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Here's our summary of key events overnight that affect New Zealand, with news investors are pulling out of equity markets as risks pile up. Bond markets are the beneficiary.
First, American retail sales in September have come in weaker than expected. In fact, instead of rising marginally, they fell from August. Year-on-year, they were up +3.8%, and that was sharply lower than the +4.5% annual rise in August. Markets weren't impressed. And not helping was data that shows inventories rising faster, up +6.2% year-on-year.
In Canada, their CPI came in at +1.9% in September, stuck at the same level now for seven straight months. It will probably mean that the Bank of Canada rate will stay at 1.75% at its next review on October 30.
In China, there are reports that office vacancy rates are starting to rise to worrying levels, even in their top cities. In Beijing it is approaching 10%. Surging supply is overwhelming flagging demand. They don't need a commercial property crisis.
The EU also released inflation data overnight and that came in at just +0.8% in the year to September across the whole bloc. This was lower than expected and down from +1.0% in August. Inflation rates ranged from negative in Portugal to over 3.5% in Romania. France was 1.1%, Germany was 0.9%, Italy was 0.2% and the UK was 1.7%.
There is a summit of EU leaders is about to start and of course the main issue is the Brexit. The pre-leaders meeting negotiations are intense and no-one has walked out yet, so these down-to-the-wire talks must be making progress.
On Wall Street today, equity prices are lower; not by a lot but the S&P500 is down -0.2% so far. A resolution of the GM strike is making no difference to the mood. That follows European markets that were mixed with the German DAX up the most and the London FTSE down the most of the majors.
Yesterday, both the ASX and the NZX were the stars, rising +1.3% and +1.2% respectively.
However, American investors generally are showing real concerns about the trade wars and have pulled about US$60 bln out of equity markets in the September quarter of 2019. In the September quarter of 2018 they added $20 bln into equity markets. The bearish turnaround represents the largest pullback since 2009 in the GFC. Meanwhile, in the same period bond funds recorded a net inflow of US$118 bln, double the same period in 2018.
Federal Reserve officials are preparing themselves for another GFC-type meltdown. And they say negative interest rates are a viable tool to provide stimulus to economies that need it. Policy makers see these types of actions as a 'strength' while the business community just sees them confirming weakness.
The UST 10yr yield is down -1 bp at 1.75%. Their 2-10 curve is positive at +16 bps. Their negative 1-5 curve is back down to just -3 bps. Their 3m-10yr curve has disappeared, now at 0 bps. The Aussie Govt 10yr is up +2 bps at 1.06%. The China Govt 10yr is up +1 bp at 3.19%. The NZ Govt 10 yr is now at 1.19%, up just +1 bp since this time yesterday.
Gold is back up today, up +US$10 overnight to US$1,489/oz.
US oil prices are little-changed again today at just under US$53.50/bbl. The Brent benchmark is just on US$59.50.
The Kiwi dollar is little-changed today, now at 62.9 USc. On the cross rates we are just under 93 AUc. Against the euro we are lower at 56.7 euro cents. That puts the TWI-5 at just on 68.1.
Bitcoin is lower at US$7,970 and down another -2.5% overnight. 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 ».