Here's our summary of key events overnight that affect New Zealand, with news of the size of the risk to global financial stability from the Chinese SOE system.
But first, American business spending on equipment appeared to have remained slow in September. Military spending held up the data. And the goods trade deficit widened further as rising imports outpaced a exports. US economic growth has clearly moderated in the third quarter. In fact, tomorrow morning we get the first official reading of Q3 US GDP and the consensus is a "+3.3%" annual rate in their terms. Year-on-year growth (the usual international measure and how New Zealand reports its growth) is expected to come it at just under +3% pa.
Pending home sales were also weak, with this September measure down -1.0% from the same month a year ago. Only in the South is this metric higher than a year ago. A lack of inventory of moderately priced homes and rising interest rates affecting affordability are the factors restraining the US housing market.
Across the Atlantic, in holding its official settings unchanged, the ECB acknowledged that the eurozone’s economic growth momentum has weakened, but confirmed it would press ahead with plans to phase out its QE policies this year. This will be particularly hard for Italy which has been counting on monetary stimulus after it has been blocked from fiscal stimulus. After outpacing the American economy over the past two years, the eurozone economy has lost traction in recent months. A closely watched survey of business managers suggested growth is at its weakest level in about two years.
Despite all this tame economic news, Wall Street is higher today, recovering all of yesterday's losses although no more than that. Shanghai finished yesterday unchanged, a rare day of no losses.
In China, their government has for the first time tallied its total financial assets across its sprawling network of thousands of state-owned companies, warning in a report of poor management, bad planning and the urgent need for a system to provide legal accountability and supervision. The scale of these assets is impressive - they are worth about US$35 tln, or about equivalent to half the world's annual GDP. There is huge global systemic risk in such a pooly managed system.
In Australia, insurer QBE who has a big business with lenders mortgage insurance (LMI) sees continuing falls in house prices in NSW, Victoria and Queesland until at least 2021. But the scale of these declines are not large, according to their analysis.
And surging corporate and personal tax collections have lifted the Australian federal budget into balance for the first time in a decade, as their coffers are boosted by both healthy global and domestic economies.Data released yesterday showed the budget is AU$9 bln better off in the first three months of this financial year, compared to the May budget forecasts. Credit ratings agency Fitch Ratings has confirmed Australia's AAA sovereign rating.
The UST 10yr yield will start today at 3.14% and marginally firmer from this time yesterday, with their 2-10 curve still under +27 bps. The other yields we follow include the Aussie Govt 10yr which is at 2.63% and down -3 bps, the China Govt 10yr is at 3.57% and unchanged, while the NZ Govt 10 yr is at 2.59% and down -7 bps. Swap rates moved lower yesterday too, and flattened. In fact our 2-10 swap curve is at its flattest since November 2016.
Gold is at US$1,229/oz and up +US$2 from this time yesterday.
Oil prices have stayed down again today and holding at a six week low. US oil prices are just under US$67.50/bbl. The Brent benchmark is just over US$76.50/bbl.
The Kiwi dollar will start today unchanged at 65.2 USc. On the cross rates we are at 92.1 AUc, and at 57.3 euro cents. That leaves the TWI-5 at 69.7.
Bitcoin is now at US$6,437, again little-changed yet again. This rate is charted in the exchange rate set below.
This chart is animated here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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