.
In China, their Mid-Autumn Festival has started and they are on holiday from yesterday (Friday) until the end of next week. This year, the National Day holiday spans from September 29 to October 6, overlapping with the Mid-Autumn Festival. To partially offset the seven consecutive days of the National Day holiday, Saturday, October 7 and Sunday, October 8, have been designated as official workdays, resulting in a 7-day working week. But Hong Kong will only be closed for National Day, on Monday, October 2, 2023.
EU inflation fell more than expected in September, down to 4.3% year-on-year and reaching its lowest level since October 2021. Analysts had expected a 4.5% rate.
In Germany, retail sales unexpectedly fell -1.2% (real) in August from July, missing market forecasts of a +0.5% rise and following an upwardly revised flat reading in the previous month. It was the steepest decline in retail trade since December 2022. Interestingly, on-line sales slumped more than -8% in August.
NSW and Victoria, South Australia, Tasmania and the ACT will start summer time this weekend and we will revert to being two hours ahead of them again. These same states will be on holiday on Monday, their Labour Day. Northern Territory, Queensland and Western Australia do not observe daylight saving.
The UST 10yr yield starts today down -5 bps from yesterday at 4.57%. But that is up +12 bps from a week ago, up +38 bps in a month.. The inverted curves have stopped flattening. Their key 2-10 yield curve is little-changed from yesterday at -49 bps. And their 1-5 curve is now at -86 bps and a bit more inverted. Their 3 mth-10yr curve inversion is more inverted too, now at -82 bps. The Australian 10 year bond yield is now at 4.48% and down -5 bps from yesterday. And the China 10 year bond rate is unchanged at 2.71%. But the NZ Government 10 year bond rate is +8 bps higher at 5.39%. This is up +13 bps in a week, up +50 bps in a month, so big movements here.
Wall Street's Friday session is soft to end the month, with the S&P500 up -0.2% today to be -0.5% lower for the week. That makes it -4.6% lower for the month however. Overnight, European markets were all up about +0.3%. Tokyo ended yesterday unchanged to be -2.0% lower for the week, -2.3% lower for the month. Hong Kong rose +2.5% on Friday, but ended its week down -1.3% and its month down -3.1%. Shanghai was closed yesterday for a public holiday and so ended its week up +0.8% and its month down a modest -0.3%. The ASX200 ended its Friday session up +0.3%, its week also up +0.3%, but its month down -3.5%. The NZX50 ended yesterday up a strong +1.1%, for a weekly loss of -0.7% and a monthly loss of -2.2%. End of quarter portfolio squaring influenced Friday's trade.
The Fear & Greed index has moved well over to the 'fear' side this week. A week ago it was just in the 'fear' zone; a month ago it was 'neutral'.
The price of gold will start today at just on US$1850/oz and down another -US$15 from yesterday. This is a new low since February 2023, all driven by the sharply rising yields. A week ago this price was US$1923/oz. A month ago it was US$1941/oz, so almost -5% lower since then.
Oil prices have retreated again today, -US$1.50 lower than this time yesterday at just over US$90/bbl in the US. The international Brent price is just over US$92/bbl. A week ago these prices were very similar. A month ago they were -US$5 lower.
The Kiwi dollar starts today at 59.9 USc, up +¼c from this time yesterday. A week ago we were at 59.6 USc and at the start of the month 59.7 USc. Those indicate very little net movement. But against the Aussie we are up +¼c to 93.2 AUc and to a four month high. Against the euro we are softish at 56.2 euro cents. That all means our TWI-5 starts today at 69.9 and up +30 bps from yesterday, up +60 bps from a week ago, and up +140 bps in a month. We have had significant rises against almost all others except the greenback.
The bitcoin price has moved back down today from yesterday, and it is now at US$26,862 and -1.2% lower from then. A week ago, this price was US$26,812, and a month ago US$27,303. So the net movements have all also been very minor. Volatility over the past 24 hours has been low at just under +/-1.0%.
Go the ABs !
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