Here's our summary of key economic events overnight that affect New Zealand, with news the new war in Gaza, and a stumbling Chinese economy are together posing new risks to an already fragile global economy. But there are some bright spots still.
Firstly in the US, one-year ahead inflation expectations held steady at 3.7% in September, up fractionally from August. Conversely, five-year-ahead inflation expectations declined by 0.2 percentage point to 2.8%. Perceptions about households’ current financial situations slipped slightly in September with more respondents reporting being worse off than a year ago and fewer respondents reporting being better off. In contrast, year-ahead expectations improved with more respondents expecting to be better off a year from now.
The weekly bricks & mortar retail store survey reported that sales were +4.0% higher than a year ago, indicating this sector of their retail industry is back experiencing real, above-inflation growth.
Not so happy are small business owners for whom optimism dipped in September as inflation remains the top problem in their mind. Oddly this survey has been the inverse of the retail survey with small business owners more optimistic when sales growth was lower and less so when it rises above inflation. Odd.
It is probably worth pointing out that a US$46 bln US bond tender today was wildly popular, garnering US$118 bln in bids - but investors are only slightly higher returns. The median yield for today's 3 year bond was 4.67% pa and that was up from 4.60% a month ago. While that is higher, it isn't as high as you might have expected given the background events, and six months ago the yield was 4.58% pa. - again, much less advancement that you might have expected.
The Fed is expected to pause any consideration of rate rises for now, given the international pressures. It next meets in three weeks on November 2, NZT.
In a Hong Kong stock exchange filing, giant developer Country Garden said it is facing a severe liquidity problem and can't pay its bond obligations. The end is near and when this giant falls, it could take a vast range of construction dependent companies with it. This will be one risk that is pushing Beijing to reconsider its recent aversion to traditional infrastructure stimulus - often building roads and rail "to nowhere" to keep their growth targets in focus.
In Australia, the NAB business confidence index was marginally positive in September, the same steady level for a third straight month. Meanwhile, business conditions remained resilient (although dipping slightly from August), suggesting their economy remained in reasonable shape through the middle of the year. Forward orders rose after contracting in August. The signs for inflation were positive.
Staying in Australia, the Westpac-Melbourne Institute Consumer Sentiment index rose in October from September, hitting the highest level in six months, but it is still in deeply pessimistic territory. And that is consistent with the contraction in per capita spending seen since late 2022 and a worry heading into the pre-Christmas sales season. Rate rise fears have also resurfaced.
The IMF released its latest global financial stability report today saying the risks to global growth remain skewed to the downside as inflation remains elevated and interest rates are set to stay higher for longer. They left its global growth forecast steady at 3% for 2023 but cut its forecast for 2024 to 2.9% compared to 3% made in July. Also, the expectations for global inflation were revised higher to 6.9% in 2023 from 6.8% and to 5.8% from 5.2% in 2024.
Meanwhile, the IMF raised its growth forecast for the US, Japan and the UK. (But the UK will have the highest inflation and slowest growth next year of any G7 economy.) On the other hand, the Chinese economy will probably grow at a slower 5% in 2023 (vs 5.2% seen early) and 4.2% next year (vs 4.5%). The Euro Area is also seen growing slower. The risks they are watching are the Chinese crisis, and commodity price volatility. They say fiscal buffers have eroded in many countries.
We should also note that wheat prices continue to fall sharply now on very good harvests across the globe. This price is down more than -4% in a month, down -38% in a year.
The UST 10yr yield starts today up +1 bp from yesterday at 4.66%. Their key 2-10 yield curve is less inverted, now by -32 bps. Their 1-5 curve is now at -76 bps and more inverted. Their 3 mth-10yr curve inversion is deeper by -3 bps today at -79 bps. The Australian 10 year bond yield is now at 4.45% and unchanged from yesterday. But the China 10 year bond rate is up +1 bp at 2.72%. The NZ Government 10 year bond rate is down -7 bps at 5.52%.
The S&P500 is up +0.7% in its Tuesday trade. Overnight, European markets all closed up about +2.0% although a little less in London. Yesterday, Tokyo ended its Tuesday session up a strong +2.4%. Hong Kong ended up +0.8%. But Shanghai closed down -0.7% however. The ASX200 rose +1.0%. The NZX50 ended its Tuesday session up +0.8%.
The price of gold will start today at just on US$1862/oz and up another +US$12 from this time yesterday.
Oil prices have slipped -50 USc to US$84.50/bbl in the US. The international Brent price is still just on US$87/bbl.
The Kiwi dollar starts today at 60.4 USc and up almost +½c from yesterday. Against the Aussie we are a tad softer at 94 AUc. Against the euro we are down -10 bps to 56.9 euro cents. That all means our TWI-5 starts today at just on 70.3 which is up +10 bps from yesterday and a new three month high.
The bitcoin price starts today at US$27,451 which is up a mere +0.3% from this time yesterday. Volatility over the past 24 hours has been low at +/-0.7%.
The easiest place to stay up with event risk is by following our Economic Calendar here ».
44 Comments
When it comes to bond yields, two wrongs seem to have made a right, and a crisis seems to have been averted. A lot of people are breathing a collective sigh of relief.
Not sure if it's a right the recent event will amplify the inflation issue...
Titanic Times Business News:
Overnight, the distance from the ocean surface to the upper stern deck increased, as measured by experts in such matters. Those betting on such a scenario have been vindicated, and those insisting the ship is sinking, debunked (word chosen with care).
Besides that encouraging news about the increased displacement, passenger-surveys indicate they're planning on indulging in even more organised activities tomorrow.
In further news, the casino has issued more chips, in a reaction to the above survey.
Enjoy your voyage; as always we bring you all the news, as it happens....
Your funniest reply ever!
National should be trouncing this election yet the polls are shockingly close. All that matters in the end is the results not the polls but I think they’re going to have do some reflection on their campaign at the end of this.
Also Winston’s crushing it, say what you will man knows the game.
Yep picked this weeks ago when people wrote Winston off, said that he will time his run to perfection. He has tapped into the underlying resentment to the co governance, which has probably surprised many with his polling numbers.
NZF would have been gone burger if both National and Labour has clearly said NO to working with him on the live debate. Luxon stuffed it up there and left the door open for Winnie. Had Luxon backed himself and said NO, especially as he was second to speak after Chippie said no then all of the NZF votes would have gone elsewhere.
We are not a two party system. The whole point of MMP is to have differing parties vote on each issue as per the wishes of the voters they represent.
I am sick of everyone needing to pick one of two sides before each election.
Vote for the party that represents you the best, hope they get in, and then all parties should be on the cross bench voting for/against legislation based on their party policies.
Its still a two party system its just now you end up with a cobbled together mess of minor parties with far more power than their number of votes. Seriously how do you get Winnie as deputy PM with only 5% of the votes, its a joke. It will end up going the full circle and one day it will be back to first past the post.
It will end up going the full circle and one day it will be back to first past the post.
That is the issue, we never left FPP behind. Most people still only think in terms of left/righ or red/blue.
Our coalitions are pre-determined and always the same. I fail to see how Labour/Greens can claim they are independent parties, same with National/Act.
NZF are the only ones that seem to be willing to align with anyone, hence why Winnie is always the one with the power.
Perhaps if everyone had a greater sense of national pride and egalitarian views they would vote based on what is best for their children's generation or grandchildren instead of themselves we would see a more wide spread of voter base/ Instead we are, as a population we are showing just how selfish and entitled we all are by voting for what suits us individually better. Winnie coming out saying over 65's getting 50% rate rebates, yet again opening up the boomer generation to aptly vote for what suits them best, as per the course of their lifetime. Now I may say things about boomers, and it doesn't apply to all, many are hard working and lovely people. I just can't get onboard with offering them this as a freebie when they have had the most prosperous period post WWII and already voted for and claimed benefits such as free tertiary education, lowering of tax rates from 66%, the ability to buy a house and let it pay itself off through rent time and again, super gold cards and the benefits it entails, and the real cost of credit declining across the lifespan. How about we look at the future of NZ which is the youth, and give them an opportunity, instead of offering freebies to retirees which will be paid for by the youth. This doesn't align with NZ's future and the young will continue leaving in droves.
Hardworking and lovely is, with respect, not the yardstick.
Striving to leave the place better - in a long-term-maintainably way - surely is?
That has nothing to do with piles of electronic proxy - it has to do with how much infrastructure, of what kind, we bequeath them, and whether they will thank us for our selection. It also has to do with how much we bequeath them PER HEAD; because by the time the young of today grow up, they won't have the luxury of pumping fossilised acres out of the ground, as we do. So they'll be down to real-time solar acreage, and I have yet to see anyone suggesting a scalable replacement for bitumen, plastic and diesel.
I look at my grandchildren, and ask: Will they thank us? And the resounding answer, currently, is: No.
They'll more likely appreciate clean water, uncontaminated food-producing land, a functioning biosphere.
I'm guessing they will be more sapient, to the point where they understand entropy and dissipation at a young age; they'll be practicing all manner of energy-efficiencies, and that re-purposing/reusing/recycling has become a major - if not the dominant - activity. And usury will likely be confined to the history-books - for the same reason other cultures have done so; not enough resources left to support exponential growth.
Fully agree with Noncents. Too much thinking in FPP terms. The parties will have to work things out with each other.
Some common taters here seem to be allergic to the idea of negotiation and compromise.
Better to learn to do it well.
National should partner with Labour, they are the most aligned policy wise.
National drops their stupid tax cuts and pro-landlord policies and Labour can drop co-governance (even though National are also committed to it but by another name) and agree to cut civil service numbers (as we know that just means more consultants charging X2/3 as much for same service). Done.
Hard agree on your last point. Winston is playing interdimensional 4D backgammon while the rest of us are playing Fisher Price tiddlywinks. Dude can hustle and you've got to respect that, even if you disagree with his policies/vision. He's so good at zeroing in on a few key issues and then hammering them home (knowing that if you can get two or three 'single issue' voting groups giving you two or three percent of the vote each, you're golden), rather than trying to be everything to everybody like the other minor parties try ... if only TOP had elected to 'go to war' on property investors and speculators like Winston has on 'woke' and co-governance, 5% might not have been such a stretch.
Also agree that National has run a shocking campaign. If (and even a week ago I wouldn't have said "if" but "when") National gets to form a government it will purely be because Labour hasn't had a track record to campaign on and so people are really voting them out and not so much voting National in, and Winston hasn't gone back on his word to not form a government with Labour as it seems unquestionable now he will be the "shot caller" come Sunday morning.
if only TOP had elected to 'go to war' on property investors and speculators like Winston has on 'woke' and co-governance, 5% might not have been such a stretch
Why not vote for TOP then? Without the votes they will never get the chance to. I still can;t grasp why everyone latches on to NZF when there are other alternatives to mix things up. Familiarity I suppose
Raf has said he aligns with National, I can't think of anything less likely than going to war on property investors should they get in.
Winton knows the game and Luxon is still in school boy shorts. There is a reason why chippy said 'no' - he is well aware of what a difficult b##stard Winston is to deal. Age is not helping him, he has become very forgetful.
Coalition of chaos is what we will get on these polls.
Do you honestly believe that if - come Sunday morning - Chippy is in a position where he could form a government by getting NZ First signed up that he will turn that down?
No way, he will be swallowing dead rats like a Labrador swallows its biscuits, and somehow all will be forgiven and a Labour + Greens + TPM + NZ First coalition will be held up as a model of stability and sensible governance.
I loved your analogy!
But yes, this time around I get the sense of a level of desperation that I've not felt before.
I find sad, and worrying that the politicians in this country have brought us to this. Even in desperate times there seems to be little to no common sense.
Agreed.
I'm a firm believer that political parties should be forbidden from ruling potential coalition partners in or out prior to the election. I don't know how you'd fix up the electoral act to do that, but it should be the case.
Vote for whichever party best represents your interests and vision for the country, and then the supposed big boys and girls can be grown ups and negotiate from there.
All this pre-emptive ruling in/out will do is create disappointment as promises are inevitably broken. Imagine the kerfuffle if Chippy does go back on his word (and let's not forget he's got an impressive track record when it comes to telling porkies) and all those people who voted Labour because Labour wouldn't go with NZ First are left out in the cold.
If we all went into the polling booth knowing that the only certainty is the biggest party gets first crack at forming a coalition, it would be a better process.
everyone has bills to pay even the politicians, when it comes to the crunch they backtrack on every promise if it means they still get a paycheck.
Well if Labour and NZF get together I will probably just laugh. Reality is it will be justice rather than Labour bailing again after it has all turned to shit and trying to leave someone else to clean up the mess.
If that occurs I will expect nothing positive from them for the next term. We've already had a few years of failed promises, under-delivering, overreaching of, and implementation of unprecedented powers, no accountability, lies, denials, and currently blaming their own mistakes and failures on past and future governments. As their lack of competence governed us into the current stretch in the wealth divide, no way they will govern us out of it, that's for certain.
We have a bigger societal discussion to have;
What is/has been the influence of self-reinforcing social-media algorithms on polarisation and ignorance-engendering?
Why does the media (mostly) fixate on the polls, rather than the policies?
Do we need to outlaw polls within, say, a month of E-day, so that people really have to think about what they're voting for?
Lastly, given that addressing the future is what we elect leaders for, is a Myers Briggs candidate score a good idea? https://dothemath.ucsd.edu/2015/04/programmed-to-ignore/
Very good points you raise. I'd argue:
Social media algorithms, and the nature of the Internet in general, have clearly made it easier than ever before to surround yourself with information/perspective that aligns with your existing viewpoint (I mean take this site - if your sense of reality came from Interest.co.nz comment section then TOP would be getting about 200% of the vote and we'd be hanging property investors by sunrise on Sunday). Short of banning social media and the Internet - which is absurd - there's not much that can be done about this. Social platforms feed you the content you want to see because the longer you stay on the platform (because you're seeing what you like and agree with) the more ads you can be shown, and therefore the more "valuable" your visit is to the platform.
Media fixates on polls because it's easy. You can torture what are often fairly minor movements (especially when considering MoE etc) into being these massive, 'game changing' news stories. No real journalistic effort or insight is required, which is good as it means it's easier to produce content and generate clickbait. Media monetisation in the digital age requires an ever-increasing number of superficial eyeballs on your content because the revenue earned per eyeball is constantly being ground down by ad networks basically clipping a bigger portion of the ticket .. I know this for a fact because I have worked and still do on both the advertiser and the publisher side - clients are paying more for ads, publishers are receiving less, the difference is making Google, Meta etc very rich. This 'need for eyeballs' means that over-exaggerated clickbaity content is the only way to win what is otherwise a race to the bottom.
Add to this the fact that media outlets and journalists are increasingly eager to make themselves the center of the story, rather than reporting on it (just look at the promotional ads for election night coverage with the likes of John Campbell or Tova O'Brien ... you'd think we were tuning in just to see them and not the election results) and it's all a rather messy story.
Yes and what degree of involvement, if any, has there been in the election process by overseas players
People simply don't understand democracy, as they are never taught.
Convo on Monday afternoon when I pick the kids (Primary age) up after the first day back at school.
- Me: How was school?
- Kids: Usual chitchat
- Me: Anything interesting happen?
- Kids: We can't use the hall this week.
- Me: Why not?, are they fixing it up? (They have been doing some renovations at school the last few months)
- Kids: No, some other people are using it all week.
- Me: Who?
- Kids: Don't know.
- Me: Is it for the election?
- KIds: Huh?
- Me: Are they teaching you about elections at school?
- Kids: Huh?
Same issue with the Census, Olympics, in fact any major issue is ignored. We do our best as parents to fill in the gaps, but the schools get them for their most productive time each day, so it is a losing battle.
Society is failing our kids in every sense.
Wow that's a big change. I always considered the time I had the kids to be the most productive part of their day.
Productive was probably the wrong word. They are more focussed in the mornings, so it is easier to teach them things. By the time you pick them up they are pretty tired and ratty.
What I do know is that Winston became a nightmare (and not due to his views, but due to his 'forgetfulness') for Labour. That's why they ruled him out. Luxon has Nil experience of the man - if he had, he would do same.
I have no idea what Lab will do on election day. What I do believe is that as a coalition partner for Nat, Winston will be chaos.
If both Nat and Lab ruled him out - problem solved.
My view does not reflect how I will be voting. Just calling it as I see it.
In NZ we tend to vote Governments out rather than vote them in.
Raining here, can hear the grass growing. Talking of that, 8 mentions of growth / grow / growing above. Limits of growth and all that. Time for a happy coffee me thinks!
It is probably worth pointing out that a US$46 bln US bond tender today was wildly popular, garnering US$118 bln in bids Phew - that's a relief.
Bidenomics: National Debt Increases By Another Half-Trillion In Just 20 Days
Lets list the benefits Winston has provided to NZ in his career?
Well,he winds you up.
So that's a positive.
Yes like most old lazy boomers he does..
Provincial Growth Fund has been hugely beneficial to the regions (3B). You could start by reading the 2023 BERL analysis. The building of the three synthetic racing tracks has had real benefits for the racing industry. Don't underestimate the influence of the racing people.
So gambling..tick
This will be one risk that is pushing Beijing to reconsider its recent aversion to traditional infrastructure stimulus - often building roads and rail "to nowhere" to keep their growth targets in focus.
Shenzhong Link, a 24km-long sea-crossing link between Shenzhen and Zhongshan in Guangdong, China It consists of two artificial islands, two bridges and the world’s widest immersed tunnel. #infrastructure #transportation #Shenzhen #China 小帅航拍 Link
they could also build more dams and water diversion schemes thereby creating further environmental disasters while pissing neighbouring countries off even more
the crash of their property giants is going to be huge and downside risks are high especially for traders like us
This might seem economics 101 but where is all the money which is being used to buy US Treasury bonds coming from now that the Fed is no longer buying it? Presumably noone would take out a loan with a private bank to buy a long term government bond with a lower yield? If the money is being taken from elsewhere, then does this not have an effect on the prices of other assets?
Out of thin air new bank money is used to purchase government bond issuance.
Banks don't take deposits and they never lend money. They are in the business of purchasing securities. When one gets a bank loan, the loan contract is a promissory note. The bank purchases that contract from the borrower. Now the bank owes the borrower money and it creates a record of the money it owes, which we call deposits - source.
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.