Wall Street down sharply; US consumers maxed out on debt; Australia says do not travel to China; China faces grain shortages; oil down and gold up; NZ$1 = 66.3 USc; TWI-5 = 69.4

Wall Street down sharply; US consumers maxed out on debt; Australia says do not travel to China; China faces grain shortages; oil down and gold up; NZ$1 = 66.3 USc; TWI-5 = 69.4

Here's our summary of key economic events overnight that affect New Zealand, with news Wall Street is in full retreat today.

But first up, apologies for our late start today. We had an internal server issue - it was not a DDoS attack. phew.

First, Wall Street has returned from their Labor Day long weekend in a grumpy mood. The S&P500 was down -2.8% but it is worse in tech with the NASDAQ down -4.1%. Overnight, European markets were similarly negative, down -1.5% on average. Yesterday Shanghai ended up +0.7%, Hong Kong closed up +0.1% and Tokyo was up +0.8%. The ASX200 was up +1.1% and the NZX50 Capital Index was up +0.3% at the close.

One driver was the falling oil price, down as global demand weakens.

Another may be the new Fed data showing a slowing of growth in consumer debt, probably indicating consumers are maxed out now.

In an echo from the escape from China by Australian journalists, Australia has now issued a ‘Do Not Travel’ warning to all its citizens over the fear of arbitrary arrest and State hostage taking.

These sort of tensions are seeing local governments adopting special arrangements to retain and attract the special skills of foreigners. Beijing City is mulling a 15% top income tax arrangement as one incentive to come or stay. That is a huge reduction from their standard 45% rate for high-paid workers for incomes over NZ$200,000.

And staying in China, a team of Chinese researchers has found the coronavirus that causes COVID-19 can survive for more than a week on the surface of chilled fresh salmon, raising implications that it could be a source of international transmission.

And the widespread recent bad weather and major storms in China have exacerbated their food security pressures. Grain prices have now hit five year highs.

We don’t often note events in Indonesia, but here’s something interesting. E-commerce sales there will exceed US$40 bln this year, large enough to be larger than for India. The pandemic is remaking retail in the world’s fourth largest country by population.

In Australia, business confidence remains weak. Business conditions unwound most of the previous month’s gains – mainly reflecting a weakening in the employment index, though trading and profitability were also weaker. There is some way to go before they are in recovery mode.

The latest global compilation of COVID-19 data is here. The global tally is 27,401,000, up +200,000 since yesterday. Global deaths now exceed 894,000.

Just under a quarter of all reported cases globally are in the US, which is up +24,000 to 6,496,500 and a relentless rise despite the holiday weekend and the official reluctance to test. Their death total is now 193,700.

In Australia, there have now been 26,374 COVID-19 cases reported, and that is only +52 more cases overnight and clearly the Victorian emergency easing. Deaths however have now topped 770.

The UST 10yr yield is down -4 bps and now at 0.68%.

The price of gold is up +US$10 and now at US$1,939/oz.

Oil prices are lower today, down to just on US$39/bbl in the US while the international price is down to just on US$42/bbl.

The Kiwi dollar is softer again today and now at 66.3 USc and more than a half cent fall overnight. Against the Australian dollar we are softer too at 91.6 AUc. Against the euro we are down at 56.3 euro cents. That means our TWI-5 has slipped -50 bps to 69.4.

The bitcoin price is little-changed today, down but only marginally to US$10,162. 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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21 Comments

ASX-SFE night session down 98 points

Jobkeeper subsidy drops at the end of this month (to $1,200 per fortnight) and the initial 6 month mortgage deferral, which was due to expire at the end of September has been extended another four months.

Bumpy road ahead.

Thanks David, the daily updates are great. Is there anyway you can include a bit more local rhetoric?

I wonder how that person I spoke to last week that was so bullish on his newly acquired Telsa shares, and didn't know what a PE was, feels today?!

-35% in 5 days. Ouch!

I love tesla, but TSLA at 480 made me request short selling privileges, having never wanted to do it before in my life. By the time they were instated on my account it was down to 370, and now 325. Oh well.

It is always those buying at peak / last gets hurt the most be it stock market or housing market unless have deep pockets

The price of Tesla had been pumped in anticipation of it being included in the S&P500 index on the latest revision at which point the Managed Index Funds have to buy it and include it in their portfolios. It wasnt to be so the front-runners are unloading. Last I heard, 80% of all managed funds are index funds

Index inclusion is over-stated. Look at those companies that were surprise inclusions when tesla was left out. They're down too.

Buy the dip in stock market has worked till now to pull it back along with FOMO.

Will it this time also bounce back or fall another 10% to be termed as crash.

The expected shift down is now on: in oil demand, markets, consumer credit, trade.
Chinese food inflation plus USA bad harvest is a canary for inflation (unexpected of course!) in the winter.
So, then effective interest rates WILL be negative, relative to inflation, a point usually neglected.
Unemployment about to start rising in earnest.
UK and EU in the mire, worse than ever.
Not a good prospect.
No wonder people after safe havens for their money!

The article puts Anglo-Saxon capitalism's excesses at the front and centre of the US-China 5G debacle and why Nordic companies, Ericsson and Nokia are the likely winners with American corporations having less skin in the game.

Lucent’s demise is a uniquely American story. The decisions made by its management were shaped by US capital markets which reward short-term results. In contrast, operating in continental European capitalism, Ericsson and Nokia survived the dotcom crisis as they pursued long-term objectives, subject less to the vicissitudes of capital markets
it [Anglo-Saxon capitalism] lacks the patience to cultivate incremental innovations over the long term, as the telecoms equipment industry often requires

https://www.scmp.com/comment/opinion/article/3100608/why-nokia-or-ericss...

No doubt we'll be more circumspect about the superiority of Anglosphere capitalism going forward. And that has to be a good thing. But it also has to start with the stranglehood of Anglo thinking about monetarism as well. We basically created and promoted the economic models globally that have taken us to the edge of the cliff.

Here a shoutout to the Rural News.

Calling out the strangeness of David Parker
https://www.ruralnewsgroup.co.nz/rural-news/rural-general-news/farming-o...
- imagine the senseless scienceless administration of zero carbon.

And for the on the ground problems caused by Aucklands border lockdown:
https://www.ruralnewsgroup.co.nz/rural-news/rural-opinion/dad-s-army-ant...
- the bits missing from the daily standups.

That first one, HT, takes the 'silliest comment' award. I'd be ashamed to link such a diatribe.

Woo hoo. The story of the Aussie journalists is awfully interesting. Is it the beginning of a squeeze on China? Are they starting to isolate themselves in a traditional xenophobic manner? Will other countries do the same to their journalists? Will they put pressure on other foreigners? We live in interesting times.

Apple stock on 112 today. In March it was on 56
Not a bubble of course, oh no.

More global doom and gloom. The NZ house prices to push higher then....

Everything is working fine.
- says part time health minister.
Police involved with covid contact tracing.

"We've got community leaders in there, we've got police working alongside Auckland Regional Public Health as well to make sure we are getting all of the information that we need.

https://www.rnz.co.nz/news/national/425580/covid-19-student-who-tested-p...

And remember this is after the fact.

This is getting serious
Over the past 4 weeks there has been an orchestrated deluge of simultaneous press releases from the "community leaders". Press releases every 2 days, in NZ Herald, Stuff, Radio NZ, Newsroom, plus Barbara Drever on TVNZ and now Meng Foon pleading for "special treatment" and amnesty and granting of automatic citizenship for overstayers who refuse to come forward. Guarantee amnesty and citizenship and they will come forward they say. Otherwise they won't. That is extortion and blackmail, holding the rest of the community to ransom. Meanwhile headline in Stuff today - "congregation hampers contact tracing" Police are involved. Newsroom headline - Meng Foon calls for overstayer amnesty for "the good of all" Sympathy is being eroded