Evergrande surprises with bond payment; China to launch a new property tax; US inflation from bottlenecks creates winners; RBA in fight with bond traders; UST 10yr 1.64%, oil and gold rise; NZ$1 = 71.5 USc; TWI-5 = 75

Here's our summary of key economic events over this long holiday weekend that affect New Zealand with news shipments and actions over the next two weeks will largely determine how 'full' shops will be for the upcoming holiday season - and the prices we will have to pay.

But first in China, Evergrande surprised late of Friday by making an US$83 mln payment to international bondholders right at the very end of their grace period, and staving off default for another week. It was a surprise because most observers thought they would prioritise local creditors, suppliers and disgruntled homebuyers. Those groups may now feel very aggrieved as their wait is extended. But Evergrande's shares rose 6% after the news, although really this is from virtually nothing to just a bit more than nothing.

But this last-minute event will do little to help the overall commercial property development sector in China, or the local authorities who rely on selling them land to fund local services. In the July-September quarter, -80% less land was sold by these local authorities than in the April-June quarter.

But regulators are still dismissing the likely impact the Evergrande woes will have on the national Chinese economy.

And separately, China is pushing ahead with a "5 year trial" of a new property tax on homeowners. Their goal is to "guide rational property buying".

In Japan, they got some inflation in September, a turnaround from the deflation it had in August. Its factories and services sector are both expanding in October, according to a widely-watched survey, and that is a good improvement too.

In the US, the Fed boss has acknowledged that inflation pressures are unlikely to be resolved fast, and although they don't anticipate raising rates soon, they are pushing ahead with reducing and stopping their bond-buying activity (tapering). He said supply bottlenecks are getting worse and that is keeping prices up, although he still bravely expects the impact to fall away at some point.

Meanwhile, a national manufacturing PMI fell to 59.2 in October from 60.7 in September, the lowest since March and below market expectations of 60.3. The index pointed to the third consecutive month of slowing manufacturing activity after a record growth in July although it is still a healthy expansion. The slip in the October data is because of a weaker expansion in output and a moderation in order book growth.

But the giant American services sector is in improving shape with its PSI index expanding a better-than-expected 58.2 from 54.9 in September and ahead of expectations. The next focus is the Black Friday and Cyber Monday sales events at the end of November. The current logistics stress may well mean that the 'deals' this year have few price advantages.

And that gives more firms pricing power. We can see the impact in current corporate earnings reports on Wall Street. In fact, they closed on Friday at a new all-time record high index of 4545 for the S&P500.

In Europe, they reported a slightly faster expansion in their factory PMIs and this was despite the continuing supply chain woes. But a noticeable slowing in their services sector PSIs, particularly in Germany. The fast re-emergence of Delta pandemic infections is holding them back.

And the EU is weighing its response to their trade deal with the UK, if the British renege on it over the Irish border arrangements as originally agreed. The mood is to respond forcefully, even ending the deal. Gaining the new FTA deal with New Zealand will be a very poor second if they lose the EU one.

In Turkey, their autocratic President ordered ten ambassadors to leave the country, including the New Zealand and Australian ones, for calling out their official detention without trial of those campaigning for democracy. It is unsure how this will affect the Gallipoli relationship. The move will almost certainly hurt its currency's value and spike an already raging inflation rate.

In Australia, after only recently dismissing the Buy Now Pay Later sector as minor, the RBA as regulator has moved to force these companies to change their contracts with merchants, so that banning surcharging, is removed. The BNPL sector fought the move, but has now lost. Merchants can now surcharge BNPL transactions in Australia (pg 49).

And the RBA was forced into a rare Friday bond auction for its 3-year maturity. It went into the market to purchase AU$1 bln, forcing the yield back down to its target 0.1%. It was forced to do that because market participants see a weakness here and bid the yield up to 0.7% pa. They profit when they can force the regulator to respond to defend its policy position because the face price of the bond rises when the yield drops. Market observers see the AU$1 bln being nowhere enough to end this game, so this test of wills will be one to watch.

And Aussie banks are raising the cost of three year fixed rate mortgages, which have now reached 4% (on a comparison rate basis).

And staying in Australia, Delta cases in Victoria have slipped very slightly to 1935 cases reported there yesterday, and so no real improvement yet again. There are now 24,993 active cases in the state and there were another 11 deaths yesterday. In NSW there were another 296 new community cases reported today with 4,615 active locally acquired cases which is slightly lower, and they had four deaths yesterday. Queensland is reporting zero new cases. The ACT has 9 new cases. Overall in Australia, more than 73% of eligible Aussies are fully vaccinated, plus 14% have now had one shot so far.

The UST 10yr yield opens today down -1 bp at 1.64%. A week ago it was 1.58%. The US 2-10 rate curve is flatter today at +119 bps with shorter rates rising, longer rates slipping so a bull flattening. Their 1-5 curve is holding at +109 bps, while their 3m-10 year curve is also flatter at +160 bps. The Australian Govt ten year benchmark rate is lower by -2 bps at 1.77%. The China Govt ten year bond is unchanged at 3.00%. The New Zealand Govt ten year is holding its new higher level at 2.44% and still a three year high.

The price of gold will start the week higher at US$1792/oz. That is a +US$24 or +1.4% gain since this time last week.

And oil prices are firmish, up +50 USc to just under US$84/bbl in the US, while the international Brent price is up a similar amount at just under US$85/bbl.

The Kiwi dollar opens today little-changed at 71.5 US. Against the Australian dollar we are also little-changed at 95.8 AUc. Against the euro we are firmish at 61.5 euro cents. That means our TWI-5 starts today at just under 75, but still well over the top of the 72-74 range of the past eleven months.

The bitcoin price is also little-changed since this time on Saturday, now at US$60,262. And that is actually -1% lower than this time last week, although it did get as high as US$66,880 and its record high on Thursday. Volatility over the past 24 hours has been modest at just over +/-1.6%.

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