Key commodity costs keep on rising; Fed says tapering this year on track; China CPI falls but PPI at 13yr high; ECB sets modest tapering; UST 10yr 1.30%, oil dips and gold firms; NZ$1 = 71.1 USc; TWI-5 = 74.1

Here's our summary of key economic events overnight that affect New Zealand with news costs seem to be rising steeply everywhere now, far from any 'transitory' indications.

The rise, rise and rise of shipping container freight hit a new milestone this week, with the global average exceeding US$10,000 for the first time for a 40ft unit per journey. That is three times higher than a year ago. All this cost is outbound from China's ports. Going the other way into China it is surprisingly cheap.

For some key commodities the overnight movements were very mixed. Aluminium and coal rose again, natural gas prices hit a seven year high overnight, but iron ore and wheat fell again. In the case of iron ore, that is down to a 13 month low.

In the US, the initial jobless claims reported for last week fell to 284,000, and lower than the week before. There are now 2.6 mln people on these claims, the lowest level since the start of the pandemic. But some of this recent decrease is because of expiring qualifications rather than them moving off to work. That may have involved about 50,000 people last week. Only ten states now have benefit extensions in place.

At the overnight UST 30yr bond auction, the Fed took only US$3 bln compared to the US$24 bln at the prior equivalent event. Demand was strong for the smaller about on offer to the public. The median yield was 1.86% pa, and down from the 1.96% a month ago.

The Fed's reverse repo activity is still high and above US$1 tln but no longer pushing the boundaries as it did in mid-to-late August.

There were Fed officials out speaking or being interviewed overnight (Williams, Bowman, Bostic, Bullard, Kaplan) and their message seemed to be that they are still likely to taper their bond buying program in 2021.

In China, and consistent with a slowing domestic economy, consumer inflation fell to under +1% in August. But factory cost pressures rose. On the household front, the cost of milk and beef is holding, but the price of lamb is slipping. All of these had large run-ups over the past few years. On the factory front, the rises were more than was expected, in fact hitting their highest growth since 2008.

And Beijing has told key steelmaking provinces to cut production during their upcoming winter to curb pollution that is now spreading to the capital. It's a move likely to cause the iron ore price to fall further. But China can't get enough coal - not for steelmaking, just for thermal electricity production.

The overnight ECB meeting and review left all its settings unchanged and only slightly scaled back its PEPP bond buying program, a more dovish stance than markets were expecting.

In Australia, there were another 1405 new community cases in NSW yesterday with another 1300 not assigned to known clusters, so zero improvement there. They now have 27,941 locally acquired cases. Victoria reported another 324 new cases yesterday, so it is getting worse there, particularly in Melbourne's north. Queensland is still reporting no new cases. The ACT has 15 new cases. Overall in Australia, more than 40% of eligible Aussies are fully vaccinated, plus 25% have now had one shot so far.

Wall Street is giving up earlier gains in its Thursday session, with the S&P500 currently down a further -0.3% taking the weekly retreat to -0.8%. Overnight, European markets were very mixed with London down more than -1.0% and Paris up +0.2%. Yesterday, Tokyo fell -0.6%, but Hong Kong fell very sharply, down -2.3% but Shanghai actually rose by +0.5%. The ASX200 dropped hard, closing -1.9% lower. The NZX50 fell by another -0.7% and taking its retreat so far this week to -1.4%.

The UST 10yr yield opens today at just over 1.30%, so down -3 bps for a second day in a row. The US 2-10 rate curve is at +108 bps and marginally flatter again. Their 1-5 curve is also flatter at +71 bps, while their 3m-10 year curve is much flatter too at +124 bps. The Australian Govt ten year benchmark rate starts today at 1.23% and down another -4 bps from this time yesterday. The China Govt ten year bond is at 2.89% and up +2 bps. The New Zealand Govt ten year is now at 1.90% and also down -4 bps.

The price of gold has recovered +US$3 today and now at US$1796/oz.

Oil prices have fallen by -US$1/bbl, so in the US they are now just under US$68/bbl, while the international Brent price has fallen to just over US$71/bbl.

The Kiwi dollar opens today at 71.1 USc and little-changed since this time yesterday. Against the Australian dollar we very slightly firmer at just on 96.5 AUc. Against the euro we are little-changed at 60.1 euro cents. That means our TWI-5 starts today at just on 74.1, unchanged and still right at the top of the 72-74 range of the past ten months.

The bitcoin price has stayed down, but rising slightly from yesterday's recent low, up +1.5% to US$46,929. Volatility in the past 24 hours has been moderate at just under +/- 2.0%.

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