US factory data positive; Japan grows better than expected; Chinese data underwhelms; NSW forces landlords to give rent relief; UST 10yr 1.26%, oil down and gold up; NZ$1 = 70.2 USc; TWI-5 = 73.2

Here's our summary of key economic events overnight that affect New Zealand with news investors are stepping back in the wake of the Afghanistan turmoil and a noticeable slowdown in China.

But in New York, the latest factory survey shows business activity continued to expand, though growth was markedly slower than last month’s record-setting pace. New order levels dipped but unfilled order levels rose as supply constraints don't show any easing. Prices paid and prices received both are expanding at record rates.

And better than expected private consumption along with better than expected capital expenditure both powered the Japanese economy to a better than expected expansion in the June quarter. This growth comes after a weak Q1 when it contracted -3.7%, and dismissed the possibility Japan had slipped back into recession.

It's not all good however. Many analysts expect growth to remain modest in Q3, if at all, as state of emergency curbs reimposed to combat a spike in pandemic infections weigh on household spending again.

There was more data released overnight confirming the slowdown in the Chinese economy. Tighter credit conditions are biting along with pandemic lockdowns in parts of their economy too. The recent flooding isn't helping either.

Chinese retail sales in July significantly missed expectations, rising +8.5% from a pandemic affected July 2020 and only +7.2% above July 2019 which for them is quite the come-down. Industrial production turned in a similar big miss.

Electricity production was up +12% from July 2019 primarily from thermal power, nuclear power, and wind power which all grew rapidly in July, while hydropower's decline narrowed, and solar power also declined. The rising demand and rising supply pressure on electricity is putting a serious dent in China's production of aluminium. Aluminium prices are surging. Tiwai Point's deal looks like the bargain of the century now.

Chinese house price growth stalled in July, which will make their policymakers happy because they have been actively seeking to quell this housing speculation.

China needs to get this slowdown sorted because it is facing significant labour market pressure - and that is according to views at the top of the Beijing government. It now says it will prioritise employment with its fiscal and monetary policies while their labour market remains under pressure.

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In an urgent law change late yesterday, NSW commercial landlords are now required to provide rental relief to tenants with annual turnover of up to AU$50 mln. Landlords there are not happy.

There were another 478 new community cases in NSW yesterday with another 337 not assigned to known clusters, so they are still not getting on top of their outbreak. It has spread into regional NSW now, and now NSW is reporting more than Fiji is reporting, the first time in a long time. Victoria is reporting another 22 new cases yesterday, a growing number and their lockdown is extended for another two weeks, this time with a curfew. Queensland is reporting 1 new case. NT has cases now. Overall in Australia, more than 26% of eligible Aussies are fully vaccinated, plus 22% have now had one shot so far.

In early afternoon trade the S&P500 is unchanged on Wall Street, but that is an improvement from the -0.6% it was down earlier. Overnight European markets fell by about -0.7% with London down -0.9% and Frankfurt down -0.3%, the rest in between. Yesterday Tokyo closed down a sharp -1.6%, Kong Kong was down -0.8%, but Shanghai closed unchanged. The ASX200 ended down -0.6% and the NZX50 Capital Index ended down -0.3%.

The UST 10yr yield starts today at 1.26% and down -2 bps. The US 2-10 rate curve is noticeably flatter at +104 bps. Their 1-5 curve is also much flatter at +67 bps, and their 3m-10 year curve is also flatter at +120 bps. The Australian Govt ten year benchmark rate starts today at 1.16% and -3 bps lower. The China Govt ten year bond is at 2.91% and up +2 bps. The New Zealand Govt ten year is now at 1.72% and -2 bps.

The price of gold has risen +US$7 from this time yesterday to US$1787/oz.

Oil prices are -US$1 softer from this time yesterday, so in the US they are just over US$67/bbl, while the international Brent price is just over US$69/bbl.

The Kiwi dollar opens today at just under 70.2 USc and marginally lower. Against the Australian dollar we are at 95.6 AUc. Against the euro we are at 59.6 euro cents, both little-changed. That means our TWI-5 starts today at 73.2 and still in the narrow range of between 72 and 74 we have been in for ten months now.

The bitcoin price has weakened slightly today and is now at US$46,501 and is down -0.1% from this time yesterday. Volatility in the past 24 hours has been moderate at just under +/- 2.4%.

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