Fed shadow restrains markets. US housing sentiment weak. Canadian housing starts good. German bund yields high. BIS issues leverage warning.
Kia ora,
Welcome to Tuesday’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 we are entering the shadow period before the next US Fed review on Thursday (NZT) and activity is restrained. The Bank of Japan is also doing its regular review and expectations of changes driven by its new governor are uncertain now.
But we can first report that the NAHB/Wells Fargo American Housing Market Index slipped for a second month in September and it is now at its lowest in five months. Quarter-century-high high mortgage rates are clearly taking a toll on both builder confidence and consumer demand, as a growing number of buyers are electing to defer a home purchase. Rising unaffordability of housing is a growing problem.
However, across their northern border, Canadian housing starts are holding relatively high.
Staying in Canada, the recent bump up in energy prices has seen their August producer prices jump by +1.3% over the previous month, the first rise since October 2022. This was much higher than expected. This upturn in producer prices is similar to what they had in consumer prices and raises the chance that the Bank of Canada will hold its policy rates higher at 5.25% for longer than anticipated.
In China, the business sector is starting to worry about the aggressive encroachment of their 'national security' laws into how business functions. There is growing talk the moves have already gone too far and effectively stifling decision-making and diverting resources.
Singaporean exports are limping along with large year-on-year decreases, reflecting the weak state global trade is in. Exports to the US of electronic products is holding up, and their exports to Indonesia are growing, but these seem to be the only bright spots.
In Europe, benchmark interest rates are rising. The yield on the German 10-year Bund has surged to 2.7%, marking its highest point in over six months, primarily driven by the hawkish statements made by ECB officials. It was 7 bps higher in March, but prior to that, this is its highest since 2011.
And staying in Europe, the BIS is warning (p4) about the sudden re-emergence of large speculative positions by leveraged investors in US Treasuries. They see a risks there that could blow up suddenly.
Meanwhile in Australia, a survey of manufacturers found that deep pessimism is rolling over the sector. More than a third of factories expect conditions to worsen over the next six months, taking the mood to the worst since 2008. Driving the gloom are fast-falling orders in response to weakening consumer demand.
The UST 10yr yield starts today down -2 bps at 4.32%.
The price of gold will start today at just on US$1933/oz and up +US$9 from yesterday.
And oil prices are -50 USc lower from yesterday at just over US$90/bbl in the US. The international Brent price is now over US$93/bbl.
The Kiwi dollar starts today still in its recent yo-yo range and up about +¼c from this time yesterday at 59.2 USc. Against the Aussie we are holding at 91.9 AUc. Against the euro we are little-changed at 55.3 euro cents. That all means our TWI-5 is actually up about +20 bps at 68.7.
The bitcoin price has moved up further from this time yesterday, and is now at US$26,809, a rise of 1.2%. Volatility over the past 24 hours has been modest at just on +/-1.9%.
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.