World Bank cuts 2024 China growth forecast sharply; US PMIs 'better'; Powell focused on full employment; Japan sentiment up; Sydney house prices recover; UST 10yr 4.68%; gold and oil fall; NZ$1 = 59.5 USc; TWI-5 = 69.8

Here's our summary of key economic events over the weekend that affect New Zealand, with news benchmark UST yields are rising fast again but the rate inversions are unwinding just as fast.

But first up, we should note that the World Bank has cut its forecast for 2024 growth in the Chinese economy sharply, down from +4.8% it forecasted in April, to now +4.4%. Its expectation for 2023 remains +5.1%, so the 2024 deceleration is substantial for China. Their property sector is getting most of the blame.

In the US, the widely-watched ISM factory survey came in much 'better' than expected in September, building on an improvement that started in July. The sector is still contracting the report shows, but only just and the improvement from August was marked. New order levels remained flat, but production rose into expansion territory.

The parallel Markit PMI survey, the internationally benchmarked version, delivered a very similar result for the US, both showing that employment remained strong (expansionary). But the carmaker strike is going to hurt October. And Tesla said for the first time in more than a year, its global deliveries to customers fell quarter over quarter, by -6.7%. And at these levels they are lower than the lowered expectations they earlier set.

In a community event in York, Pennsylvania (in the manufacturing heartland of the US), Fed boss Powell said his institution is now focused on keeping the American labour market at full strength for as long as possible. “Lots of good things happen” in addition to real wage increases, when a good labour market lasts for a sustained period of time, he said. "To have that, though, the record is also clear that we need price stability,” Powell said.

But the really big key news is the return of the sharp rises in benchmark UST yields, up another +10 bps today for the US 10yr, and up +5 bps for their 2 year. If there is a silver lining, it is that the rate inversions are evaporating quite fast now, and indication that recession pressure risks are less important to the bond markets. (See below for details.)

In Japan, sentiment among large businesses is improving, back to its best since March 2022.

Despite that optimism, the Japanese PMI eased lower into contracting territory in September. And the Australian version did as well.

And in Australia, Sydney house prices have bounced back +11% since bottoming out in January. But they dropped -12.4% in the period to that trough. However they are getting close now to making back all those losses, up +1% in September from August. Melbourne is the laggard there, Perth and Adelaide where the percentage gains are highest.

In something of a surprise for a region that has long struggled with embedded unemployment, the EU reported an August jobless rate of 5.9% - which is is lowest since records for the EU started in 1995.

Globally, the factory PMIs delivered a contraction but at a slower rate, led by new order levels. Mainland China was one of only seven nations to register growth of total new orders, almost all of them in Asia. (It will probably be no surprise, but war is good for Russian factories.)

The UST 10yr yield starts today up another sharp +10 bps from yesterday at 4.68%. It was last at this level in August 2007. Their key 2-10 yield curve is less inverted from yesterday at -43 bps. And their 1-5 curve is now at -81 bps and also less inverted. Their 3 mth-10yr curve inversion is much less inverted at -71 bps. The Australian 10 year bond yield is now at 4.57% and up +10 bps from yesterday. But the China 10 year bond rate is unchanged at 2.71%. The NZ Government 10 year bond rate is up +6 bps at 5.45%. Overall big movements here again.

Wall Street has opened its week lower with the S&P500 down -0.6% in Monday trade. Overnight European markets closed about -1.0% lower. Yesterday, both Hong Kong and Shanghai were closed for their National Day holidays, but Tokyo traded normally, closing down -0.3%. And the ASX200 did trade, but very thinly and ended its Monday session down -0.2%. The NZX50 ended down -0.5%.

The price of gold will start today at just on US$1832/oz and down another -US$16 from yesterday. This is another new low since February 2023, all driven by the sharply rising yields.

Oil prices have moved down -US$1.50 from yesterday to just on US$88.50/bbl in the US. The international Brent price is just on US$90.50/bbl.

The Kiwi dollar starts today at 59.5 USc and down -½c. Against the Aussie we are firm however, now up at 93.5 AUc and a new four month high. Against the euro we unchanged at 56.7 euro cents. That all means our TWI-5 starts today at 69.8 and down only -10 bps.

The bitcoin price has moved even higher today from yesterday, and it is now at US$27,972 and up +3.1% in the sort of move we haven't seen for a while. Volatility over the past 24 hours has been moderate at just under +/-2.8%.

The easiest place to stay up with event risk is by following our Economic Calendar here ».