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.

Today we lead with news the momentum building to avoid Russian oil and gas supplies is now starting to be quite impressive.

But first, American jobless claims last week were a very low +156,000 taking the total number of people on these benefit to just 1.225 mln and the lowest level ever recorded and half what it was this time last year (which was also historically low). Labour market pressure in the US remains very high.

Going the other way, American mortgage interest rates are rising fast. The average rate on a 30-year fixed mortgage climbed to 6.7% this week, the highest since July 2007, up from 6.29% last week and 3.01% a year ago. That's according to a survey of lenders by mortgage giant Freddie Mac. Their 15-year fixed-rate mortgage averaged 5.96%, up from 5.44% last week and 2.28% a year ago.

South Korean business confidence fell sharply in August and back to pre-pandemic levels. But to be fair it has been the elevated prior two years that have been unusually positive. The current confidence level is what they were used to from 2004 to 2020.

Singapore reported its producer prices rose +17.3% in the year to August, although they slipped slightly from July, so the heat is starting to go out of this surge.

In China, they are about to start another Golden Week holiday so data and activity there will be a bit more restrained next week. Their news will tend to be political as the Communist Party holds it two big meetings.

But stresses can't be avoided. Investors dumped shares and bonds of Chinese property developers yesterday after a media report that CIFI Holdings had defaulted, adding to worries over the crisis-stricken real estate sector. Their Hong Kong-listed shares plunged 32% to a record low as of the market close yesterday, after credit intelligence provider Reorg reported that the Chinese developer had missed payment on certain non-standard debt. The company itself is remaining staunch.

The movement of business out of China is on full display in Vietnam. In the July-September quarter they say their GDP was almost +14% higher than the same quarter a year ago. And that was on top of an almost +8% surge in Q2. Exports to the US are a key driver. But a sharp rise in personal consumption also contributed materially.

Germany reported that its September consumer inflation rate touched +10% and is up matching the UK now (on the same basis).

And the German government has announced a major energy cost relief plan that could cost up to €200 bln. They are terming it a 'defensive shield' including a petrol price brake and a cut in VAT on the fuel.

Meanwhile, Norwegian exports of oil and gas are running at record levels. And China is diverting more fuel to Europe too. Heat pump sales are booming in Europe too, many sourced from China.

And Japan and Malaysia have reached a deal for natural gas that would lessen Japan's reliance on Russia.

In Australia their Federal Government reported a sharply improved fiscal performance in the year to June 2022. It was a significant positive surprise. 

And electricity major AGL has sharply brought forward is decommissioning of coal-fired electricity generation. It is a major move there, pressed by activist shareholders.

There was another -10% fall in the cost of shipping containers internationally last week. This dive is fast, and takes prices back to just +8% above the porior 5-year average.

The UST 10yr yield starts today at 3.77% and +4 bps firmer than this time yesterday. 

Wall Street is down sharply today in its Thursday session, with the S&P500 down -2.9% in late trade and slipping into a loss for the week so far. 

The price of gold will open today at US$1659/oz. This is down a mere -US$1 from this time yesterday.

And oil prices start today +50 USc firmer at just over US$82/bbl in the US while the international Brent price has risen to be just on US$88/bbl. The price of natural gas is falling, now at a two month low, as the Europeans make steady progress in building reserves and alternate sources from Russia.

The Kiwi dollar will open today at just over 57.1 USc and marginally firmer than this time yesterday. Against the Australian dollar we are firmer at 87.7 AUc. Against the euro we are down -½c 58.3 euro cents. That all means our TWI-5 starts today at just 67.4, and down -20 bps in a day.

The bitcoin price is now at US$19,473 and virtually unchanged from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.4%.

You can find links to the articles mentioned today in our show notes.

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again on Monday.