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US data generally weaker; EU economic confidence slips; German prices up; IMF ups Argentina bailout; WTO downgrades trade growth; SEA rate hikes; UST 10yr at 3.06%; oil up and gold drops; NZ$1 = 66.2 USc; TWI-5 = 70.1

US data generally weaker; EU economic confidence slips; German prices up; IMF ups Argentina bailout; WTO downgrades trade growth; SEA rate hikes; UST 10yr at 3.06%; oil up and gold drops; NZ$1 = 66.2 USc; TWI-5 = 70.1

Here's our summary of key events overnight that affect New Zealand, with news the edge is going off some key international metrics.

Washington may be gripped by the culture wars, but we are going to stay firmly focused on the data.

The final reading for the US Q2-2018 GDP growth was unchanged from the prior estimate, but the core PCE inflation measure was revised higher to +2.1%. This is the inflation data the Fed prefers.

US durable goods orders rose strongly in August, up at a +4.5% pa rate from July and much more than expected. Year-on-year, this data is up +13%. The capital goods component - the indication of future investment trends - went the other way, falling unexpectedly when a good rise was predicted. And their trade deficit swelled yet again in August, rising to -US$83 bln in the month compared with -$US72 bln in August 2017. Exports rose +7.7% but imports rose +10.2% year-on-year. This is a significant deterioration.

Industry analysts are reporting that American car sales in September likely fell -6% from the same month la year ago. "The weather" is one reason, they say.

Further, pending home sales fell in August - again - and have now decreased on an annual basis for eight straight months.

Across the Atlantic, EU economic confidence fell in September, pushed down by lower consumer confidence while business confidence, which dipped in July, held at the lower level.

Meanwhile, German inflation took a bit of a surprise jump in September, now up +2.3% are considerably above the +2.0% rate expected. Rising energy costs had a bigger impact than expected.

The IMF overnight said it will provide a bigger bailout to Argentina than initially planned, and front-load it significantly in an effort to restore market confidence in the country. The rescue package has been increased by almost +15%, and now more than 85% of it will be delivered in the first year of the 3 year arrangement.

The WTO has downgraded its outlook for trade, seeing world trade growth slip to +3.7% this year, down from their +4.4% forecast six months ago. A lot of that slowing will be felt by emerging economies.

New data in China shows factories are coming under some signs of strain from the trade war with the US. Profit growth decelerated for the fourth month in a row. Those profits were up +9% from August 2017 a slowing from the +16% rise in July. It may be a slowing, but it is still a very good result.

In Southeast Asia, there was central bank action overnight. Indonesia raised its benchmark rate again - for the fifth time in six reviews - up by +25 bps to 5.75%. In the Philippines the rise was +50 bps to 4.50%.

Through all this, Wall Street is modestly higher in mid-afternoon trading. Yesterday, both Shanghai and Hong Kong posted modest declines. The greenback is stronger today.

In Australia, a CBA owned bank is raising mortgage rates again. BankWest is raising rates by +15 basis points, which means the new standard floating rate is 5.57% for a owner-occupier principal and interest borrower and 5.92% for an interest-only. At these levels, Aussie floating rates are now quite similar to equivalent Kiwi rates.

The UST 10yr is unchanged at 3.06% while their 2-10 curve keeps falling and is now at +22 bps. The Aussie Govt 10yr is at 2.69%, down -5 bps, the China Govt 10yr is at 3.66%, down -2 bps, while the NZ Govt 10 yr is at 2.68% and down -3 bps.

Gold is down sharply by -US$12 at US$1,184/oz in New York.

US oil prices are higher today at just over US$72/bbl with the Brent benchmark at just under US$82/bbl.

The Kiwi dollar is down more the -½c against the greenback at 66.2 USc. On the cross rates we are a little firmer at 91.8 AUc, and at 56.8 euro cents. That puts the TWI-5 at 70.1.

Bitcoin is now at US$6,519 and virtually unchanged this time yesterday. This rate is charted in the exchange rate set below.

This chart is animated here. For previous users, the animation process has been updated and works better now.

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

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11 Comments

Exclusive: NZ's biggest hoki fishery is a 'barren wasteland' - insider
https://www.newshub.co.nz/home/new-zealand/2018/09/exclusive-nz-s-bigge…

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People take too many fish. Complain there aren't enough fish left.

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The quota system is a joke - they cut it when they can't catch their quotas. The question is what was the previous under-catch on average - and the cut then needs to be well in excess of that under-catch rate. But I doubt it is.

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Hadn't heard about this. Disgraceful. Needs more exposure.

(As an aside, I'd be interested to hear Judith Collins' opinion on it. Suspect she may have been relieved to not be in government when this call came up for the making. Oravida, Sanford.)

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Yes, I just watched Jacinda's speech to the UN - many lines rang as hypocritical in the face of what is actually happening on the ground here.

I accept that much of her problem might be the need for the support of NZ First in coalition, but if that is the case - both she and Peters need to be more upfront about it. He needs to say, "we blocked this" and she needs to say "we were unable to do this because that initiative was blocked by our coalition partner".

Both parties need to be more clear - and less apologetic - on these matters of disagreement.

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Her strength has always been in the painting of an ideal picture using loose abstract language that sounds great - Academic stuff and she would probably get a A+ for the essay at school - But reality doesn't care about ideals and shes already shown how ineffective she is in the real world

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If that's the case it's not much different from Key, who campaigned well and occupied his seat well but did little. The important thing is for society to hold all our leaders to account, regardless of for whom any of us voted.

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After the Fed hikes rates. An opinion from Martin North on impact in Australia

https://www.youtube.com/watch?v=v7DdhUG0CE8

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Let me guess, his opinion is bearish?

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Hayne interim report to be released across the ditch today. Can only be net negative for Australian assets. Thankfully our banks ,mortgage brokers and insurers operate on a different playing field.

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