US factory orders jump; UST yields rise; US Federal deficit falls; Taiwan factories even busier; China confronts sudden power outages; margin debt jumps; UST 10yr 1.48%, oil and gold firm ; NZ$1 = 70.2 USc; TWI-5 = 73.6

Here's our summary of key economic events overnight that affect New Zealand with news China is facing a major energy crisis that could have worldwide implications just as it tries to deal with its Evergrande property crisis.

But first in the US, American durable goods orders rose more than expected in August, up +10% above the July level, and up +25% above the pandemically-affected August 2020 level. A more relevant comparator is the August 2019 level and they were +5.3% higher than that. So, overall a very positive result.

Further, new orders for capital goods were similarly impressive and also a new record high. Boardrooms seem to be investing heavily again. But with both sets of data you can't help but wonder what the impact of higher prices has been on the results.

However, the Dallas Fed factory survey, while still expanding, did pull back in terms of overall general business conditions. In fact, the forward outlook turned negative in the face of hesitating order levels and sharply rising costs.

There were two US Treasury bond auctions overnight, for their 2 year and 5 year paper and both recorded rising yields. The 2 year one wasn't as well supported this time as the prior one a month ago. The 5 year one was as well supported but the median yield rose faster at this event than the last one, also a month ago.

Meanwhile the latest update of the US federal budget shows a narrowing of their large deficits, down -7% lower than last year and down to -12.5% of US GDP from -16.1% in 2020. By the way, there is still no resolution to the US debt limit crisis.

Taiwanese industrial production is still rising at a fast clip, but their retail sales shrank again in August, but not be as much as they did in July. And an update on the Taiwanese water storage crisis and drought. You may recall it was a severe event, its worst in 50 years. But recent rains have replenished all their reserves. Droughts are 'news' when they happen; the passing of the event is not. (The same is true for Cape Town.)

As the northern hemisphere heads into its winter season, and with coal burning unfashionable these days, the pressure is on natural gas prices and supplies. In fact prices are already up +125% since the beginning of June and the sky seems to be the limit. Russia will be the main beneficiary in Europe. Australia will also be a huge beneficiary. China will also be paying the price of their relative energy deficiencies and inefficiencies.

In fact, the Chinese electricity crisis may turn out to be more important that the Evergrande crisis. High demand and soaring energy prices have forced some Chinese factories to shut down, adding further problems for already snarled global supply chains. And commodity prices are starting to show the impact of a sudden drying up of demand from Chinese buyers as their plants shut down. Nickel and bauxite are already feeling the squeeze. Coal may get a lifeline.

In Australia, there were another 787 new community cases in NSW reported yesterday with another 596 not assigned to known clusters, and these numbers are a material improvement - or perhaps they just relate to weekend testing. They now have 11,260 active locally acquired cases. Victoria reported another 779 new cases yesterday. Queensland is still reporting zero new cases although mystery surrounds a possible new outbreak there. The ACT has 25 new cases again. Overall in Australia, more than 51% of eligible Aussies are fully vaccinated, plus 24% have now had one shot so far.

On Wall Street, they have started their week with the S&P500 down -0.4% in afternoon trade. Overnight, European markets were relatively subdued and all up about +0.2%. Yesterday, Tokyo ended unchanged, Hong Kong was up a minor +0.1% while Shanghai was the big mover, down -0.8%. The ASX200 ended up +0.6% while the NZX50 ended down -0.2%.

Some readers may recall a reference to skyrocketing US margin debt levels issued by brokers to their customers. At the end of June, it was up to US$600 bln. Well, it has grown sharply higher since the and by the end of August it has risen to US$910 bln, an unprecedented growth of +50% in eight weeks and approaching US$1 tln. Reverse repo activity has blown past the US$1 tln level which it reached at the end of July. Now it is more than +30% higher in just eight weeks.

The UST 10yr yield opens today at just over 1.48% and up +3 bps from this time yesterday. At one point it hit 1.50%. The US 2-10 rate curve is steeper at +120 bps. Their 1-5 curve is steeper at +90 bps, while their 3m-10 year curve has steepened further to +142 bps. The Australian Govt ten year benchmark rate starts today up +3 bps at 1.43%. The China Govt ten year bond is at 2.90% and up +1 bp. And the New Zealand Govt ten year is now at 1.94% and unchanged since this time yesterday but still in a rising trend.

The price of gold will start today marginally firmer again, up +US$2 at US$1750/oz.

And oil prices have moved higher again and by +US$1 to now just over US$75/bbl in the US, while the international Brent price is even higher at just under US$79bbl. 

The Kiwi dollar opens today at just on 70.2 USc and little-changed since this time yesterday. Against the Australian dollar we are soft at just on 96.3 AUc. Against the euro we now just under 60 euro cents. That means our TWI-5 starts today at 73.6 and like yesterday, still below the top of the 72-74 range of the past eleven months.

The bitcoin price has slipped today but only by -0.5%, and is now at US$42,978. Volatility in the past 24 hours has been modest at just over +/- 1.9%.

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