US sentiment stays low but inflation expectations rise; US PMI's expanding; Japan, Taiwan, India & the EU all deliver expanding PMIs; Australia doesn't; election season starts; UST 10yr at 4.99%; gold falls and oil rises; NZ$1 = 57 USc; TWI-5 = 60.7

Here's our summary of key economic events overnight that affect New Zealand, with news that the oil price is rising again today on expectations the war on Iran is about to cause more chaos.

But first, in the US the University of Michigan’s consumer sentiment index was revised up for its full October result, but it remains at its lowest level in five months (when it hit its record low). The cost of living continues to dominate consumer views of their economy, with sentiment now -10% below its year-ago level and -15% below February, just before the war on Iran. Year-ahead inflation expectations edged up to 4.7% from 4.6% in September, while long-run inflation expectations also increased, rising to 3.5% from 3.4%.

But the major data out overnight relates to PMIs. The US factory PMI stayed very positive at near a five year high, as factories bask in tariff protection which allows them to raise prices to recover fast-rising cost increases. Input costs are rising but this survey featured how fast companies were raising selling prices. Inflation expectations are rising and the flow-through of these sort of increases will worry the US Fed if it is serious about inflation control. Price rises in their services sector seemed even less restrained.

In Canada, and although slightly dated, they reported good growth in their retail sector in August, up +1.2% in volume terms. This data shows expanded activity even excluding cars and fuel. And their data for September shows the expansion continued in 'real' terms.

Japanese inflation was unchanged in September from August, to be 2.1% higher than year ago levels. That is up from 1.9% in August but lower than the expected 2.3% rate. This will bolster the expectation that the  Bank of Japan will make no change to its 1.25% level at its review next week (October 30).

According to the S&P Global PMI for Japan, October delivered a solid expansion even if it was marginally less than in September. Order backlogs rose but the pace of new orders incoming slowed. Employment growth was minimal. Japanese businesses are still optimistic about the year ahead.

Taiwan's industrial production rose strongly again in September and although it didn't rise as fast as in the prior three months, it was still up +20% from year-ago levels.

In India, their 'flash' October PMIs show business activity rose markedly in October and inflationary pressures softened further. Their post-pandemic economic expansion shows no signs of slowing.

EU October PMIs remained positive and expanding in October even if slightly less than in September. Germany posted an improving factory PMI, and better than the EU average.

Meanwhile the ECB consumer inflation expectations survey for September only shows a modest rise, from 3.0% to 3.1% for the year ahead, even though the same survey records that consumers felt it was running at 3.6% in the month. But this survey doesn't cover the period of the US war on Iran.

On the election front, we should note two important votes happening this weekend (Sunday, local time); in Brazil and in Serbia. Both pit right-wing autocrats against reformers. The outcomes remain quite uncertain although the autocrats seem to have an edge in these two.

In Australia the S&P Global factory PMI stayed in a minor contraction, and their services PMI fell from a September expansion to an October contraction. Both the rates of input cost and output price inflation rose in October amid a broad-based intensification of price pressures.

The UST 10yr yield is up +4 bps from yesterday to 4.99% but down a sharp -12 bps for the week in a major defensive move. The 30 year yield is at 5.31%, up +1 bp from yesterday but also down -13 bps for the week. The key 2-10 yield curve is now at +29 bps (-3 bps). Their 1-5 curve is now at +40 bps (-2 bps) and the 3 mth-10yr curve is at +98 bps (-3 bps). The China 10 year bond rate is unchanged at 1.63%, down just -1 bp for the week. The Japanese 10 year bond yield is now at 2.80%, down -2 bps from yesterday, down -14 bps for the week. The Australian 10 year bond yield starts today at 5.21%, up +3 bps overnight, but up +5 bps for the week. The NZ Government 10 year bond rate is now at 4.97%, down -4 bps, down -6 bps for the week.

Wall Street is down -0.4% on the S&P500 to be -0.9% lower for the week, while the Nasdaq is holding little-changed in its Friday session, down -1.5% for the week. Overnight European markets were all lower between Frankfurt's -0.7% and London's -0.3%. Yesterday Tokyo ended its Friday session down -0.3% for a weekly fall of -3.3%. Hong Kong was up +0.7% on Friday for a -5.1% weekly fall, and Shanghai rose +0.9% on Friday for a weekly -0.1% dip. Singapore ended up +0.1%. The ASX200 was unchanged in its Friday session to end its week down -0.4%. The NZX50 dipped just -0.1% on Friday to be down the same for the week.

The Fear & Greed index is still in the 'extreme fear' zone where it was a week ago.

The price of gold is down a sharp -US$139 at US$3998/oz, down -US$159 for the week. Silver is just over US$54/oz and down -US$1/oz from yesterday, down -US$3/oz for the week..

Oil prices have risen +US$3.50 from yesterday to just under US$103/bbl in the US, while the international Brent price is up +US$4 at US$116.50/bbl which is now higher than its early May peak and closer to its June 2022 US$119/bbl high point. A week ago these prices were US$101.50 and US$110/bbl respectively. Hormuz transits have dropped to a trickle today with just five ships exiting over the past 24 hours, no tankers escorted (0 dark with transponders off) and 9 entering for new loads, no tankers (2 dark). The Red Sea activity features a rise in outbound traffic at the Yemen chokepoint but much less inbound. There were no reported attacks on shipping, but there have been significant attacks on Saudi oilfields.

The Kiwi dollar is +20 bps firmer from yesterday at just on 57 USc, up +50 bps for the week. Against the Aussie we are holding at 81 AUc. Against the euro we are up +30 bps as well at 50.9 euro cents. That all means our TWI-5 starts today at just under 60.7 and up +10 bps from yesterday, up +40 bps for the week.

The bitcoin price starts today at US$81,510 and up +0.5% from yesterday at this time, up +0.3% for the week. Volatility over the past 24 hours has been low at +/-0.6%.

Finally, remember it is a holiday in New Zealand on Monday, Labour Day, and ahead of Wednesday's key RBNZ OCR review.

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