Equity markets in sharp falls; US jobs growth wanes; WTO ruling invokes more tariffs; Japan consumers gloomy; Aussie rate cut contested; UST 10yr yield at 1.59%; oil down and gold up; NZ$1 = 62.6 USc; TWI-5 = 68.2

Equity markets in sharp falls; US jobs growth wanes; WTO ruling invokes more tariffs; Japan consumers gloomy; Aussie rate cut contested; UST 10yr yield at 1.59%; oil down and gold up; NZ$1 = 62.6 USc; TWI-5 = 68.2

Subscribe to our daily podcast here.

Here's our summary of key events overnight that affect New Zealand, with news there is blood on the equities trading floors.

Wall Street is having a very bad day. In early afternoon trade the S&P500 is down almost -2% and falling. Benchmark bond yields are falling sharply too.

The US ADP employment report has come in weak, undershooting analysts expected results and far less than for August. This is the precursor report for this weekend's American non-farm payrolls report and recall last month the ADP data (+157,000) was more positive than the official data (+130,000). This slowing of hiring is a key source of market gloom.

The US service sector is also losing its mojo.

And the trade wars are getting worse. The US is about to tariff EU goods and especially Airbus products. A new tit-for-tat round is about to start and American factories will be affected as much as EU ones. Interestingly, this decision is a WTO one, and comes before the EU case decision against Boeing and the subsidies it receives from the US government.

In Europe, they took even greater fright overnight with equities there falling more than 2.5%, and London was the hardest hit, down -3.2%.

In Japan, consumer sentiment weakened for the 12th straight month in September, hitting its lowest level since the survey started in April 2013.

Markets know all this trade war stuff is counterproductive and recession-inducing; it is just nationalist politicians who can't see the damage that is being done and it may now be too late to stop a global recession no matter what the monetary and fiscal authorities do. World trade is worth about the same as the GDP of the world's largest economy (about US$20 tln) and about a quarter of global GDP, and even small reductions involve huge flows, flow changes that overwhelm most economies. For example, if the US economy grows +2% this year (which now seems unlikely), a -5% fall in world trade (which is now possible) will wipe out all the growth they may have been expecting from their share of the fall. Worse for them, their largest multinationals and the source of their huge investment flows inward, are likely to be the hardest hit.

In Vancouver, housing sales were up more than +40% in September from a year ago, now back to normal historical levels.

In Hong Kong, retail sales tumbled -23% in August from the same month last year as the massive anti-government protests take their toll on their economy. Street protests continued overnight in reaction to police shootings of demonstrators.

In Australia, all four majors have announced that only a portion of the RBA rate cut will flow through to mortgage borrowers, about -15 bps of the -25 bps RBA benchmark cut. The rest will be retained for savers who won't get the full cut to their interest rate. Bank-bashers including most politicians are having a field-day, although conveniently ignoring the saver-benefits.

The UST 10yr yield is down -5 bps to 1.59%. Their 2-10 curve positive at +11 bps. Their negative 1-5 curve is wider at -26 bps. But their 3m-10yr curve is narrower at -17 bps. The Aussie Govt 10yr is firmer at 0.95%, an rise of +3 bps. The China Govt 10yr is unchanged at 3.16%. The NZ Govt 10 yr is at 1.06%, a -5 bps fall from yesterday.

Gold has risen further today, up another +US$19 after yesterday's +US$13 rise and is now back up to US$1,501/oz.

US oil prices are lower yet again today, down another -US$1 and now just over US$52.50/bbl. The Brent benchmark is just over US$57.50. Weak demand views are behind the reductions.

The Kiwi dollar is firmer today, now at 62.6 USc and off its decade lows. On the cross rates we are back up to 93.4 AUc. Against the euro we are at 57.2 euro cents. That puts the TWI-5 back to just on 68.2.

Bitcoin is now at US$8,215 and -2.8% lower than this time yesterday. 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 ».

Daily exchange rates

Select chart tabs »

The 'US$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'AU$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'TWI' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥en' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥uan' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '€uro' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'GBP' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'Bitcoin' chart will be drawn here.
Loading...
USD 
NZD
End of day UTC
Source: CoinDesk

Daily swap rates

Select chart tabs »

The '1 year %' chart will be drawn here.
Loading...
Opening daily rate
Source: NZFMA
The '2 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: NZFMA
The '3 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: NZFMA
The '4 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: NZFMA
The '5 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: NZFMA
The '7 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: NZFMA
The '10 years %' chart will be drawn here.
Loading...
Opening daily rate
Source: NZFMA

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

48 Comments

Comment Filter

Highlight new comments in the last hr(s).

For those suffering from weltschmerz as they watch TD's limbo under the inflation bar, here's a catchy tune to cheer y'all up. No chickens were harmed in the making of this video, although homing pigeons in the vicinity of Pachelbel's grave are said to experience magnetic disorientation. Scientists attribute this to subterranean rotational effects.

"with news there is blood on the equities trading floors"

When the stock markets surge upwards on sentiment (aka speculation) rather than good earnings data and positive business models then of course you can expect them to correct as soon as you cant find a bigger fool to sell to

I don't think that the growth in business activity in one country can so easily be compared (or scaled) with changes in worldwide trade.

Thanks very much Donald.

16
up

Blood in the streets of Hong Kong, for sure. Nothing to do with interest rates being too low for too long, so house prices are unbelievably high and people have to live in cages? Of course not, you unsophisticated fellow!

The dark forces of institutionalised saver hatred have overrun the perimeter. They hurt first home buyers and pensioners the hardest, it seems. How do we turn this around?

Auckland, 2025?
https://www.theguardian.com/cities/gallery/2017/jun/07/boxed-life-inside...

Great link - thanks. Nothing like context....

I see they are very time efficient, you can take care of the morning ablutions while cooking breakfast and doing laundry at the same time..
Thats just so disgusting..

A case of time and motions

Dibs not doing the time & motion study for that use case...

A couple of million mainland immigrants moving to one city would probably have more to do with it than interest rates? Bumping up voting numbers communist style.
https://www.statista.com/statistics/901381/number-of-immigrants-from-mai...

Completely unlike Auckland, of course?

Yeah having a policy of one immigrant for every baby born here may have something to do with it. But of course we all voted for this 1:1 policy so can't complain.

Competition for a place in one of Hong Kong's top universities is fierce, but even if you do get a spot and graduate, a good job or stable income isn't guaranteed. Increasingly, Hong Kongers are also competing for jobs with Chinese students.

Mr Chan published a report looking at wage growth and living costs for Hong Kong's youth over the last 30 years. He found that while starting salaries have stagnated, property prices have gone up tenfold.

https://www.bbc.com/news/business-49848073

Wow. State house tenants have no idea how bad their lot would be overseas.

So is looting part of the democratic agenda now? Is this some kind of expression of freedom or a blatant disregard of the law and the sequestration of the rights of others in the society? Link

I see the herald has a (paywalled) article about westpac bankrupting a property investor who couldn't pay her mortgages. I expect to see more of this in the coming year or two.

"Yingqui Zhang", yep.

There is also a big mortgagee sale of sections up on the North Shore. We can presume from this the developer has gone bust and importantly section sales are slowing right down.

looks like an investor who tied to use leverage in a rising market to make hay with CG and got caught holding to long as the market turned.
happens all the time, like all markets property rises and falls the only constant is over time it rises.

https://www.msn.com/en-nz/news/world/putin-i-dont-share-excitement-about...

You know the old narrative is in trouble when they acknowledge the harbingers of the new.

And David - "and it may now be too late to stop a global recession no matter what the monetary and fiscal authorities do". How about removing the word 'may'? This phase has been inevitable, and predicted, for 50 years. Only those who chose to believe a false narrative, have been able to avoid this truth. As Rowan Atkinson said in his devil-skit - 'My, there were a lot of you'.

In regards to Putin's remarks.

I have to agree that using kids to peddle their message is ridiculous.

Im betting half of the kids that protested think that CO2 is a poison, and dont understand that CO2 feeds plants which convert that CO2 back into O2 and carbohydrates, which essentially feeds all live on earth.

Just don't tell them they emit CO2 when they exhale.

I am confused over this term using kids to peddle their message. Is she being paid or coerced some how? I think she did her own research, looked at the scientific evidence and came to her own conclusion. Whether you believe in climate change or not, or the world is flat cannot you just agree the environment is being detroyed and some big changes are needed quickly - we cannot carry on the same path? Why is everyone so upset by a 16 year old girl - quite wierd really. Mostly thoughs invested in the satus quo and cannot think for themselves.

"Why is everyone so upset by a 16 year old girl"

One reason = Because she clearly doesnt understand the predicament ...
Try cutting off the supply chains to a city (ie all those inputs also known as fossil fuel CO2 nasties) and see how long it continues to function...
She wants Politicians to do something so she can go back to her life (style)

You can shuffle climate change down the worry list ... We have overshoot to deal with before then

"She wants Politicians to do something so she can go back to her life (style)" - no she wants a complete transformation of the planet - so that her kids can wander around like she is doing now. You are stuck in Boomerland - gobble up future resources as fast as you can and pull the ladder up as you go.

Why the Green New Deal Won’t Really Work

"Because you’d kill maybe 7 to 7.5 billion people. Try feeding 7+ billion mouths without fossil fuel inputs. Try growing crops to feed 7+ billion without fossil fuel inputs or raising livestock without fossil fuels. Greta Thunberg and the AOC cabal can’t seem to figure this out. The entire global infrastructure and the globalized “Just in Time” delivery network is dependent on fossil fuels. Without the J.I.T. delivery system all of your supermarkets and Walmarts would be empty in a matter of days.

Yes all food is grown and supplied from Supermarkets? I shop at a farmers market - does not seem that hard. Try laying of the meat and dairy for a few weeks - go on dare you too!

So vegetables have no carbon footprint?

Sept - Oct have traditionally been fragile months for stock markets, it could get much worse than 2% down which is nothing

This isn't a linear process - it's exponential.

Your comment is linear - even though it quotes a percentage :)

Sorry I only know how to type line by line, not exponentially

Write 1 extra word per line?
Might give PDK some intuition on asymptotics / limits that he missed during his education.

Your education missed the last doubling of them all on a finite planet. You need to be standing well back and seeing the big picture for that. Not often taught in the hallow'd silos.

I wonder if Forrester used his understanding of statistical mathematics in formulating the "bullwhip effect", or when developing the models uses in the Club of Romes work?

Typical of you to quote maths that deals with infinites.

True. Sorry for referencing that devil Euler.
I guess the natural sciences will just have to think of some other framework for which to base their calculus.

People who need to appear clever, usually appear as people who need to appear clever. Plain English usually suffices.

It's the growth-acclaiming, growth-expecting, short-term-is-permanent-assuming, price-will-produce-a-substiture-at-some-point-assuming discipline (if such we can call it at this point; it's trousers being so far down) that is in plain-speak trouble.

It's called 'economics'. Sadly, a lot of the others thought it knew what it was talking about.

Plain English? If the name Euler doesn't reference anything in your lexicon, you require plainer than plain English.

You performed your normal spiel about exponential growth. I told you why (positive) non linear growth rates cannot be globally permanent - ironically implying the opposite is the 'short-terminism' that you accuse economists of.

No one could understand what you're talking about because you talk in riddles

If Aussie banks pass on rate cuts they will become very sick lads.

"Markets know all this trade war stuff is counterproductive and recession-inducing; it is just nationalist politicians who can't see the damage that is being done and it may now be too late to stop a global recession no matter what the monetary and fiscal authorities do."
What about the damage from certain trade deals and globalisation? It's almost a pick your poison situation. We will struggle with our high minimum wage and high input costs in an increasingly open globalised world, what can we afford to produce to sell?

Very little unless there are tariffs in place. The folly of globalisation - production in low cost dictatorships (read China) and no production locally. How does this end well ?

Yup. It truly is becoming for vs against globalisation. Nationalism gets thrown about as a convenient (and derogatory) label but is a slight misnomer in my opinion and would be more to do with immigration than trade.

Yes, that comment is more opinion than fact

The UST 10yr yield is down -5 bps to 1.59%. Their 2-10 curve positive at +11 bps.

This bear steepener in reality (bull steepener in bond trading) is perfectly clear. The short end drops quickly with the long end following if at a slower rate. Nominally, the whole curve shifts lower but because the short end is moving fast the curve steepens while it shrinks. Traditionally, this is the recession signal.

Local NZ govt yields are being pulled back down to previous lows. The cat has bounced.

Looks like well below those levels, to me.

#Fed rate cuts not likely to fuel stocks higher as they did in 1990s, UBS says: Fed-easing rallies of 1990s were made possible by inverse correlation betw rates & P/Es. This relationship no longer exists. Since Fed easing began in Jul, lower rates have translated to lower S&P500. Link