US CPI inflation eases more than expected. This draws outsized market reactions. China mulls more housing assistance. EU GDP lame; NAB sentiment falls.
Kia ora,
Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the international edition from Interest.co.nz.
And today we lead with news markets sense the US Fed is about to say it is done raising rates
In the US, their annual inflation rate slowed to 3.2% in October from 3.7% in both September and August, and below market forecasts of 3.3%. Core inflation retreated to 4.0%, also a touch less than expected. Even the month-on-month data came in lower than expected. These are all small moves, but they had a large impact on financial markets, who took them as a signal that the Fed is done raising rates in this cycle. Equities raced higher, bond yields fell sharply, and the USD weakened sharply.
The American Redbook index of retail sales rose just +3.0% last week over the same week a year ago, and hardly keeping pace with inflation.
Despite that, the NFIB SME optimism index came in better than expected for October, even if it did edge marginally lower than in September.
In China, they are contemplating a release of ¥1 tln in low cost debt funding for urban village renovation and affordable housing programs, in its latest effort to bolster the struggling property market.
Markets are sensing something bigger is coming because iron ore prices are now rising and back near Mar 2023 highs.
EU GDP was unchanged in Q3-2023, but edged a touch lower (-0.1%) in the euro area from Q2. That means the annual year-on-year expansion hardly exists now. But this happened as employment rose slightly, ameliorating the impact.
But in Germany there was a surprise jump in economic sentiment, as measured in the widely-watched ZEW survey. Both the business and financial sectors drove the rise. Firms are indicating the bottom has passed.
In Australia, the widely watched NAB business confidence index fell to -2 in October from a downwardly revised flat reading in the prior month, pointing to the lowest level since May. However business conditions did edge up.
Australia released its September short-stay visitor arrivals data yesterday and they are still not back to 2013 levels yet, struggling to get to levels that existed a decade ago. They were 584,000 in the month, and the largest source was New Zealand (22%), followed by China (10%), then the USA (6%).
In a new embarrassment for PwC, the ICIJ has released a hoard of documents that shows the firm actively aided Russian oligarchs in Cyprus to avoid Western sanctions.
The UST 10yr yield is down a very sharp -17 bps from yesterday, now at just 4.47%.
The price of gold will start today at US$1963/oz and up +US$18/oz from yesterday, mainly on the USD change.
Oil prices have firmed about +US$1 overnight, to be just under US$79/bbl in the US. The international Brent price is up a bit less to just on US$83/bbl.
The Kiwi dollar starts today at 59.9 USc and up a full +1c from yesterday. Against the Aussie we are unchanged at 92.2 AUc. Against the euro we are also unchanged at 55.1 euro cents. That all means our TWI-5 starts today at just on at 69.2, and a net +30 bps higher.
The bitcoin price starts today at US$36,871 and down -0.7% from this time yesterday. Volatility over the past 24 hours has also been modest at just on +/- 1.1%.
You can find links to the articles mentioned today in our show notes.
You can get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston. And we will do this again tomorrow.