Second tier US data quite mixed; Canada reports larger trade surplus; China expansion slows; dairy prices firm; Australian consumer sentiment weak; UST 10yr at 5.26%; gold firmish but oil eases again; NZ$1 = 56.2 USc; TWI-5 = 60

Here's our summary of key economic events overnight that affect New Zealand, with news that although the Strait of Hormuz is essentially shut again, alternate flows of crude oil are starting to ramp up. And benchmark bond yields have eased back today.

But first, the overnight dairy auction was a full one and prices rose +1.2% in USD terms, up +3.6% in NZD terms from the prior full event three weeks ago. SMP starred again, up +4.3% while WMP was up +1.2%. But the milk fats were all lower with butter dipping slightly, butter down -1.1%, cheddar down +3.7% and mozzarella down -3.9%. However the overall result is likely enough to confirm Fonterra's recent raising of its payout forecasts.

In the US, the weekly ADP Employment pulse report recorded a 23,750 rise, continuing a trend that started in mid-August.

Meanwhile the US logistics industry has issues. Their LMI rose in September to its second-highest reading in four years, behind only June’s level. It is being driven by high and rising inventory levels and inventory costs. Transport costs are surging. Supply chain pressure is not easing.

We have reported US merchandise trade data for August before, but the same data is now out including services, and that has a similar negative result - a monster US$105.6 bln monthly deficit, worse than in any pandemic month, and only exceeded by the pre-tariff rush in 2025. So after the new tariff levels were introduced - the situation is worse.

However, the optimism survey by RCM/TIPP is marginally better in October than for September. But it remains well below 2025 levels, and those themselves were lower than pre-pandemic levels. Investors are much more optimistic now than non-investors.

Canada is reporting a wider trade surplus in August, in fact its best result since 2022. Interestingly, its surplus with the US is particularly strong.

In Asia, the World Bank has updated its growth forecasts, noting that many countries in the region are getting a very sharp boost from the AI adoption investment. China seems to be excluded from that growth pulse although the eased the rate of growth decline in this latest assessment for China, seeing a +4.3% expansion in 2027, +4.2% in 2028. Indonesia, Vietnam, Malaysia and the Philippines will all do better than China, they say. And of course the World Bank ignores Taiwan at China's insistence and they will do better as well. (Not doing well are the Pacific Islands, unfortunately, lumbered with high fuel costs and without the electronics industry.)

German factory orders tumbled an outsized -10.6% in August from July, but this is more about the unusual jump in the prior month. From a year ago, these order levels ae +2.7% higher. And, as with most German data, this is inflation-adjusted.

In Australia, the Westpac-Melbourne Institute consumer sentiment survey for October makes grim reading too. This is how they introduced these results: "Australian consumers remain stuck in a cost-of-living nightmare that seems to have no end in sight. At just over 80, the latest sentiment Index is amongst the forty worst reads since our monthly survey began in the early 1970s. We have had two others in this unfortunate group already this year – in April and June – with another eight recorded in 2022–23. Altogether this marks the worst period of recurring extremely weak sentiment since the disastrous recession in the early 1990s."

The UST 10yr yield is easing, now just on 5.26%, down -8 bps from yesterday and off its highs. The 30 year yield is at 5.65%, down -5 bps. The key 2-10 yield curve is now at +48 bps (unchanged). Their 1-5 curve is now at +58 bps (-3 bps) and the 3 mth-10yr curve is at +136 bps (-6 bps). The China 10 year bond rate is little-changed at 1.68%. The Japanese 10 year bond yield is now at 3.10%, down -3 bps from yesterday. The Australian 10 year bond yield starts today at 5.35%, down -7 bps from yesterday. The NZ Government 10 year bond rate is now at 5.14%, up +6 bps from yesterday and a three year high.

Wall Street moving up with the S&P500 up +0.7% and the Nasdaq up +0.6%. Overnight, European markets were mixed between London's +0.4% rise and Frankfurt's +0.8% rise. Yesterday, Tokyo ended up +1.1%. Hong King was up +1.0% and of course Shanghai was closed. Singapore ended up +0.7%. The ASX200 closed up +0.6%. The NZX50 ended its Tuesday trade little-changed.

The price of gold is at US$4157/oz and up +US$27 from yesterday. Silver is at just under US$61.50/oz and up +50 USc today.

Oil prices have eased -50 USc/bbl from yesterday to just over US$89.50/bbl in the US, while the international Brent price is down -US$1 to US$100/bbl. And we should note the pace of the flurry on attacks on tankers in the Hormuz region in the past few days are ongoing, keeping tanker traffic essentially non-existent. Hormuz transits have reduced again today with just eight ships exiting over the past 24 hours, no tankers escorted (1 dark with transponders off) and 5 entering for new loads (0 dark). The Red Sea activity is back up to the low 20 vessels in either direction at the Yemen chokepoint.

The Kiwi dollar is back up +30 bps from yesterday, now at just on 56.2 USc. Against the Aussie we are up +20 bps at 80.5 AUc. Against the euro we are up +10 bps at just on 50 euro cents. That all means our TWI-5 starts today at just under 60 and up +30 bps from yesterday.

The bitcoin price starts today at US$85,687 and up +0.5% from yesterday. Volatility over the past 24 hours has been low at just over +/-0.8%.

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