China-US talks achieve only photo ops; US durable goods orders unchanged; US sentiment falls; markets expect Fed to hike again; China initiates big holiday liquidity support; UST 10yr at 5.17%; gold up but oil dips; NZ$1 = 56.7 USc; TWI-5 = 60.3

Here's our summary of key economic events overnight that affect New Zealand, with news the US-China talks were all show and with nothing substantive resulting.

In the US, August durable goods orders were essentially unchanged in August from July, which was better than the expected -0.4% decline. From a year ago they are +8.4% higher although we should note that PPI inflation ran at 5.4% in the same period. Non-military capital goods orders are up +5.8% on a year-ago basis, but given the huge surge in data center buildouts this is surprisingly weak..

This week, US petrol prices breached the +50% rise since Trump's war on Iran started in early March. Diesel prices are now up +67% in that market.

The University of Michigan September survey of consumer sentiment tracks anxiety of the inflationary pressure these sort of cost increases are bringing and the overnight update is grim reading. Only once since this survey started in 1946 has this reading been as low as it is now - and that was in May. Year-ahead inflation expectations jumped from 4.0% in August to 4.6% this month, the highest reading since June. The current level substantially exceeds the 3.4% seen in February before the Iran conflict began, along with all 2024 levels.

Financial markets are betting that rising inflation will be more important to the Fed than falling sentiment and the US Fed will raise rates at its next meeting on October 29, which is just days ahead of their mid-term elections. This positioning is more than 2:1 now, and is bolstered by recent Fed speakers who are clearly worried that delays could cause them to lose control of the US inflation impetus.

China is on holiday for Mid Autumn Festival and their central bank has said it will inject up to ¥1 tln of liquidity into their banking system for this holiday via reverse repos. (During the same holiday last year it injected ¥735 bln in reverse repo operations, but later it revealed another ¥500 bln in direct repo purchases.)

In the UN yesterday it may be worth noting that two countries (the US and Israel) walked out of the Iranian president's address. But 77 walked out of the address by the Israeli prime minister. There is a wholesale shift in the geopolitical landscape underway.

The UST 10yr yield is now just on 5.17%, down -1 bp from yesterday but up a net +16 bps from this time last week. The 30 year yield is at 5.49%, up +2 bps and +16 bps higher for the week. The key 2-10 yield curve is now at +32 bps (up another +6 bps). Their 1-5 curve is now at +52 bps (-3 bps) and the 3 mth-10yr curve is at +122 bps (down -4 bps). The China 10 year bond rate is little-changed at 1.67%. The Japanese 10 year bond yield is now at 3.08%, unchanged from yesterday but up +10 bps for the week and a generational 30 year high. The Australian 10 year bond yield starts today at 5.39%, up +3 bps from Friday, up +10 bps for the week and a new 16 year high. The NZ Government 10 year bond rate is now at 5.14%, up +4 bps and up +17 bps for the week.

Wall Street is firmer today with the S&P500 up +0.5% to be up +0.7% for the week while the Nasdaq is up +0.5% today for a weekly +1.3% gain. Overnight European markets were mixed between Paris's no-change and Frankfurt's +0.6%. Tokyo was up +1.3% for a +4.2% weekly gain. Hong Kong ended its Friday down -1.0% to be down the same for the week, while Shanghai was closed to end it's week little-changed. Singapore rose +0.5% to end its week. The ASX200 ended its Friday session down -0.4% for a -0.2% net easing for the week. The NZX50 ended down -0.1% on Friday to end its week up +0.5%.

The Fear & Greed index is now still in the 'fear' zone from being in the same position a week ago.

The price of gold is at US$4289/oz and up +US$25 from yesterday, down -US$92 from this time last week. Silver is at just over US$64.50/oz and up +US$1. down -US$2 for the week.

Oil prices have retreated -US$4 to just on US$92.50/bbl in the US, while the international Brent price is down -US$2.50 to US$104.50/bbl. The US has re-engaged with Iran on Iran's plan to re-open the Strait, and Saudi Arabia says its pipeline repairs will be completed "within days". Hormuz transits are still low today with just five ships exiting over the past 24 hours, of which three are tankers escorted (0 dark with transponders off) but only two entering for new loads (0 dark). The Red Sea activity is holding low at about 20 vessels in both directions at the Yemen chokepoint.

The Kiwi dollar is up +10 bps from yesterday, now at 56.7 USc but down -50 bps for the week. Against the Aussie we are down -10 bps at 80.6 AUc. Against the euro we are also down -10 bps at just on 49.7 euro cents. That all means our TWI-5 starts today at just on 60.3 and little-changed from yesterday, down -40 bps for the week.

The bitcoin price starts today at US$83,934 and down a minor -0.2% from yesterday but up a net +3.6% from a week ago. Volatility over the past 24 hours has again been modest at just over +/-1.2%.

The easiest place to stay up with event risk is by following our Economic Calendar here ».