American consumer spending rises but brittle; earnings season positive; China industrial profits fall less; Aussie PPI up modestly; carbon price languishes; UST 10yr 4.86%; gold and oil up; NZ$1 = 58.2 USc; TWI-5 = 68.4

Here's our summary of key economic events overnight that affect New Zealand, with news sentiment seems to be ebbing today despite the raft of good economic data this week.

Following yesterday's surprise surge in US economic growth, details released today confirm the sharper than expected rise in consumer spending, up +0.7% in September from the prior month. The appetite for both goods and services rose at about the same rate. Personal income rose at a consistent +0.3% rate on that same basis. Their savings rate eased back marginally.

But behind the consumption rise, there are signs that Americans are avoiding big-ticket items. Firms are reporting softer demand or a preference for less expensive alternatives. It seems the more you have to think about a purchase, the less likely you will make it.

The Wall Street earnings season is developing into a good one, despite some high-profile misses. Of the 245 companies in the S&P 500 that have reported earnings so far, 77% of them beat earnings expectations. Third-quarter earnings are expected to grow +4.3% from a year earlier.

In another setback for GM however (that is, in addition to the UAW strikes), California authorities suspended the Cruise driverless operating authority, saying the safety record isn't as claimed. It's a tough decision because their fleet is far, far safer than human-driven vehicles. It is a decision that only affects GM, and not Waymo. Apparently authorities are looking for perfection in driverless car safety, not just 90%+ better than human-driven vehicles. Pressure from taxi driver representatives is probably behind the move. Waymo may be next.

In China, profits earned by their big industrial firms fell by -9.0% from a year earlier in the first nine months of 2023, amid weak demand at home and abroad and persisting margin pressures. The decrease followed a -11.7 % slump in the prior period, so the situation is easing. Things have turned up smartly in the past two months even if they still lag year-ago levels.

And staying in China, the unexpected death of retired ex-Premier Li Keqiang of a heart attack has brought an unexpected outpouring of grief - maybe one way Chinese netizens have to obliquely criticise Xi Jinping. It is public grief for an era of greater growth and possibility. Li's pro-market reformist wing of the Chinese Communist Party is in full retreat having been sidelined under Xi.

Russia reviewed its monetary policy settings and surprised with a +200 bps hike when a +100 rise was anticipated. That takes their official rate to 15%, and they signaled that monetary policy will remain tight for a prolonged period to fight their high inflation which is now running at 7% in October and much more than they anticipated. Today's decision took the cumulative rate hikes since the start of the bank’s tightening cycle in July to +750 bps.

In Australia, their producer price index rose by +1.8% quarter-on-quarter in September, rising from a +0.5% gain in Q2 (which was the lowest in over two years). The Q3 rise was the 13th straight period of growth and the fastest pace since the third quarter of 2022. They are up +3.8% in a year.

Yesterday we noted that SkyCity is bracing for a large penalty following AML breaches caught at its Adelaide casino. They are not the only casino in regulators crosshairs. The iconic Melbourne Crown casino is having its license reviewed at present and there is a real risk it may not be renewed based on endemic fraud, crime and AML issues. It is a real test of the power of money to influence regulator decisions despite the ongoing documented breaches and failings.

The UST 10yr yield is little-changed from this time yesterday, now at 4.86%. A week ago it was at 4.93%. Their key 2-10 yield curve is less inverted, now by -16 bps. Their 1-5 curve is inverted by -62 bps and little-changed. Their 3 mth-10yr curve inversion is little-changed too at -55 bps. The Australian 10 year bond yield is now at 4.84% and up +1 bp from yesterday. The China 10 year bond rate is unchanged at 2.74%. The NZ Government 10 year bond rate is -1 bps lower at 5.56%. A week ago it was at 5.62%.

Wall Street is lower again; in its Friday trade the S&P500 is down -0.4% and looks like it will end the week down -2.2%. Overnight European markets were all lower with Frankfurt down -0.3% and Paris down -1.4% and the others in between. Yesterday, Tokyo ended its Friday session up +1.3% to end its week down -0.5%. Hong Kong rose 2.1% yesterday to book a +1.6% weekly gain. And Shanghai rose +1.0% yesterday for a +1.6% weekly rise. The ASX200 ended its Friday trade up +0.2% on the day to limit its weekly loss to -1.1%. But the NZX50 fell -0.8% on Friday to crash -3.3% lower for the week.

The Fear & Greed index we follow is still hard over on the 'fear' side but little-changed from this time last week. Or the week before.

The price of gold will start today at US$1986/oz and up +US$2/oz from yesterday at this time. A week ago we were similar at US$1982/oz.

Oil prices have risen +US$1/bbl today to be now at just under US$84.50/bbl in the US. The international Brent price is now just under US$88.50/bbl. But these latest price levels are -US$4 lower than a week ago.

We haven't looked at it for a while, but we should note that the carbon price is stuck at about NZ$70/NZU. This whole market has struggled since the failure at the last two official auctions. But it is not just the local market that has struggled. The EU carbon permit price has atrophied as well, now down to €83.32/tonne. That is down -21% from March. These have become has-been markets.

The Kiwi dollar starts today at 58.2 USc and little-changed from this time yesterday. A week ago it was at 58.3 USc, so not much change. Against the Aussie we are down almost -½c to 91.7 AUc. Against the euro we have slipped to just under 55 euro cents. That all means our TWI-5 starts today slightly softer at just under at 68.2. This time last week it was at 68.4, so again, little change.

We probably should note that Beijing authorities have effectively pegged the yuan to the US dollar again. Since September 15 it has been held in a 7.17-7.19 range to the US dollar, at every day's official fixing. The Americans are probably close to certifying it as currency manipulation.

The bitcoin price starts today at US$33,654 and down -0.5% from this time yesterday. But for the week it is up +14% in a notable move. Volatility over the past 24 hours has been modest at just on +/- 1.2%.

Go the All Blacks! despite the weather.

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