US confidence falters; Wall Street down; China orders soybean from Brazil; Japan expands; EU courts block Brussels; Austrac challenges PayPal; UST 10yr yield at 1.64%; oil down and gold up; NZ$1 = 63.2 USc; TWI-5 = 68.5

US confidence falters; Wall Street down; China orders soybean from Brazil; Japan expands; EU courts block Brussels; Austrac challenges PayPal; UST 10yr yield at 1.64%; oil down and gold up; NZ$1 = 63.2 USc; TWI-5 = 68.5

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Here's our summary of key events overnight that affect New Zealand, with news both consumers and courts are influential today.

In a widely-watched survey, American consumer confidence slipped in September for a second month in a row. The deepening trade tensions fanned concerns about business and labour market conditions. Consumer spending has been driving the American economy and faltering confidence is an out-sized risk to that expansion.

Of course, consumer confidence is a lagging indicator. One leading indicator includes confidence by producers, and in the latest regional Fed survey in the Mid-Atlantic states, the news is generally downbeat as well.

It is not all negative in the US, although the positive data out today for house prices is now two months old. The S&P CoreLogic Case-Shiller U.S. National Home Price Index rose +3.2% in July from a year ago, the same gain reported in June. Prices are still cooling in the largest cities, however.

Wall Street is down -0.8% on the flagging consumer confidence data and few signs of progress on the trade front. Benchmark bond yields have fallen. And the oil price has dipped on the expectation of lower demand in the world's largest economy.

China seems to have decided to shift its potential soybean orders away from the US to Brazil. Not only will that hurt the Americans, it won't be good for Brazillian deforestation pressures either.

Japan latest PMI's for September show an expanding economy that has shown some surprising strength in the past three months, led by its service sector.

In Germany, their IFO sentiment survey improved slightly in September. The rise was due to better immediate assessments. However, the outlook for the coming months worsened again.

In Brussels, an EU court struck down a European Commission order for Starbucks to pay €30 mln in back taxes to the Netherlands. A similar case involving Fiat is awaiting a decision. And Google also won a case involving Europe's right-to-be-forgotten law where the judges rules it can't be made to apply globally.

In the UK, their Brexit mess got even messier. They have a new prime minister who has lost every vote and decision he has made in his short tenure. It has the hallmarks of a 'failed state'. New elections seem certain soon, but that too may not resolve anything.

In Australia, regulator Austrac has ordered the appointment of an external auditor to examine ongoing concerns in regard to PayPal Australia’s compliance with their anti money laundering laws.

At 2 pm today, the RBNZ will release its decision on its latest OCR review. Universally, analysts expect no change although to be fair analyst expectations were wrong at the last review. In Australia, the expectation is that the next RBA review will bring another cut for the core reason that not to cut will see the Aussie dollar rise and undermine their tenuous growth track. Currency wars in action.

The UST 10yr yield is sharply lower today, at 1.64% and down -7 bps from this time yesterday. Their 2-10 curve is still positive at +3 bps. Their negative 1-5 curve is wider at -27 bps. Their negative 3m-10yr curve is slightly wider at -28 bps. The Aussie Govt 10yr is down -4 bps to 0.96%. The China Govt 10yr is at 3.13% and up +2 bps. The NZ Govt 10 yr is still at 1.16%, unchanged overnight.

Gold is up +US$3 to US$1526/oz.

US oil prices are down sharply, down more than -US$1.50 at now just on US$57/bbl. The Brent benchmark has fallen too to just on US$63.

The Kiwi dollar has firmed slightly this morning, up to 63.2 USc. On the cross rates we are still at 93 AUc. Against the euro we are at 57.4 euro cents. That puts the TWI-5 back up to just on 68.5.

Bitcoin is now at US$9,478 and that is another -3.3% lower than this time yesterday. In fact, this price has now fallen below NZ$15,000 for the first time since July. The bitcoin rate is charted in the exchange rate set below.

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

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41 Comments

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For those looking at cryptocurrencies , another buying opportunity or panic since Mr Chaston prepared this mornings breakfast update

Damn, 13% down intraday and falling!

$US 8487 , last time I looked . . chartists say its heading down to 5800 ... a bullish sign , keeping the long term trend intact ...

A lot of people are going to be burnt.

... no ... shes back up ... $US 8652 ... the recovery is on ... get in , guys ... follow the momentum .... woo hooo ... we're all gonna be rich ... ( teee heeee ! )

Yep, thats generally the outcome of gambling.

... but , if everyone joins the game , can't we all get rich ... after all , it works with house prices ...

$US 8696 ... YAY HEYYY ... Buttcoin is back up and running ... take that you Craptocurrency Deniers !!!

yes but at least if you buy a house, you have something of value

Whoop whoop buying opportunity.
For gold and silver that is...

$US 8685 ... don't panic Mr K ... just a breather ... before she resumes the upwards march ... Go go go Buttcoin ... go you good thing . .

Of course, just a healthy market ajustment....
Nothing to worry about...

Facebook has offered nearly $US 1Billion for start up company CTRL Labs , who're developing a wristband capable of reading the wearers thoughts ...

.. rather than opening the garage door , or turning on the kettle ahead of time as is envisioned ... many mens wristbands would go " ooh yuck , you dirty sod " ... and explode ...

Soybeans and Brazil. When Shanghai Pengxins Lochinver offer was knocked back, followed by its failed Australian land purchase it used raised funds to acquire Fiagril . Along with Cofco, the Chinese are already prominent in Brazilian soybeans.
https://www.reuters.com/article/brazil-grains-china-idUSL2N17W2B0
https://www.reuters.com/article/fiagril-turnaround/brazils-fiagril-turna...

Chinese colonisation by stealth? Have they adopted a colonisation strategy based on the US financial colonisation model? That and a fair bit of drug trafficking on the British model (ie the Opium Wars)? Is that what has "happened" to Tonga?

Its official , an impeachment inquiry into el presido Don Trump is to begin ... as announced by Nancy Pelosi ...

... and if the Dems think they'll get 66 % support in the house to have the Don impeached , tell them they're dreaming ...

3 years into his term , the Republicans aren't gonna cross the floor to turf out their leader , regardless of their feelings towards him ...

Ageed. And Pelosi knows that. So "why is she doing it?" becomes the question, because all Hell is likely to be let loose on the Biden Clan..Maybe, that's the plan?

Definitely the plan.
Distract from the fact that the Biden fiasco is going to absolutely derail the entire Democratic selection process for 2020.

Continuing along the party line of throwing aside law making responsibilities in order to pursue some inconsequential impeachment process.

The Don's greatest chance of re-election success is if the Dems choose Joe Biden to run against him ...

... the Dems should recall George Bush Jrs comment : " fool me once , shame on you ... fool me twice , shame on me ... " .... Hilary .. Joe .... hmmmm !

Obviously a political stunt timed for the upcoming election...

I dont think Trump is without an overall plan.
Something those against him have not except nip at his heals.
I'm expecting Trumps reaction to be swift and final. Hillary and Bill jailed quick smart for a start. Removal of the Fed, gold standard installed.
Drain the swamp is going to happen even if it takes Trump down.

Well, fingers crossed.

"why is she doing it?"

Bowing to pressure from the super dumb AOC

Yet, to the rabid blood lusting Republican alligators he has passed up several golden opportunities to "bomb the hell out of Iran". He even called off an airstrike in mid flight as the Iranians had only blown up a drone, and the estimate of Iranians deaths was, er, 63, I think (presumably a highly improbable minimum figure). More Kennedy than Bush, much to my surprise.

The traditional Republicans and the traditional Democrats just love bombing people in far away places, almost to a man. Read John Pilger on that one. Trump was elected because he was the only hope of the war weary classes (how scary is that).

More Kennedy than Bush is perhaps on the money - both of them do their own thing and rely on family, as opposed to the party machine in making decisions. Trump's really unaligned at heart - eventually realising that Americans aren't mature enough to vote in an independent.

Trump registered as a Republican in Manhattan in 1987 and since that time has changed his party affiliation five times. In 1999, Trump changed his party affiliation to the Independence Party of New York. In August 2001, Trump changed his party affiliation to Democratic. In September 2009, Trump changed his party affiliation back to the Republican Party. In December 2011, Trump changed to "no party affiliation" (independent). In April 2012, Trump again returned to the Republican Party.

That is actually quite surprising, most Americans seem to be chained to Red or Blue for their lifetimes

The traditional Republicans and the traditional Democrats just love bombing people in far away places, almost to a man.

No longer, according to these sources:

https://www.moonofalabama.org/2019/09/how-russian-and-iran-beat-their-op...

http://www.unz.com/pcockburn/the-saudi-arabia-drone-attacks-have-changed...

https://www.strategic-culture.org/news/2019/09/23/a-precision-strike-on-...

I believe they only need 50% in the house. Then there is a trial in the senate overseen by the Chief Justice and then they need 66% to remove from office.

The thinking by dems is it’s worth impeaching him in the house because of the high crimes and misdemeanours regardless of the likelihood of conviction in the senate.

Regardless of what the senate do he will still be just as impeached as Nixon and Bill Clinton but like Clinton he will likely continue his presidency.

It's only an enquiry, no decision to impeach had been made yet. My reading is this is an attempt to tread the line between the left of the party demanding action and those who fear a failed impeachment benefits trump. Get an inquiry going, get the evidence out in the open to energise the democratic voters, don't carry through with the impeachment unless still required after the next election.

The Fed is keeping up the interventions in the repo market.

https://www.businessinsider.com.au/fed-repo-injects-105-billion-into-mar...

Oh dear, we're past the quad witching and still the market needs these interventions.. so much for it being a temporary liquidity issue at end of quarter. And the amounts are trending up.

They've announced they will continue this daily funding every day until October 10. Pretty doubtful that will be the end of it.

Cranking higher and higher.... How long till there is not enough to keep the calm???
$200b ? $500b ? I dont think that many have faith in the Fed's ability to control the slide.

Ziera Retail , formerly Kumfs Shoes , has stepped into bankruptcy ... they employ 140 people in NZ , and a similar number in Australia ...

... couldn't foot it with the big box stores , and online sales ...

More and more hitting the wall. I read an artical a few years back that there hadn't been many bussiness go bankrupt for a long time due to the low interest rates. We are even lower we are seeing firms fall apart...
Not long now, till the cracks turn into a landslide.

Retail across the world has been on a down trend for a few years now. In the UK many town centres were decimated as retailers moved into large shopping centres. Shopping centres then became somewhere to go for the day - you don’t have to spend money in the shops, It’s a warm and dry place to visit and you can get something to eat at the foodcourt.
Have been observing this at Sylvia Park.... plenty of people walking about but hardly anyone buying. We visited the Newmarket Westfield a couple of weeks ago which was a complete letdown as most of it isn’t open yet. You needed a parking app to park for 2 hours free.... we stayed for a total of 2 hours and 35 minutes - as we needed to visit shops on Broadway too and it cost us a fortune so won’t bother going back. Can see this new shopping centre as being a very, very costly mistake.

Informative podcast here from macrovoices on the repo thing if anyone wants to try and get their head around it. Fairly ominous warning by the sounds of it

https://www.macrovoices.com/podcasts-collection/macrovoices-all-stars-po...

Certainly a good podcast on this by Jeff Snider.

I wonder if this is a form of Backwardation? Or heading towards it.

About UNINTENDED CONSEQUENCES! ......... I read the Herald piece stating that there could be 40,000 housing units in Auckland unoccupied not being offered to rent and locked up .

Well if interest rates were not so low , investors would have no incentive to leave them empty , or even buy them in the first place .

I would suggest that some of these investors have borrowed money in Asia at NEAR ZERO interest rates , and if the capital gain is even 5 % per annum , ( its actually closer to 20%) then its an excellent investment in the long run

Lol good luck on getting 20% capital gain in the Auckland market.

At the moment it’s more like -2% nominal and -4% real.