US factory orders rise faster; Canada building consents fall; China scrambles to ring-fence Evergrande; commodity prices shift up a gear; UST 10yr 1.47%, oil high and gold firm; NZ$1 = 69.6 USc; TWI-5 = 73.2

Here's our summary of key economic events overnight that affect New Zealand with news there is new energy emerging in commodity price rises, driven by the good US and EU economic recoveries.

But first, overnight data shows that American factory orders rose at a slightly faster pace than expected in August, confirming the recent strength in their manufacturing sector reported by other measures like the PMIs.

This is all the more impressive because their vehicle manufacturing sector is stuck in the slow lane, stifled like everyone else by the shortage of computer chips. Sales in September ran at only 9.7 mln vehicles/year, another sharp drop from August, itself a reduction from the 18.5 mln annual rate they were running at in April.

The key problem is that cars use old-style basic chips, the really cheap versions. And chip-makers have moved on and don't want to invest billions in old tech to sort this problem out. And vehicle makers don't want to pay for the new-style chips. It is hard to see when this standoff ends, but almost certainly carmakers will have to reengineer their products to accept updated technologies. It won't be a short process.

Meanwhile in Canada, building permit levels really disappointed in August data released overnight. They have been on a downward slide since March. A pickup of +3% was anticipated in August, but another decline eventuated, down -2.1%.

In China, they are using their holiday week to ensure the Evergrande collapse doesn't have economy-wide consequences. Almost 30% of China's GDP relies on the property sector, and Evergrande is just one of many drivers in that sector in shaky financial shape. But Evergrande itself, as large as it is, only represents 2% of their GDP. So Beijing's energy is going in to save the rest, not Evergrande. Likely, bond holders will lose all their investment.

In Japan, their new Prime Minister has said he doubts China can qualify to be a CPTPP member. This comes as China offers up promises of "unprecedented market access" if it is let in. But China expects some rule-bending for that prize to be won.

Commodity prices are rising sharply in October. Yesterday we noted the rise and rise of coal prices. Today it is oil prices. And there may be more to come because OPEC has declined to raise output significantly into a market with rising demand. Prices are now at seven year highs. The inflationary impacts won't be minor. Some American analysts see US$100/bbl oil over this coming northern winter. Natural gas prices are already at 13 year highs and they are just getting started and that has caught some sceptics short.

In NSW, business owners will face fines of up to AU$5000 if they do not take “reasonable measures” to stop unvaccinated people entering their premises. Also, watch for the infection echo among the unvaxxed from the NRL Finals parties Sunday night. (It was a Labor Day holiday in parts of Australia yesterday, although the ASX was open.)

Staying in Australia, there has been an explosion of Delta cases in Victoria with 1377 cases reported there yesterday and more than 12,711 active cases in the state. In NSW there were another 623 new community cases in NSW reported yesterday with another 480 not assigned to known clusters. They now have 9,020 active locally acquired cases which is lower, but they had 6 daily death toll yesterday. Queensland is now reporting zero new cases. The ACT has 28 new cases. Overall in Australia, more than 57% of eligible Aussies are fully vaccinated, plus 23% have now had one shot so far.

The UST 10yr yield opens today at just over 1.47% and up +1 bp from this time yesterday. The US 2-10 rate curve is marginally flatter at +119 bps. Their 1-5 curve is little-changed at +86 bps, while their 3m-10 year curve is softish at +137 bps. The Australian Govt ten year benchmark rate is marginally softer at 1.49%. The China Govt ten year bond is at 2.89% and unchanged because they are still on holiday. And the New Zealand Govt ten year is down -2 bps at 2.00%.

Equity markets have started soft on Wall Street, with the S&P500 down -1.5% in early afternoon trade in the Monday session. Tech is being hit. Overnight, Europeans bourses slipped about -0.7% across the board. Yesterday, the very large Tokyo market fell -1.1% and Hong Kong fell -2.2% (hurt by the Evergrande demise). Shanghai is closed until Friday, and that is lucky for them. The ASX200 ended yesterday up +1.3% on strength by commodity stocks. The NZX50 rose +0.4%.

The price of gold will start today firmer, up +US$8 at US$1769/oz.

And oil prices are up sharply, up +US$3 to just under US$77.50/bbl in the US, while the international Brent price is just under US$81.50/bbl. These levels are a seven year high.

The Kiwi dollar opens today slightly firmer at just on 69.6 USc. Against the Australian dollar we are unchanged at just on 95.6 AUc. Against the euro we still at 59.9 euro cents. That means our TWI-5 starts today at 73.2, and still in the middle of the 72-74 range of the past eleven months.

The bitcoin price is higher again since this time yesterday, up another +2.1% to be now at US$48,618. Volatility in the past 24 hours has been moderate at just over +/- 2.4%.

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