Here's our summary of key economic events overnight that affect New Zealand, with news bond yields are rising fast today as hot American data fuels bets the US Fed will need to raise rates again.
But first, the overnight dairy auction was a reprise of the previous two, up another +4.3% this time. But to be fair it hasn't yet made back all of its steep falls of July and August yet even if it is on the way. Both SMP and WMP rose like the overall result, butter was up +2.9%. Prices at this level are basically what we had in the 2016-2020 period. It was a solid, average auction, and a relief that the steep reductions from the 2021 peak seem to have ended.
In the US, retail sales came in stronger than expected. They were up +0.7% in September from August, following an upwardly revised +0.8% rise in the prior month and beating forecasts of a +0.3% rise. Gains were across the board, and car sales topped other sectors. Year-on-year that is a +3.8% rise and now topping inflation (3.7%). The data continues to point to healthy consumer spending despite high prices and borrowing costs.
This is all confirmed with much better bricks & mortar retail sales, up +4.6% year-on-year in the Redbook weekly survey of same-store sales last week.
US industrial production is again expanding too, up +0.3% in September and enough to drag their year-on-year activity positive, even if only modestly at this stage.
US business inventories were up, but not as fast as sales, so they do not have a problem in this regard.
The only sector in the US struggling is their residential real estate sales sector. That includes homebuilders who remain glum. Buyers aren't buying because of the high interest rates.
In Canada, they revealed their September CPI inflation overnight and like New Zealand, it came in lower than expected. There it fell to 3.8% in September from 4% in the previous month. The result further strengthened expectations that the Bank of Canada will refrain from further rate hikes in the current cycle.
In China, they are finding that only Beijing is confident enough to invest in industries designated as 'strategic' and their central government is responding with a +30% rise in support for those industries.
And all eyes are on giant developer Country Garden, who are widely expected to default on bond payments later today. There is a chance that the impact could cascade through the wide network of dependent contractors.
In Germany, the ZEW Indicator of Economic Sentiment surged by 10 points from the previous month to almost eliminate their negativity in October, significantly exceeding market expectations. This marks the highest reading since April, indicating that Europe's largest economy has likely overcome its recent downturn, driven by the expectation of further reductions in inflation and the fact that over three-quarters of respondents now anticipate stable short-term interest rates in the Eurozone.
In Australia, they released the minutes of the last RBA meeting yesterday and they were somewhat more hawkish than expected. They might raise fears that the RBA may be inclined to raise rates again which would be a 13th rise since they last fell. "[M]embers noted that some further tightening of policy may be required should inflation prove more persistent than expected." They have a target of "between 2 and 3 percent". The last monthly inflation indicator was 5.2% in August and the next one is released for September on Wednesday, October 25, 2023. The RBA next meets on Tuesday, November 7, 2023 and they have signaled they will have a low tolerance if inflation progress isn't forthcoming.
The UST 10yr yield starts today up +14 bps from where we started yesterday at 4.86% and a new modern post-GFC high. Their key 2-10 yield curve is little-changed at -38 bps. Their 1-5 curve is much less inverted at -62 bps. Their 3 mth-10yr curve inversion is sharply less inverted again at -58 bps. The Australian 10 year bond yield is now at 4.62% and up another +10 bps from yesterday and back at a 12 year high. The China 10 year bond rate is little-changed at 2.72%. The NZ Government 10 year bond rate is +3 bps higher at 5.48%.
Locally, market pricing expectations for another RBNZ rate rise have all but vanished.
Wall Street is little-changed, with the S&P500 down -0.2% in its Tuesday trade. Overnight European markets ended up +0.1% also except London which gained +0.6%. Yesterday, Tokyo ended its Tuesday session up +1.2%. Hong Kong rose +0.8%, and Shanghai rose +0.3%. The ASX200 ended its Tuesday trade recovering +0.4% and the NZX50 rose +0.3%.
The price of gold will start today at US$1925/oz and up +US$3/oz from this time yesterday.
Oil prices have dipped -US$1 to be now at just over US$85/bbl in the US. The international Brent price is now just over US$88.50/bbl.
The Kiwi dollar starts today at 59.1 USc and little-changed from yesterday. Against the Aussie we are slightly firmer at 93.6 AUc. Against the euro we have eased lower by almost -½c to 55.8 euro cents. That all means our TWI-5 starts today at just over 69.1 which is down -40 bps from yesterday.
The bitcoin price starts today at US$28,590 which is up another +1.7% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.3%. In Australia, they have released their long-awaited crypto regulations and they are expected to wipe out the bulk of Australian-registered exchanges as they struggle to comply with the requirements designed to limit the scams and fraud rife in the industry.
The easiest place to stay up with event risk is by following our Economic Calendar here ».
103 Comments
Auckland airport. Interesting to see Board and management get defensive about their performance. Sounds like the Qantas leadership response. As someone who frequently uses the airport it’s plain to see that despite their huge remunerations this team can’t even get the basics right!
It's a disgrace of an airport.
Very poor impression for visitors to the country (and a right pain in the proverbial for residents) when you arrive off an international flight and it's 30 minutes before the airbridge arrives, nearly an hour for the bags to come out, and then the same again to go through customs and MPI - as happened on my latest trip - all while standing in an arrivals hall that makes American infrastructure look modern and appealing. Just in time to sprint to the domestic terminal for your connection, only to get stuck in another massive security queue because they've got just a third of the scanners open and the avsec staff who are there would make British Leyland workers look productive by comparison.
I guess from the management perspective, why do you need to bother to get the basics right when you've got guaranteed business?
We are a funny country. I can guarantee you most visitors will be more shocked when they leave the airport and find the only option to the city is a $100 taxi. At least Labour did build a semi decent bus / train combo to the city, but I doubt it is as easy to catch or as well advertised as almost any other city.
I used to use the Skybus service to go to both CBD and North Shore (it would stop at that big commercial development, Smells Farm) but that got axed with Covid. As far as I can tell there are no bus services to/from the airport any more but maybe I'm missing something?
SkyDrive and Intercity, express from/to CBD in 30 mins (bus lanes), from $10.
I used one of them last time I flew to Auckland.
Yup you are missing something
There's the AirportLink shuttle bus to the flash new train station, which operates every 10 minutes from 4.30am to 12.40am, 7 days a week.
Or the 38 to onehunga.
Or commercial services as mentioned above.
My parents have recently decided the airport bus service is so good they no longer rent a car when visiting.
https://at.govt.nz/bus-train-ferry/bus-services/airport-services
Thanks, hadn't heard of any of those.
Uber too. Easy enough if you have 5 minutes or so to wait. Cost much less than the taxis at stand who for example, wanted to charge us $65.00 for the Sudima 3kms away, plus a charge for luggage & airport fees.
Never keen on Uber if it involves motorway travel. Most of the drivers don’t know the meaning of ‘safe following distance’
Agreed. I actually use Uber at the moment when I get to Auckland airport to travel into town for work, as it is so much cheaper than a taxi but some of the driving (and the condition of some of the cars) is shocking, like 'how did this heap get a WOF' kind of shocking.
Agree with you regarding Auckland Airport
Returned after a month in Europe
I said to my wife this is like arriving in a third world country
Same issues ,Bridge took for ever to connect to the aircraft, then we waited,and waited,and waited for bags.
Finally reached the security to be confronted by massive queues, We had filled out the customs declaration on our phone but as we got closer to to the the customs staff someone started calling out that if anyone had filled out their declaration on line , they needed to complete the paper version because they had a computer malfunction.
Just what you need after waiting for hours.
Bloody awful
Its a shopping mall, property investor and industrial area with an airport as an add on. And the monopoly cash cow part can be ignored.
If it is run by the same crooks who secretly bought 24.99% of Queenstown airport a few years ago, then that explains everything.
Except that one foreigner told me that 25 minutes after his international flight landed at ZQN he was in a pub in QT. It can be done.
Our council just loads up the Queenstown airport company with extra costs, and the 24.99% of the profit that Auckland Airport Company sees is surprisingly small.
Yeah you're right the issue seems to stem from the ancillary property development on the wider 'precinct' taking all the focus, as opposed to the core business (or so it should be) of operating an effective, reliable airport.
Neoliberalism at its finest
They are though very good at gutting the joy of your holiday when you return from overseas. Surprised that by now an American airline hasn’t started service from Christchurch. Singapore made that connection to Europe work well over thirty years ago and Emirates & Chinese airlines now too.
Translated:
The lifts moving between D deck and B deck are being badly run; officers on the Bridge appear disinterested.
Signed: Titanic passenger representatives committee.
Icing up there certainly pdk, but not icebergs.
I think pre-Covid American Airlines had proposed doing a Chch to La (or maybe San Francisco) flight a couple of times a week but that got knocked on the head.
I also believe Air NZ used to do a Tokyo to Chch flight that had some weird transit through Auckland that effectively made part of it a domestic flight.
Years ago, my CHC, LAX, LHR Singapore Airlines flight was a doddle. LA International Airport was very third world, I thought.
I think the same about LA, 20yrs behind the times.
Things are quite expensive here now although our exchange rate doesn't help. US$14 for a glass of beer. Have been to a few classic car shows, US$60k car works out to approx NZ$127,000 landed.
Other things noticed, $250 fine for parking in a disabled park without the right to and the same amount for smoking in a restricted area.
American Airlines are promoting CHC to LA, but it involves a stop in Sydney
Long time ago AirNZ offered CHC - LAX but it dropped down in Fiji. Still that was much much better than transiting AKL.
Yet another lazy and arrogant dinosaur. Give Fletchers a run for their money
Rba hawkish, 10yUST close to 5%, our cpi still at 5.6% and the spruikers think rates will come down soon..
Wishful thinking
I don't think rates will come down until the now-unfolding collapse in consumer spending leads to actual fear.
Been to a couple of malls recently, during usually busy times, most of the shops I went in to were pretty quiet
Rates will only come down when inflation is below the 2% maximum. QED. It is not rocket science. Reserve bank can do it with one ten minute meeting, without the eye watering numbers of eye wateringly paid staff to make that decision. All they do is check the CPI every month. CPI up, rates up. CPI stable, rates stay up. CPI down, rates stay up with a lag to protect the CPI reduction. It is all in a slim guidebook from the 1980s. It worked like a charm then, and will do now and in the future.
Swung by Costco the other day, sales must have been slow, plenty of stock nearing it's BB date, no queues. Still some interesting finds, and some bargains, but questioning whether it's worth renewing when the current years membership expires next month.
Absolutely correct. Mortgage rates will likely rise another 3% once the US Bond market hits 6%
And hey, at 6% treasury yields, the US Government is bankrupt.
The US is heading towards an outcome like Argentina.
Next year 5 trillion debt will roll over at higher rates, deficit likely to hot 2.5 trillion even before a sovereign risk downgrade.
The next 3 years is going to be shocking
One can’t help but think the NZD could tank in the next month or so
I don't know how many times I've read that here...
....try counting.
That’s true, but don’t you think it’s more likely now? Very hot USA data, every chance the Fed will hike again, but less chance the OCR will be hiked, weakening NZ economy etc etc
You are correct. Even if Fed doesn't hike USD is set to rise for a very different reason.
US Treasury is issuing a huge amount of bonds. This is causing yields to rise as we see. But it is also sucking USD from global markets. On the other hand Fed too is taking liquidity out of the system through QT and a high rate.
This will raise DXY in the coming months. NZD will fall with all other currencies against the US Dollar. Commodity prices in NZD will be important.
At least this is what I am expecting.
dollar milk shake theory
Yes. I forgot to add...we are only just beginning to see the tsunami of US debt flood the markets. So far the Treasury has used the reverse repo facility to not scare the markets. They are now moving from short dated to long dated bonds, which will cause real impact.
Treasury releases its QRA on 30th Oct. That will give a better picture. Lets see!
look forward to more of your comments...you obviously have some expertise here.
You are very intelligent. Great posts.
Are we all really just waiting for the next "Big Short" ? I have watched that movie twice and still don't understand it, however I think that's the point they tried to get away with it because pretty much nobody but one guy understood it.
Asset prices way ahead of income makes a fragile system, vulnerable to shocks squelching debtors forcing them to liquidate, deflating asset prices and panicking govt/banks to try to reinflate.
Yeah, I'm watching it pop right now, but not just waiting. Still investing in commodities that I think will hold up better than most.
Currency traders fly to safety, commodity currencies drop until people realise what a good deal they are, our much maligned farmers will be able to sell all the stuff they can produce, our tourism will be going gangbusters, and people not involved directly or indirectly in these industries will be struggling. Think most Kiwi property drones. Think Wellington uncivil unservants. Think all the people who live off them.
Our rural and touristy areas will be economically doing quite well. Now would be a good time to relocate to one of the go ahead areas with a bit of economic potential.
Good post.
Although might not property benefit from a weaker NZD if the Nats are able to avoid Winston’s grasp and free up foreign property buying?
And pay over 1.5mil for a poorly built box in Hanleys Farm that sees the sun for three hours a day? Yeah nah
Got to also hope the refined fuel keeps flowing to nz and without big price increases. That is down to luck.
Actually, it's down to depletion-rates and amount of competition.
And I don't like our chances...
Had to look that one up
https://www.datawallet.com/crypto/dollar-milkshake-theory-explained
I have been using ChatGPT to simplify, or expand on, many comments here!
Literally, "Could you please explain the following [Insert comment by Audaxes] statement in layman's terms".
I then repeat the simplification process until my tiny pea-brain gets it. ChatGPT is very patient!!!
US Retail Sales Soared (Again) In September
Update (0910ET): We hate to be the ones to steal the jam from the exuberant consumer's donut BUT on a non-seasonally-adjusted basis, retail sales actually crashed 5.4% MoM in September - that is the biggest drop for September since 2019
US Manufacturing Production Lower YoY For 7th Straight Month
Update (0950ET): Ok, you can't make this up but both Industrial Production and Manufacturing Output bothtumbled on a non-seasonally-adjusted basis...
Industrial Production rose 0.3% MoM (SA)... but plunged 1.7% MoM (NSA)
NY/NJ/CT Services Sector Collapses In October
Activity declined significantly in the service sector, according to firms responding to the FRBNY’s October 2023 Business Leaders Survey (which covers service firms in New York, northern New Jersey, and southwestern Connecticut). The survey's headline business activity index plunged 16pts to -19.1 (biggest drop in a year), its lowest level since Jan 2023..
Things are getting ugly in the Middle East. What exactly is Israel’s end game? No doubt they have bred another generation of militants after indiscriminate bombing of hospitals overnight.
https://strategic-culture.su/news/2023/10/16/pulling-the-roof-down-on-t…
Not a bad take on it
Come on Muz, you're better than this.
Overall, we rate the Strategic Culture Foundation (SCF) a Questionable source based on extreme right-wing bias, promotion of Russian propaganda and conspiracy theories, as well as a complete lack of transparency with the goal to deceive readers. This is not a credible source. (D. Van Zandt 12/27/2016) Updated (02/25/2022)
https://mediabiasfactcheck.com/strategic-culture-foundation/
Horrible. Total disgrace. As bad as the horrific attack by Hamas. Probably worse as not only did it kill en masse but also takes out medical infrastructure.
Hamas rocket launch gone wrong ?
Hamas and their Iranian controllers are perfectly capable of butchering their own to get the sympathy vote. Not that any of them have voting.
Everyone who's latched onto this should realise you don't have have MSM narrative to back up up this time. The first version of the bombing event is the one they want to report as factual. You're on your own here if your and you might want to make sure you can back up your justifications for genocide. There is video evidence to find on social media since you are already using this a source.
I don't know if people are getting this from rabid Zionists (I would guess we have a few Ben Shapiro listeners as commentors here) or you actually are one. Where's this precedent that people are willing to blow up high 100s of their own citizens in a hospital to elicit sympathy?
Israel is losing support by the day with their reaction, if they don't show restraint soon I think it will really kick off in that part of the world.
if they don't show restraint soon - have they ever?
And the rest of the world. Watch for terror attacks on western targets to ramp up.
Check your history. If the Israelis had shown restraint in 1948 they wouldn't be here today. Same with 1967. Same with 1973. Restraint cannot work with the people they are up against. What can some of the commenters here be reading or smoking to come up with such out of touch comments.
"Check your history..."
https://thedailyblog.co.nz/wp-content/uploads/2023/10/LossOfLandMapCard-1-1-1.png
Thanks Kiwi - Sit23 needs to sit down
The Palestinians need to get smashed, they are all with Hamas. Your not telling me all that equipment got moved into Gaza and setup and nobody noticed. Maybe they need to blow up the crossing to Egypt so they can begin to flood out, not even dual nationals are able to leave at present. Deliberate attempts are being made to widen the conflict.
So let me get this straight.. Your take is those kids knew something and so they deserve to die?
Overtaken Yvil for idiot comment of the year. Well done
What about the innocent Jewish people that got slaughtered? The babies that were beheaded? The people that were taken hostage? Did they deserve it? Or is that okay you reckon?
This seems like an overly simplistic take, and quite frankly - pretty hateful take. The people of Palestine are still human beings, you can’t condemn them to death for the actions of a few.
The whole situation is cooked beyond belief but killing everyone can’t be the solution, it’s the exact same logic that lead to the holocaust. And you have to realise these people have nowhere to go. They’ve lived their whole lives stuck there, young people with zero prospects, raised in blood and violence with no alternative options. “Just blow up the crossing and go to Egypt”. I sincerely hope you’re never in a situation like these people are in. Hate breeds hate, Hamas commits atrocities and Israel commits them in return, all it breeds is more violence, more hate and more death. God knows how it will ever be fixed, it all seems depressingly inevitable with no end in site.
Nice map. Did you know that the origin of these maps is unclear; the earliest known reference to them appears to be in a 2003 book which attributes them to the “Palestine Solidarity Campaign,” a British group supporting the “BDS” movement (urging boycott, divestment and sanctioning) against Israel.
The maps usually begin with one labelled 1946. The Uniting Church features on its website another stock version that claims to “demonstrate” that in 1946 “more than 90 percent of the land” belonged to the Palestinians. It does nothing of the sort; it merely presents a map almost entirely one colour and labels this “Palestinian”.
As in the map appearing at the top, small patches are labelled “Jewish land”; everything else is claimed as Palestinian. While the small patches may correspond reasonably accurately with the land then privately held by Jews, the rest of the map is a lie. The totality of the remaining area was not in any sense “Palestinian”, whether this refers to ownership, control, or even simply habitation.
Here's another map, which accurately show the historical development of Palestinian/Arab political control in the region. Interesting what turns up when you check your history isn't it?
That map is a joke, under British rule for instance, Palestine wasn't run as prison camp.
The recent ABC map progression seems to align closely:
The origins of the Hamas-Israel war explained | ABC News - YouTube
Look up the talpiot program, unit 8200 and the cyber samson option, "cyber is the real domain of power".
What a fundamentally broken situation. Any peaceful resolution seems impossible at this point.
Fundamental terror campaign. Nowadays you don’t missile strike hospitals by accident. Iran via Syria & Lebanon are the potential combatants but unlikely that will mean boots on the ground.
How can an area with damn all of anything in the way of resources, be it land, minerals or water have any future? Throw in the conflict on top and the outcome is hopeless.
I cannot see any solution or future for these people.
Correct. As a far more entertaining and humorous person than any of us said once, " If people from shit hole countries want to fight each other, what business is it of ours?"
The west created the conflict by taking the land in the first place. The west continually funds Israel's military, that is where the bombs come from.
By that definition, it is definitely our business.
The fact that we collaborated in, or benefited from, creating those countries?
..
As has been the case lately, every bank is finally doing what we have been showing since 2012 when JPM's excess deposits led to the London Whale disaster, and is disclosing how it is handling its "excess deposits over loans" which these days are mostly parked in deeply underwater (but HTM) treasuries. Here are the details:
- Deposits in excess of loans grew from $0.4T in 3Q19 and peaked at $1.1T in 4Q21; remained above $0.8T in 3Q23
- Excess deposits stored in cash and investment securities
- 53% HTM and 47% cash and AFS in 3Q23
- Cash levels remained well above pre-pandemic levels ($157B in 3Q19)
- AFS securities mostly hedged with floating rate swaps; duration less than 0.5 years and marked through AOCI1 and regulatory capital
- Invested net $33B in short-term US Treasuries in 3Q23
- HTM securities were $603 billion; these declined $80B since peaking at $683B in 3Q21; down $40B vs. 3Q22 and $11B vs. 2Q23. This is where all the deeply underwater TSY and MBS holdings are found.
- MBS of $474B down $11B vs. 2Q23; $129B UST / other flat
- Valuation declined 13% vs. 3Q22, as mortgage rates ended 3Q23 at highest level in almost 23 years
Rather than wasting time and money on a luxury tram project, I wish that Labour had focussed with urgency on our health infrastructure:
https://www.nzherald.co.nz/nz/hospitals-running-surgeries-on-weekends-t…
Some of us Aucklanders need a way to get to the around the city and to the airport on a daily basis (without losing half a day) - its a need not a want. Never mind National will pull the rug and back to clogged up roads and fumes. Hopefully National will make healthcare their number one priority..., once they are confirmed?
They did they did - they are building a new hospital in Dunedin to replace one only 60 years old - something that will never be done again.
Tells us they were as dinosaur in their empathetic way, as the less-empathetic crowd who have taken hold of the levers again.
And who are going to find they're running on Reserve...
cough, splutter....
oops....
And Christchurch is complaining about a rates blow-out this morning and wants Govt help.
Let them eat their new stadium.
It counted for nothing, but I'm still pleased to have written a submission against that stupid white elephant.
If rugby organisations and concert promoters want a better stadium, they can pay for it.
Supposedly though the huge cost rate payers have assumed for that will be mitigated by the huge cost of the cathedral where we can all go and pray for relief along with the prospect of great dividends soon to be yielded by the new airport in Central Otago 4 hours drive away. Who cares anyway, what’s the use of other people’s money to the brown cardigan brigade if it can’t be squandered on vainglorious vanity projects.
Yeah good. But Dunedin isn’t growing. Auckland is, and quickly
Yeah. But Dunedin has the only stadium in the world with a fixed roof and real grass. Cost $140million. $5600 for each of 25000 seats. Can be ramped up more if required. With all the Southern back bone of the country farmers and tourism, Dunedin is poised to take part in the coming boom. Literally at the expense of the people mentioned in an above comment!
.
In your dreams!
Estimated costs $227 Million.
Annual running costs $23 Mill.
You have a liability, not an asset down there.
Alternatively not having added 5% or more to our total population over their term with the required increase in demand.
I've been waiting two years. I got the pre-op call in January and never heard back. A friend at the hospital said I would have been done and dusted 9 months ago if I was Maori.
I am lucky. My wife has a bit of Ngai Tahu and I have a spiritual affinity to the land when it suits me. By the by, we also live happily in two different electorates. At the same address!
.
...& if you did that would be nothing to do with your ethnicity
Your point being?
If you were Maori, then statistically you are more likely to have died of your illness already.
Why is that?
Heart transplants are expensive. Is your friend a doctor or possibly a receptionist?
.
Who here ? ....while Audaxes may know, but I heard that when the yield curve starts to reverse it's inversion, the risk of a recession rises, especially if unemployment is increasing ?
The 2:10 spread turning positive after an inversion has preceded every recession since 1955
Thanks kiwimm ....Independent Observer also had a reply to my question in the late afternoon edition today.
What always amazes me about NZ and the rest of the Western World is that no one thinks ANYTHING will upset their applecart - look at NZ with "property prices can't fall" and the USA and the stockmarket that will NEVER be affected !
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