Here's our summary of key economic events overnight that affect New Zealand, with news today markets are reacting to another sharp rise in the crude oil price combined with another surge in benchmark interest rates. In the US that is coupled with a troubling fall-off in demand for their latest US Treasury bond auction.
First today however, there was a full dairy auction overnight and prices slipped -1.1% overall in USD although are up +1.1% in NZD. Within that, there were some wide swings; butter fell -5.7%, but cheddar cheese was up +16.5%. Mozzarella was down -6.0%. However the powders only had small moves with SMP up +0.1% while WMP eased -0.8%. It seems unlikely that this auction would trigger any reassessment of farm gate payout forecasts.
In the US, the ADP weekly report on hiring in private payrolls ticked up last week to +16,750, a second week of a small gain.
After delivering a string of strong gains, the NY Fed's survey of New York factories was much tamer in their September report. And that was probably because pricing pressures intensified in a fresh burst of supply-chain inflation. The overall situation there is a modest expansion now.
Meanwhile, US fuel prices for petrol and diesel continue to push higher, up +45% from the start of Trump's war, and +4% of that happened in the past seven days.
The overnight US Treasury 20yr bond auction delivered a median yield of 5.36% (high 5.42%), and that is up from the prior equivalent event a month ago of 5.15%. Demand at US$33.4 bln was noticeably lower than the prior US$42.5 bln, an outsized and unusual -21% drop and a worrying sign for them.
Tomorrow's Fed meeting is widely expected to deliver a +25 bps rate hike, with more priced in, which is likely to infuriate the US President, already boiling after losing a Supreme Court ruling he needed to thwart upcoming US elections. A Fed rate hike could bring fireworks from him.
Across the Pacific, China's new-built house prices have stopped falling overall. This is largely due to small rises in some of their largest cities. However in a majority of their seventy largest cities, new house prices fell or were unchanged. For second and third tier cities they are still falling although at a slower rate. For existing homes, they are still declining too.
And staying in China, their retail sales rose a meagre +0.4% in August from a year ago, less than their low inflation levels and slowing from a +0.6% gain in July. And that was only half the expected +0.8% increase. There was weak demand for big-ticket items, with car sales down a very sharp -18.5%, furniture was down -7.9%, building materials -11.8%, and gold and silver jewelry sales fell -17.5%. If it wasn't for the sharp fall in car sales, the rest would have been up +2.5%, helped by cosmetics, hospitality, and appliances.
China said its industrial production rose +5.2% in real terms in August from a year ago. However, China's electricity production was basically stable in August, essentially matching the July level and up just +0.8% from year-ago levels.
The UST 10yr yield is now just on 5.01%, up +5 bps from yesterday and its highest since 2007. The 30 year yield is at 5.38%, also up +5 bps. The key 2-10 yield curve is now at +35 bps (up +1 bp). Their 1-5 curve is now at +46 bps (+3 bps) and the 3 mth-10yr curve is at +116 bps (+6 bps). The China 10 year bond rate is little-changed at 1.69%. The Japanese 10 year bond yield is now at 3.04%, up +4 bps. The Australian 10 year bond yield starts today at 5.40%, up +6 bps from yesterday. The NZ Government 10 year bond rate is now at 5.07%, up its own +3 bps.
Wall Street is lower again today, down another -0.5% in Tuesday trade on the S&P500, and down -0.8% on the Nasdaq. Overnight, European markets were lower between Lindon's -0.4% rise and Frankfurt's -0.2%. Yesterday Tokyo ended little-changed. Hong Kong was down -1.0% and Shanghai fell -0.5%. Singapore was fell a hard -1.4%. The ASX ended its Tuesday trade down -0.9%. And the NZX50 fell -0.6%.
The price of gold is now at US$4294/oz, and down -US$16 from yesterday at this time. Silver is at just under US$63.50/oz and unchanged.
Oil prices have jumped +US$4.50 to US$106.50/bbl in the US, while the international Brent price is up US$3 to just on US$109/bbl. Hormuz transits have essentially stopped today with just two ships exiting over the past 24 hours, no tankers escorted (0 dark with transponders off) and six entering for new loads (1 dark). The Red Sea activity is still at about 20 each way at the Yemen chokepoint.
The Kiwi dollar is down another -20 bps from yesterday, now at 57.6 USc. Against the Aussie we are also down -20 bps at 80.8 AUc. Against the euro we are down -10 bps to just on 49.9 euro cents. That all means our TWI-5 starts today at just on 61, down -20 bps and a six-week low.
The bitcoin price starts today at US$76,779 and down -2.7% from yesterday. Volatility over the past 24 hours has been moderate at just under +/-2.5%.
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