Here's our summary of key economic events overnight that affect New Zealand, with news of some very aggressive Chinese regulatory action overnight.
But first, the world is waiting on the US election results. Short lines and calm are features of today's turnout. It may be days before it is clear, but markets are already betting on a change in leadership, even a Democratic sweep. Equity markets are up, commodity currencies are back in favour, and UST bond rates are rising on the expectation that the new Congress will need to issue a lot more fiscal recovery debt. But early chicken-counting is a high risk game.
In the US, data for last week's retail sales was positive with good gains reported over the weak prior week. And compared to the same week a year ago, the rise was +3%.
US factory orders for September also came in slightly positive compared to August, but they were -2.6% lower than the same month in 2019. But it was positive to see non-defense capital goods orders rise +6.1% year-on-year.
China called a sudden halt to the world’s biggest initial public offering citing "major issues" in a mammoth US$37 bln event that drew US$3 tln in offers. It has cast real uncertainty over the future of fintech giant Ant Group and delivered an extraordinary rebuke to its controlling shareholder, Jack Ma.
China also announced that its trade in services continues in deficit, with both exports and imports of services falling very sharply in the first nine months of 2020.
And China’s big six state-owned banks reported a sharp decline in profits and a rise in non-performing loans (NPL) ratios. This comes as their total business activity rose a strong +6%, but clearly increasing sections of their activities are unprofitable.
China is ramping up its punishment of Australia for its security and human rights challenges to the Middle Kingdom. The list of goods China is blocking its traders from importing now includes coal, barley, copper, sugar, timber, wine and lobster, with sugar being the big new one added to their list. Iron ore is not being included.
Yesterday's late RBA decison brought the rate cut expected, down to just above zero, but also a much more aggressive overall QE package than expected. As a consequence, Aussie bond rates fell, but the expected fall for the AUD hasn't happened yet - even though that is a key driver for the RBA; they want a lower currency to aid their recovery, a recovery they need to meet their jobs goal. And preventing any more job losses, and reversing the recent deterioration is the final test of whether this new policy will be effective. The Governor mentioned jobs 18 times in his explainer and justification speech.
So far, none of the main Australian banks have passed on any of this official rate cut.
The overnight dairy auction was a weak one. Not only did prices fall -2% in US dollar terms, the rising NZD undermined the results in local currency where they were down -3.8%. Butter prices were up +3.9% but SMP fell -4.4% and WMP fell -2.0%. Analysts will be holding off any more rising estimates of the farm gate milk price and most of them did not see this drop coming.
Equity markets have risen again today on those hopes of a clear election result. The S&P500 is up +2.0% in early afternoon trade and European markets were up even more by an average of +2.5% overnight on top of Monday's strong gains. Yesterday, Shanghai rose +1.4% and Hong Kong was up +2.0% but Tokyo was on holiday. The ASX200 ended up +1.9% but the local NZX50 Capital Index was the laggard and only managed a +0.5% gain.
The latest global compilation of COVID-19 data is here. The global tally is 47,331,000 and a huge +643,000 rise overnight. It is very grim in Russia and Western Europe with serious stress on their hospital systems (and especially in Belgium). Global deaths reported now exceed 1,203,000.
The largest number of reported cases globally are still in the US, which rose +90,000 since yesterday to 9,579,000 as their surge grows and by far the most of any country. The pandemic is now particularly sever in the Midwest states. The number of active cases is higher at 3,167,000 so many more new cases more than recoveries. Their death total now exceeds 237,000 and still rising at +1000 per day.
In Australia, they are not getting any resurgence. There have now been 27,610 COVID-19 cases reported, and that is just +8 more cases than we reported yesterday. Reported deaths are unchanged at 907.
The UST 10yr yield is up +5 bps today at just under 0.89%. Their 2-10 rate curve has steepened to +72 bps, their 1-5 curve is also steeper at +27 bps, while with their 3m-10 year curve is significantly steeper at +80 bps. The Australian Govt 10 year yield will start today up +2 bps at 0.84%. The China Govt 10 year yield is little-changed at 3.20%. And the New Zealand Govt 10 year yield is down -2 bps at 0.54%.
The price of gold has risen again overnight, up +US$15 at US$1907/oz.
Oil prices have firmed again overnight and are now at just over US$37.50/bbl in the US, while the international price is now over US$39.50/bbl. But both up about +US$1.50/bbl.
And the Kiwi dollar is much firmer this morning from this time yesterday at 67.1 USc and that is a rise of nearly +1c as commodity currencies gain on the risk-on market mood. Against the Australian dollar we are weaker however at 93.6 AUc as the Aussie gains more than us. Against the euro we firmer at 57.2 euro cents. That means our TWI-5 is up at 70.3 and it's highest in six weeks.
The bitcoin price starts today at US$13,516 and -1.6% lower than where we left it 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 ».