Here's our summary of key economic events overnight that affect New Zealand, with news risk aversion is taking hold among global investors. The pullback is especially noticeable from China.
Major stock indexes around the world were all lower on Friday amid concerns about an escalation in the Middle East conflict, elevated bond yields and mixed corporate results.
In Canada, retail sales are expected to have stagnated in September, according to preliminary estimates. That follows a small decrease in August.
In Ottawa, their main banking regulator has told lenders to hold more capital against mortgages that have had their repayment terms extend beyond the original terms due to the stress of interest rate hikes. They are moving to contain risks building in the Canadian home loan system.
In Japan, their CPI inflation rate fell to 3.0% in September from 3.2% in August, the lowest level in a year.
In China, foreign direct investment fell -8.4% in the first nine months of 2023, a faster pace of retreat than the -5.1% fall in August and the -4.0% fall in the seven months to July. This is a retreat and disengagement that must be worrying the Beijing economic mandarins.
Foreign money managers are bailing on some of the biggest names in China’s technology sector as a global exodus from the nation’s equities deepens.
And staying in China, they held lending rates steady at the October fixing, as widely expected. The one-year loan prime rate, which is the medium-term lending facility used for corporate and household loans, was left unchanged at a record low of 3.45%; and the five-year rate, a reference for mortgages, was maintained at 4.2% for the fourth straight month. This decision came amid growing signs that the Chinese economy is stabilising.
Taiwanese export orders rose sharply in September from August, up almost +12% to US$51.4 bln. But they were down -15.6% from a year ago, the same year-on-year decrease in the prior month.
Indonesia’s central bank unexpectedly raised its benchmark rate by +25 bps to 6% late on Thursday after months of standing pat, as it looks to support the stability of the rupiah and guard against inflation.
Producer prices in Germany tumbled by almost -15% in September from a year ago following a 12.6% drop in August. It was the third straight month of decline and the steepest pace since data collection began in 1949. But it is largely due to the base effect of very high oil prices a year ago.
In Australia, their central bank released its Annual Report yesterday and it reported huge financial losses from its extraordinary pandemic stimulus measures that have blown out to about AU$43 bln and sunk its balance sheet deeper into negative equity. See page 191. (The RBNZ released its Annual Report on October 12, 2023, and it retained little-changed net worth levels. See page 101.)
The UST 10yr yield has fallen back today. It is now at 4.93% and down a net -6 bps from this time yesterday. But a week ago it was at 4.63% so a very major shift up from then. Their key 2-10 yield curve is much less inverted, now just at -16 bps. A week ago this key inversion was -43 bps. Their 1-5 curve is unchanged at -54 bps. Their 3 mth-10yr curve inversion is slightly more inverted, now at -49 bps. The Australian 10 year bond yield is now at 4.73% and down -3 bps from yesterday. The China 10 year bond rate is down -1 bp at 2.74%. The NZ Government 10 year bond rate is -3 bps softer at 5.62%. A week ago it was at 5.51%.
Wall Street is down -0.6% in its Friday trade and heading for a -2.1% weekly retreat. Overnight European markets all ended down about -1.5%. Yesterday, Tokyo ended its Friday session down -0.5% for a -2.3% weekly fall. Hong Kong fell -0.7% on Friday for a -3.6% weekly drop. Similarly, Shanghai fell -0.7% on Friday and booked a -3.5% weekly fall. The ASX200 ended its Friday trade -1.2% lower to take the weekly level down -2.1%. The NZX50 fell -1.3% on Friday to be -2.4% lower for the week. Earnings are no longer the key valuation metric; yields are.
The Fear & Greed index we follow is still hard over on the 'fear' side but little-changed from this time last week.
The price of gold will start today at US$1982/oz and up +US$21/oz from this time yesterday - and a new three month high. A week ago it was at US$1928/oz so up +2.8% from then.
Oil prices have risen another +50 USc to be now at just over US$88.50/bbl in the US. The international Brent price is now just over US$91.50/bbl. A week ago these prices were US$86/bbl and US$$89.50/bbl so a +2.2% rise in that time.
The Kiwi dollar starts today at 58.3 USc and and down -20 bps from yesterday. This is a new low in almost a year. A week ago it was at 58.9 USc. Against the Aussie we are still at 92.3 AUc which is down -1¼c since the start of the week. Against the euro we have fallen to 55 euro cents and a five week low. That all means our TWI-5 starts today at just on 68.4, down -85 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$29,478 and up a solid +2.8% from this time yesterday. Earlier it had pushed over US$30,000 before retreating somewhat. And it is now at NZ$50,000, the first time since July. A week ago it was at US$26,713, so up +10.4% since then. Volatility over the past 24 hours has been high at just under +/- 3.0%.
This is the Labour Day weekend holiday in New Zealand. Monday is a full public holiday. Go, the All Blacks!
The easiest place to stay up with event risk is by following our Economic Calendar here ».
20 Comments
"Earnings are no longer the key valuation metric; yields are."
Speaks volumes. People have found other ways to make their money work hard.
'Now' or 'no'?
LOL! I've corrected mine; for some reason I cannot correct the article....
:( and I have corrected mine now too. Thank you.
In China, foreign direct investment fell -8.4% in the first nine months of 2023, a faster pace of retreat than the -5.1% fall in August and the -4.0% fall in the seven months to July. And now Mexico.
The Chain Linking Rome and Mexico City To You and Me
The reason for Mexico’s fortune is simple: nearshoring. Money had been pouring in to the country from all over seeking to take advantage of reworked supply chains – using NAFTA to do it. Funds come in, using eurodollar medium, the peso goes up.
Since late July, though, the peso has gone down all of a sudden. Something has seriously changed in the eurodollar world that even Mexico’s currency can no longer escape it.
The Eurozone’s next crisis is already approaching, in #Italy. 10y risk spread over German bunds have spiked >200bps. Debt ratio of 140% of GDP is a real challenge for a „sub-sovereign“ borrower that no longer prints its own currency. https://telegraph.co.uk/business/2023/ Link
What a boring game, a farcical mismatch.
NZ excells at rugby union. A globally successful point of difference. Long may we "Foster" it!
There something else we excel at. Grass fed protein and milk fat. Another USP but one we don't rally behind with such unity. Sadly succesful primary producers are no longer enough to sustain our lifestyle especially when under social attack.
The country we love is changing, what is our identity going to be in 2100. Food bowl of Asia? Let's invest in it!
The price of gold will start today at US$1982/oz and up +US$21/oz from this time yesterday - and a new three month high. A week ago it was at US$1928/oz so up +2.8% from then.
China weighs options to blunt U.S. sanctions in a Taiwan conflict
Does this explain why Gold is rallying, Why Treasuries are selling off, and why China continues to dump them along with the rest of the world at a more accelerated pace?
That is incorrect. Yes, China is selling out of its UST holdings. But the rest of the world have not only increased their holdings, they have done so at a faster pace than the China sell-out. See the TIC data.
A new report from Goldman Sachs reveals that in 2023, U.S. households and hedge funds are poised to gobble up a whopping $1.3 trillion in Treasuries, a massive leap from last year. Their ownership in the U.S. Treasury market has surged from a mere 2% at the beginning of 2022 to + 9%.
Does this explain why Gold is rallying, Why Treasuries are selling off, and why China continues to dump them along with the rest of the world at a more accelerated pace?
Trying to wrap your head around what is happening with the gold markets is fascinating right now. Comment from colleague:
"If the $2000 paper gold iron top is not defended by the Banksters, the paper gold super slam will happen around the price range of $2030 to $2150. They will slam so hard that normies will think twice before they ever touch gold, silver & miners again for the rest of their lives."
I think that the normies will probably not even look at gold until it's north of USD3K.
I have some of my meager savings in gold, but I don't pretend to understand how the market gets pushed around. For me it's an investment (OK I know it's not really an investment) of desperation, and I am encouraged by the thought that the people who make each other rich clustered around the money hoses may not want me to have it.
One of my normie mates asks me occasionally how my gold is going with a snicker in his voice. And that's before a super slam. I expect I will go down with the ship.
There are some goldbugs who claim the precious metals market is not manipulated. It's an interesting position to take. I don't claim to understand how the market is manipulated in detail. But we know it is and there's enough evidence to support that it is. Whether or not that has meaningful impact (and extent of) on the market price is unknown.
I know this much. A kilo of Gold in Aug of 2018 was US $39,000/ Kiwi $58,000. Today it would cost you near NZ $110,000 to buy a Kilo.Looks like a functioning holder of value over the medium to long term My brother retired and cashed in his horde from early 90's purchased at US$300 ounce. Along the way he did exceptional with Bitcoin.Worked for him-two simple investments that saved him when the 5 year payback from an employee buying his business fell over with 2 years to run on payments--Covid killed it. The KISS method saved him-you never know.
Dp
Mighty stuff from Chris Joye across the ditch. Wolverine never disappoints.
The RBA has several idiosyncratic challenges to contend with. The first is that the savings buffers Aussie households built up during the pandemic, worth more than 20 per cent of their annual income, are much larger than those accumulated by consumers in peer countries.
This is because our fiscal policy was more profligate and households saved more because of tougher lockdowns.
But this cash is now being spent, which is contributing to excess demand and inflation. And whereas the excess savings buffers in the US are likely to run out in a few months, Australia’s buffers will last until late next year. This implies that the RBA may have more wood to chop than the US Federal Reserve.
https://www.afr.com/wealth/personal-finance/spectacular-opportunities-i…
Yeah good piece. It seems a bit of a stretch though to think that covid buffers might last till late next year.
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