A review of things you need to know before you go home on Wednesday; another TD cut, good dairy prices, trade diversifies, Aussie services sector stumbles, 'psychic derangements', swaps unchanged, NZD lower, & more

A review of things you need to know before you go home on Wednesday; another TD cut, good dairy prices, trade diversifies, Aussie services sector stumbles, 'psychic derangements', swaps unchanged, NZD lower, & more
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Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes to report today.

TERM DEPOSIT RATE CHANGES
SBS Bank is the latest bank to cut TD rates. Update: ANZ also cut but only to match BNZ and ASB. The Cooperative Bank is following them down but with a small premium to the main banks. And we know another bank will move down tomorrow.

GOOD NEW SEASON RESULT
The latest diary auction rose +2.2% on top of the prior +3.6%. This one was led by butter (+8.4%) and on relatively high volumes for a season that is peaking soon with higher output to come. At least one analyst said "the result introduces some upside risk to our forecast" for farm gate milk prices.

LESS RELIANCE ON CHINA
New data out from StatsNZ monitoring our merchandise trade exports shows that as at the end of September we had exported just a fraction under NZ$40 bln to all countries in those nine months. Despite COVID, that was marginally more than for the same period in 2019. But exports to China were down -2.9% on the same basis at $10.2 bln in the nine-month period. To Australia, we were down -7.5%. To the US we exported +19.4% more. To Japan, it was +2.3% more. To the EU it was unchanged. To other countries we were unchanged as well. That means during COVID in 2020 we have diversified away from China and Australia, and to the USA. But China still takes 25% of all our exports (a proportion vastly less than for Australia).

SENTENCE FOR FRAUD
A former employee of a charity that offered social support services in Auckland has been sentenced to two years and one month of imprisonment on charges brought by the Serious Fraud Office. Tapualii Raewyn Uitime (49) was sentenced today in the Manukau District Court on three representative charges of ‘Forgery’ and six representative charges of ‘Dishonestly using a document’. Ms Uitime defrauded the now defunct Pacific Island Safety and Prevention Project of approximately $260,000. The defendant was the operations manager of the charity, which received most of its funding from the Ministry of Social Development, Ministry of Justice and Department of Corrections.

PAYING PEOPLE TO SPEND, BUT THEY SAVED
In Australia, their household savings rate leaped in the year to June to almost +20%, the highest rate since June 1974. This was driven by the record fall in consumption. Gross disposable income rose +2.2%, driven by an historic +42% increase in social assistance benefits, due to both an increase in the number of recipients and additional COVID-19 support payments.

REALITY CHECK
Here are a few features of the Australian Budget announced late last night. Their 2020/21 deficit is expected to be -AU$214 bln, or 10.8% of their current GDP. Federal debt is due to exceed AU$1 tln when this extra is added. And in three years of expected borrowing, that will take their Federal governmnet debt to 44% of GDP (and still low by international standards). And that is all based on offical assumptions that next year will bring a +4.75% economic growth rate, followed by +2.75% and +3.0% in the two subsequent years. It is over to you to judge how realsitic that assumtion is.

UGLY BACKSLIDE
An indication of how tough it is in Australia's huge service sector came today when the AIGroup services PSI for September which dropped from a contracting 42.5 in August to a much worse contraction of 36.2. This is a serious backslide, and the Victorian lockdown will have had a lot to do with it.

INCREASING IRRATIONALITY
In a fit of partisan pique, the US President instructed his officials to stop negotiating about fiscal support measures for the American economy. Markets reacted badly to the move. The latest move was just a few hours after he tweeted: "OUR GREAT USA WANTS & NEEDS STIMULUS. WORK TOGETHER AND GET IT DONE. Thank you!" One of the steriod drugs the President is on to mask his infection (dexamethasone) has a know side effect of "psychic derangements".

GOLD PRICE DOWN SHARPLY
The price of gold is now at US$1878/oz in early Asian trading, and down -US$34 from yesterday's equivalent price. That is +US$2 more than the closing price in New York earlier, and -US$35 from the London afternoon fix.

EQUITIES UPDATE
After being up +0.6% in mid-afternoon trade, the S&P500 ended down -1.4%, the sharp fall caused by a Presidential tweet (see above). Shanghai is still closed (I got this wrong yesterday; it won't reopen until October 9), Hong Kong is down up +0.8%, and Tokyo is down -0.2% in their opening sessions. The ASX200 is up +0.9% in mid-day trade. The NZX50 Capital Index is little-changed near the close.

SWAP & BOND RATES RISE
We don’t have the final data for today yet and if it is significant we will update it here. The 90 day bank bill rate is unchanged today to 0.28%. The Australian Govt ten year benchmark rate is down -6 bps at 0.85%. The China Govt ten year bond is unchanged at 3.16%. Meanwhile, the New Zealand Govt ten year is down -2 bps at 0.52% but above the earlier RBNZ-recorded fix of 0.50% (-4 bps). And the NZGB five year is down and is now at +0.01% pa. The US Govt ten year is down -2 bps from this time yesterday to just under 0.75%.

NZD SLIPS
The Kiwi dollar is down sharply lower from this time yesterday at 65.9 USc a fall of more than -½c. Against the Aussie we are marginally firmer at 92.6 AUc. Against the euro we are lower at 56.1 euro cents. That all means our TWI-5 is down at 69.2.

BITCOIN ALSO SLIPS
Bitcoin is down -1.6% in today's trade, now at US$10,575. The bitcoin rate is charted in the exchange rate set below.

This soil moisture chart is animated here.

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

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17 Comments

Today's data release from ABS shows that company profit share of total factor income grew 2.9% over June 2020 quarter while taxes took a -11.1% hit and employee compensation was down -1.2%.

None of it contradicts the fact that over the last six years in Australia especially, and over the last 20 years in other countries, and over the last 40 years in the United States, there has been a steady shift in the distribution of income from labour to capital.
Australia was sheltered from that for a while by the mining boom, but not anymore.

- Saul Eslake, University of Tasmania

Seems inevitable that it won't be long before Trump is 'relieved' of his duties for health reasons - he looks to be one very sick puppy.

Can't be long before the markets price in a Biden President.

11
up

Just biden their time?

To be honest I think the whole summary about Trump by Interest above is nothing short of p*ss poor, and incredibly misleading. I wouldn't even call it journalism.

And what summary would you like.........

The most interesting part of the comment is "One of the steroid drugs the President is on to mask his infection". Why does he have to "mask" his infection?

Steroid use for patients with aliments is common in the USA. One of the many reasons their medical insurance costs are frequently said as being out of reach.......

How about just the facts?

If you're on blood pressure medication, of which a negative side effect can be erectile dysfunction, can I insinuate that you can't get an erection, or is that bordering on defamation?

Davids insinuation is even in the headline of this page. He should get out of the gutter.

McConnell told Trump they don't have enough time to both get the Supreme Court issue done and negotiate an extension of the Support Measures - something about not enough Senate time available for debate before the election, so he had to choose one or the other.
Given that he or Biden can implement Support Measures right after the election, but the Supreme Court nominee, that might affect Republican policy for the next 40 years and might get tossed out, he was pragmatic?

13
up

Great article on why the US political establishment hate Trump (and, unfortunately, our dear editor seems to have drunk the Kool-Aid too):

President Trump is not figuratively hurting the financial livelihoods of DC politicians; he’s literally doing it. President Trump is not an esoteric problem for them; his impact is very real, very direct, and hits almost every politician in the most painful place imaginable, the bank account.

In the pre-Trump process there were millions upon millions, even billions that could be made by DC politicians and their families. Thousands of very indulgent and exclusive livelihoods attached to the DC business model. At the center of this operation is the lobbying and legislative purchase network. The Big Club.

https://www.zerohedge.com/political/there-are-trillions-stake-how-washin...

And all those people buying guns for the first time probably won't be voting Democrat, 270,000 first time gun owners, just in Pennsylvania
https://www.zerohedge.com/political/fbi-background-checks-blows-past-ann...

I think that shows how crazy American's are - most of what is going on in America is a home goal.

Seriously - Zerohedge with an anonymous author and you complain about "our editor" . The Rabid Right seem to be getting desperate

Yeah. I'm going to trust our dear editor over a site that is rated by media fact checking sites as low on factual reporting and in the realm of "conspiracy pseudo-science". The irony that you are accusing David Chaston of drinking the Kool-Aid, while sipping on your conspiracy-psuedoscience blog is amazing.

https://mediabiasfactcheck.com/zero-hedge/

politics in australia ,
Ms Berejiklian says states with hard borders such as Queensland and WA would be "better off getting those borders down, creating jobs through tourism and business and generating economic activity and keeping jobs" than continuing to ease restrictions for their own residents.

When Jacinda said she wants houses to remain the same price, is that after a Covid boom or before?

Jacinda you said you would fix the housing problem in NZ and lower house prices. How do you sleep at night? Do you know or even care about your betrayal?

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12371325

Your just a fool to vote for her to think they were going to solve the housing crisis. The labour party have done zilch in 3 years except stuff up the gun laws. We get told they cannot even setup a gun register how stupid is that ? I can tell you that it already exists for Cat B owners and has done for years.