Kia ora,

Welcome to Friday’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 it is all about the fast-rising benchmark interest rates and steeper curves today. And higher rates may be here to stay. We should remember that in the decade prior to the GFC, which ushered in 'lower for longer', the benchmark UST 10yr rate average 4.52%. We could well be a 'higher for longer' period now.

The US Fed kicked off the shift in rates with its 'hawkish hold' yesterday and strong signal that it will raise rates again before the end of the year. But overnight there were many other central banks with policy decisions. The Philippines and Indonesia kept their rates unchanged as expected. So did the Swedes. Switzerland was expected to raise its rate by +25 bps, but in the end it didn't, leaving it at 1.75%. But the Norwegians did, taking their rate up +25 bps to 4.25%. The Taiwanese left theirs at 1.875% unchanged, as did Hong Kong. And the English (5.25%) and South Africans (8.25%) both held. For the English it was a close-run thing, a 5-4 vote to not raise. And Turkey raised their rate by another eye-watering +500 bps to 30%. Now that's a 'real' move up.

The US Fed's hawkishness was bolstered by more strong signals from their labour market. Initial US jobless claims stayed very low at +176,000 last week and an eight month low with only 1.65 mln people on these benefits, also unusually low.

The Philly Fed factory survey turned negative in September for current conditions, but also turned more positive for future conditions. They are in a temporary flat patch, it seems, and the surveyed firms are increasing their investment in capital projects.

American existing-home sales fell -0.7% in August to an annual sales rate of 4.04 mln. Sales dropped -15.3% from one year ago. However, the median price climbed +3.9% from one year ago to US$407,100 (NZ$685,000) and the third consecutive month the median sales price surpassed US$400,000. Their inventory of unsold homes dipped to just 14 weeks supply at the current monthly sales pace.

In China, their 10 year benchmark government bond yield is remarkably stable. But this needs to be seen in the light of other official rate cuts, so the gap is widening. More starkly, one and two year yields are actually rising there. What we have is tightening capital supply undermining the central bank's efforts to boost the economy by stimulating demand. China's attempt to escape the international pressure of rising interest rates is now coming out in other distortions.

Also not so positive is EU consumer sentiment in September, although the slip was relatively minor. But it is a second month to dip after a longish series of improvements.

New Zealand featured in a Canadian ranking of "economic freedom", topped by Singapore who beat Hong Kong at the head of this listing, while Switzerland, New Zealand and the US rounded out the rest of the top five spots. Australia was #8.

There was another chunky -5.2% fall last week in global container freight rates, and again led by rates from China to Europe. However, rates for bulk cargoes took off higher last week, back to the top of the range over the past year. It was quite the shift up.

The UST 10yr yield starts today up a sharp +13 bps at 4.48%. It was last at this level in October 2007 (on the way down from 5.48%). And rate curves are less inverted today.

The price of gold will start today at just on US$1920/oz and down a sharpish -US$23 from yesterday.

And oil prices are little-changed from yesterday at still just over US$89.50/bbl in the US. The international Brent price is still just over US$92.50/bbl.

The Kiwi dollar starts today still in its recent yo-yo range and down -10 bps from this time yesterday at 59.4 USc. Against the Aussie we are +½c higher at 92.4 AUc. Against the euro we are unchanged at 55.7 euro cents. That all means our TWI-5 is unchanged at 69.

The bitcoin price has retreated from this time yesterday, and is now at US$26,677, a fall of -2.0%. Volatility over the past 24 hours has been modest at just over +/-1.7%.

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 on Monday.