Good US data; weak China data; China faces huge population decline; German inflation tops out; container shipping rates do too; Aussie deficit blows out; UST 10yr 1.53%, oil and gold firm; NZ$1 = 68.8 USc; TWI-5 = 72.8

Here's our summary of key economic events overnight that affect New Zealand with news underestimates of China's birth rate will have very major long term impacts.

But first, new US jobless claims came it just under 300,000 last week, similar to the prior week. A surge in California masked improvements elsewhere. There are now 2.46 mln people on these benefits and also similar to last week.

The closely-watched Chicago PMI came in pretty much as expected in September with a very good expansion even if it was less than in July and August. The pace of new order intakes eased back a little, and the pressure of price increases did too.

The US Q2 final GDP result has ended better than the second estimate, which in turn was better than the initial estimate. A surge in corporate profits was the main reason for the improvement. The US economy grew +6.7% (real) in Q2-2021 to have economic activity running at a record US$22.7 tln (nominal) pace per year.

China is now on a week-long holiday, starting with National Day today.

But their energy crisis isn't going away, and Beijing has blinked on its climate and trade policies, issuing orders for energy companies to do whatever necessary to secure coal for the winter season. No doubt that will mean it will be back buying Australian coal.

The Caixin PMI for September shows the private factory sector neither expanding nor contracting - and that is a minor improvement from August. But if the energy crisis persists, it won't stay this 'good' for long. And the official version was more downbeat, reporting a contraction that is deepening due to the power cutbacks.

However, their services sector does show a noticeable improvement, moving from a sharp August contraction to a good September expansion.

And the Evergrande crisis rolls on. Last week, the company missed an US$83 mln interest payment on an overseas bond, but struck a haircut agreement with domestic investors over a US$36 mln payment which was also due. Now there are reports they have missed a second US$48 mln interest payment to offshore investors. There are grace periods involved, but they seem certain to be heading for default, despite prioritising payments to local investors and depositors. China is leaning heavily on its billionaires to buy-up distressed parts of the business, something they seem reluctant to do. But the risks to them personally for not inconsiderable.

And the liquidity injections by the central bank just keep coming - another +NZ$22 bln added for a tenth straight day.

And if demographics is destiny, China may be in real trouble. A local university has published a review of population trends and they say the birthrate problem has been seriously underestimated - and that China's population could halve in 45 years.

Hong Kong retail sales rose strongly in August off a very weak base and on the basis of some official vouchers the local government handed out to encourage spending. But they still haven't got back to retail levels they once had in 2014.

German inflation came in at +4.1% in September, higher than expected on a year-on-year basis. But in fact, there was no change month-on-month, indicating the cost and price pressures there may be easing.

And we should note that container shipping rates were unchanged at their very high levels again last week. At least they have stopped rising.

In Australia, the Federal deficit has blown out to -AU$134 bln in the year to June 2021 or -6.5% of GDP - year that started with a boast it would be in surplus. Now with extended pandemic trouble in the 2021/2022 year, they could well post an even larger deficit. (New Zealand has yet to release its final 2021 financial result.)

Staying in Australia, there has been an explosion of Delta cases in Victoria with 1438 cases reported there yesterday and more than 10,000 active cases in the state. AFL parties are probably the cause. In NSW there were another 941 new community cases in NSW reported yesterday with another 755 not assigned to known clusters. They now have 10,109 active locally acquired cases which is marginally lower, but they had a record high daily death toll yesterday. Queensland is now reporting six new cases. The ACT has 22 new cases. Overall in Australia, more than 53% of eligible Aussies are fully vaccinated, plus 24% have now had one shot so far.

In equity markets, Wall Street is in a sell-off mood to end the quarter with the S&P500 down -0.8% in its Thursday afternoon session and about to lock in a -4.4% monthly loss. Overnight, European markets all fell by between -0.3% and -0.8% and for the month, Frankfurt booked a -3.6% loss, Paris a -3.5% loss, and London a -0.9% retreat. Yesterday the very large Tokyo market slipped -0.3% on the day and ended September with a starring +3.5% gain. For Hong Kong, it fell -0.4% yesterday and ended the month down -5.6%. Shanghai was up +0.9% which managed it to claim a flat result for September. The ASX200 rose a strong +1.9% yesterday to limit the monthly loss to -2.6%. The NZX50 Capital Index rose +1.2% in its final September session to end the month up a mere +0.2%.

The UST 10yr yield opens today at just on 1.53% and down -1 bp from this time yesterday. The US 2-10 rate curve is unchanged at +123 bps. Their 1-5 curve is a little flatter at +91 bps, while their 3m-10 year curve is unchanged at +147 bps. The Australian Govt ten year benchmark rate is unchanged at 1.49%. The China Govt ten year bond is at 2.89% and also unchanged. And the New Zealand Govt ten year is now at 2.01% and up +3 bps since this time yesterday and still in a rising trend.

The price of gold will start today recovering, up +US$33 at US$1759/oz. Silver is recovering too.

And oil prices have been volatile overnight, but are now up +$1 to just under US$76/bbl in the US, while the international Brent price is just on US$79/bbl. 

The Kiwi dollar opens today marginally firmer at just on 68.8 USc. Against the Australian dollar we are a little softer at just on 95.5 AUc. Against the euro we down again to 59.5 euro cents. That means our TWI-5 starts today at 72.8, and back towards the middle of the 72-74 range of the past eleven months.

The bitcoin price is higher since this time yesterday, up +3.4% to be now at US$42,923. Volatility in the past 24 hours has been high at just over +/- 3.6%.

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