Kia ora,

Welcome to Thursday’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 commodity prices are trending down across the board now - but not money commodity prices.

But first in the US, although mortgage applications 'only' fell -1% last week from the prior week (and to be down -22% from a year earlier), the big news was the +20 bps jump in their benchmark 30 year mortgage interest rate from a week ago, now up to 7.9% plus points, the highest since 2000. Rates have now risen seven consecutive weeks at a cumulative amount of +69 bps.

While this may is keeping the existing home resale market quiet, oddly it is doesn't seem to be hurting new home sales. They rose sharply in September to an annualised rate of 759,000 and their highest since February 2022. In this corner of their housing market, FOMO seems to be active. And as we recently noted, there may be more to come because building consents and housing start data is holding up too.

This housing data was noticed by financial markets, triggering a turnaround, and a new jump in bond yields.

In Canada their central bank held its policy rate at 5.0% in an overnight decision. Their quantitative tightening program continues (selling down bonds they earlier bought to support markets). They noted that overall market conditions are now doing their rate job for them and the risk is that markets may overdo things while inflation falls away.

In China, outflows of investment capital are growing, marking their biggest net decline in in September in nearly eight years. Driving it are a combination of foreign companies scaling back their operations in China, and wealthy Chinese shifting funds abroad. The net outflow reached almost US$54 bln in September, the most since January 2016.

In Germany, a widely-watched business sentiment survey continued to turn positive and is back to year-ago levels.

In Australia, inflation is rising again. Their monthly inflation indicator came in at 4.9% in July, 5.2% in August, and that rose again to 5.6% in September (5.4% was expected). This locked in the Q3-2023 CPI at 5.4% and although down from 6.0% in Q2, it is clearly on the rise again recently. Fuel, electricity, housing and insurance all are keeping the pressure on. The AUD rose on the news, in the expectation of a higher chance the RBA will raise rates there on November 7. That comes just a few hours after Westpac Australia economists set their forecast as a no change, followed by reductions from September 2024 (see page 19).

Generally however, commodity prices are falling, mostly because demand out of China is weak and not expected to revive any time soon. This includes weak prices for copper and coal, nickel and zinc. Tin and lead prices are holding, but lithium carbonate prices are now back down to pre-surge levels.

The UST 10yr yield has risen +11 bps from this time yesterday, now at 4.95%. 

The price of gold will start today at US$1977/oz and up +US$3/oz from yesterday at this time.

Oil prices have ticked back up +50 USc today to be now at just over US$84/bbl in the US. The international Brent price is now just over US$88/bbl.

The Kiwi dollar starts today at 58.2 USc and down -10 bps from this time yesterday. Against the Aussie we are up to 92 AUc. Against the euro we have slipped slightly to 55 euro cents. That all means our TWI-5 starts today unchanged at 68.3.

The bitcoin price starts today at US$34,586 and up another +1.7% from this time yesterday to an eighteen month high. Over the past week, this crypto price has risen more than +NZ$10,000 and is now just a tad under NZ$60,000. Volatility over the past 24 hours has been moderate at just under +/- 2.6%.

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.