Powell talks down the middle but can't avoid strong labour market signals; China's separation signals grow; Aussie labour market growth twists to part-time; UST 10yr 4.99%; gold and oil up again; NZ$1 = 58.5 USc; TWI-5 = 68.6

Here's our summary of key economic events overnight that affect New Zealand, with news the US may not be over more rate hikes yet.

First up today, Fed boss Powell has been speaking and trying to pitch a middle path, one that he suggests they have got policy settings about right. But he did concede that the American economy's strength including very tight labour markets could warrant more rate hikes, and they may not yet be done with the rate increases.

"We are attentive to recent data showing the resilience of economic growth and demand for labour. Additional evidence of persistently above-trend growth, or that tightness in the labour market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy," he said overnight.

Meanwhile, American jobless claims fell by -13,000 from the prior week to 198,000 last week, the least since January and well below market estimates of 212,000. These are the seasonally-adjusted headline levels. On an actual basis there were 181,000 claims nationally last week, and there are now 1,549,000 people on these benefits, which is the lowest level in 2023 so far.

Also low are American house sales. Existing home sales fell by -2% in September from the previous month to an annualised rate under 4 million units, the lowest since October 2010. They are down more than -15% from year-ago levels.

The Philadelphia Fed factory survey reported a rise in new orders shipments that weren't expected, but overall activity is lower than a year ago. Firms in this survey are positive about the future over the upcoming year,.

Across the border, and for a second month in a row, Canada's producer prices rose although this time the rise was about what was expected, and up a manageable +2.4% from a year ago.

Japan's pivot away from China seems to be paying off. Exports are rising again, up +4.3% in September from the same month a year ago. This was underpinned by a +13.0% jump in exports to the US.

In China, new home prices fell their most in almost a year in September. This undermines the idea that Beijing is on top of their property crisis. For new homes they fell in 45 of the top 70 cities. For resales they fell in 67 of the 70 on a year-on-year basis. It was similar for both sectors of their housing market on a month-on-month basis. Both are worse than for August and a blow to sentiment in this sector.

Overnight, updated American data for China's holdings of US Treasuries shows them continuing to sell down these holdings. As at the end of August they held US$805 bln which is down -US$16.7 bln in a month and down -US$133 bln in a year. Analysts are saying China is building reserves to defend the yuan. Interestingly Beijing has held the yuan exchange rate virtually unchanged for each of the last seven days, something that seem unnatural and can only be achieved with aggressive intervention in currency markets. That can be very costly, but so far they are achieving that fixed rate stability. It's isn't hurting the Americans; foreign holdings of their debt has risen +US$213 bln (+3%) over the same one year period.

Yields on the Chinese yuan bonds are now at their steepest discount to the US since 2002. At some point, something will give. Apparently Chinese holders are sweating it because a rise in yuan yields will come with bond price losses.

And staying in China, a Japanese manager based in China at a Japanese drug company there was arrested on 'spying' charges, for apparently 'sharing company information' with his bosses that was deemed 'sensitive' by China. The charges are unclear. The arrest comes after China revised legislation broadening the scope of what activities beijing considers espionage. Foreign firms are on edge. Foreign investment will retreat further.

Australia reported its monthly September labour market data yesterday. Things were little-changed with their jobless rate at 3.6% but the twist was to much more part-time work. There were +58,200 part time jobs added in September, and -23,300 full time jobs lost in the month.

Globally, container freight rates were unchanged last week, the first time they haven't fallen week-on-week since August. They have settled 60% lower than year-ago levels and -4% lower than pre-pandemic levels. Rates to and from China are still falling, but low rates elsewhere are now rising. And bulk cargo rates continue their rise.

The UST 10yr yield has risen further today. It is now at 4.99% and up a net +11 bps from this time yesterday. Again, this is a new modern post-GFC high. Their key 2-10 yield curve is much less inverted at -22 bps. Their 1-5 curve is also less inverted at -52 bps. Their 3 mth-10yr curve inversion is less inverted as well, now at -46 bps. The Australian 10 year bond yield is now at 4.76% and up another +6 bps from yesterday and as new 12 year high. The China 10 year bond rate is up +1 bp at 2.75%. The NZ Government 10 year bond rate is +10 bps higher at 5.65%.

Wall Street is holding soft today, with the S&P500 down a minor -0.3% in its Thursday trade on some good earnings reports, mostly brushing off the sharp Tesla profit dive. Overnight European markets all ended down about -0.5% except London which was down a sharp -1.2%. Yesterday, Tokyo ended its Thursday session down a sharper -1.9%. Hong Kong fell -2.5%, and Shanghai fell -1.7%. The ASX200 ended its Thursday trade -1.4% lower while the NZX50 fell a lesser -0.8%.

The price of gold will start today at US$1961/oz and up +US$9/oz from this time yesterday - and a three month high.

Oil prices have risen +50 USc to be now at just over US$88/bbl in the US. The international Brent price is now just over US$91/bbl.

The Kiwi dollar starts today at 58.5 USc and just marginally softer from yesterday. But this is its lowest level in almost a year. Against the Aussie we are still at 92.4 AUc which is down -1¼c since the start of the week. Against the euro we have eased lower again to 55.3 euro cents and a five week low. That all means our TWI-5 starts today at just on 68.6, down -100 bps from this time last week. We are starting to get into territory where the lower exchange rate can itself be inflationary

The bitcoin price starts today at US$28,676 and up +1.1% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.3%.

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