Here's our summary of key economic events overnight that affect New Zealand with news the world wide surge in producer prices shows no sign of topping out.
But first in the US, initial jobless claims came in lower than expected for last week at +278,000 and that leaves 2.25 mln people on these benefits, also a sharp drop. This is the lowest since the start of the pandemic. The fall in California was notable. At this rate of fall, they could be under 2 mln by the end of the month, which would take it back to pre-pandemic levels.
US producer prices rose +8.6% in the year to September. It is probably little comfort that was lower than the expected +8.7% but it pushed higher than the +8.3% in August. (The month-on-month change is actually a nine month low.) A feature is the success that manufacturers have being able to pass these cost rises on to customers.
The US Budget Statement for September was due before we released this story, but it seems to have been delayed. We will update this item when it is released.
Consumer price inflation might be racing higher in many western countries, in response to rising demand and high commodity prices. But they certainly are not seeing that in China where the month inflation was zero in September and the annual change just +0.7%. The story is sharply different on the factory floor however. Chinese PPI rose +10.7% from a year ago, the highest jump since 1995. Month-on-month they rose +1.2% and that indicates the recent changes are running even faster.
More is coming. China’s authorities have decided to allow electricity prices to rise by as much as +20% compared with the current +10% cap, but rates for residential users will be kept unchanged. This will boost headline PPI by 2ppt in the near term and by the end of the year could reach +12% by some estimates. The effect on consumer prices will be much more modest, although they may reach +2% by the time this cost-cycle is done.
Inside China and little-reported there is a sinking housing market that now impacts tier 1 cities like Beijing and Shanghai. Prices are falling fast. Unsold units in their vastly overbuilt residential property sector are staggering, undermining the value of occupied units. Household wealth is about to be hit quite hard in China from this effect alone.
Of more immediate effect for consumers worldwide is that typhoon. It is notable that this wild weather is just adding to the supply chain problems that importers are suffering getting goods out of China.
Still, for the week prior, the cost of container freight out of China is still trending lower. The immediate problem is not the cost, it is the availability.
The Baltic Dry Index is also trending modestly lower now even if it remains still historically high.
In Australia, consumer inflation expectations have slipped from a high +4.4% in September to +3.6% in October, according the Melbourne Institute survey.
Jobs and the participation rates both fell in Australia in September. But that was mainly because of a large drop in part-time employment. Full time jobs inched up.
And staying in Australia Delta cases in Victoria have risen to 2292 cases reported there yesterday, and that was far more than expected. Deaths were 11 yesterday. There are now 20,505 active cases in the state. In NSW there were another 406 new community cases reported yesterday with another 285 not assigned to known clusters. They now have 5,587 active locally acquired cases which is lower, but they had 6 deaths yesterday. Queensland is reporting zero new cases again. The ACT has 58 new cases. Overall in Australia, more than 64% of eligible Aussies are fully vaccinated, plus 19% have now had one shot so far.
The UST 10yr yield opens today down another -3 bps at just under 1.52%. The US 2-10 rate curve is flatter at +116 bps. Their 1-5 curve is flatter too at +96 bps, while their 3m-10 year curve is flatter at +151 bps. The Australian Govt ten year benchmark rate is down -3 bps at 1.61%. The China Govt ten year bond is unchanged however at 2.98%. But the New Zealand Govt ten year is only -1 bps lower at 2.13%.
In equity trading, the S&P500 is up a strong +1.6% in afternoon trade in their Thursday session. Strong earnings reports are behind today's jump. Overnight European markets were all up by +1.4% except London which lagged with only a +0.9% rise. Yesterday, Tokyo ended with a +1.5% gain, Hong Kong was closed again, this time for a public holiday. Shanghai treaded water, down -0.1%. The ASX200 ended yesterday up +0.5% reversing the prior day's fall, and the NZX50 rose +0.2% again.
The price of gold has moved up another +US$3 to US$1797/oz.
And oil prices are 50 USc higher at just on US$80.50/bbl in the US although that is in the middle of quite volatile trading in between, while the international Brent price is now at US$83.50/bbl.
The Kiwi dollar opens today nearly +¾c firmer at just under 70.3 USc. Against the Australian dollar we are firmer too at 94.8 AUc. Against the euro we up +½c at 60.6 euro cents. That means our TWI-5 starts today at just on 73.9, and suddenly back near the top of the 72-74 range of the past eleven months.
The bitcoin price has risen +0.5% today from this time yesterday to be now at US$57,257. Volatility over the past 24 hours has been modest at just over +/-1.6%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».