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 the fall in bond prices (rise in bond yields) is biting even harder today. Equity market valuations are taking a hit from the pressure on capitalisation as rates rise.

And a looming US government shutdown isn't helping sentiment either. JP Morgan boss Jamie Dimon is now worried the Fed could take its policy rate all the way up to 7% and the world is "not prepared" for that.

The US Redbook retail sales index we follow was up +3.8% last week from a year ago, barely holding on to inflation-adjusted gains.

New home sales were expected to slip in August, but in the end they fell more than expected from July. But they are still running at a +5.8% rate higher than year-ago levels. The slip from July does not take it out of the overall trend higher however.

September consumer sentiment as tracked by the Conference Board was also expected to slip from August, and it too retreated more than expected. But that retreat only took it back to levels it has held since mid-2022 until the more recent rises. The survey did find little-change in present conditions but that the political situation and higher interest rates are affecting future expectations.

Improving present conditions is helping the Richmond Fed factory survey, with a stronger-than-expected expansion in September. We should note the rise in new orders.

Meanwhile, the Dallas Fed services survey turned much more negative in September than expected, expanding still but at a much slower pace and clouding the outlook in America's oil patch.

And staying in the US, regulators have sued Amazon, alleging that the internet giant is illegally maintaining monopoly power. The Federal Trade Commission said Amazon uses "a set of interlocking anticompetitive and unfair strategies" to push up prices and stifle competition.

Singapore is investigating a large money-laundering case, one likely to damage its banking system integrity in the island hub.

And Singapore's industrial production shrank more than -12% year-on-year in August, more than market forecasts of -3.1% drop and slipping further from a downwardly revised -1.1% fall in the previous month. This was the 11th consecutive month of decline and the sharpest drop since November 2019, mainly due to a steep fall in output for electronics.

And in Hong Kong, major law firms there are shedding staff at an increasing rate as deals with the mainland dry up.

The clouds from China's economic woes are affecting the whole region.

And perhaps we should note that steel rebar prices in China, an essential concrete construction component, are falling and failed to hold the rises driven by expectations their property market would recover at some time. The winding-up of troubled Evergrande is now very much closer.

In Australia, the popular (with voters, not business) premier Daniel Andrews has suddenly quit, calling time on an active period as premier of Victoria.

The UST 10yr yield starts today up another +3 bps from yesterday at 4.56% to another recent high. 

Wall Street's Tuesday session is sharply lower on the strong bond market signals, with the S&P500 down a full -1.0% to a three-month low. 

The price of gold will start today at just on US$1901/oz and down -US$15 from yesterday.

And oil prices are +50 USc firmer at just over US$90/bbl in the US. The international Brent price is just over US$92.50/bbl.

The Kiwi dollar starts today at 59.5 USc, little-changed from this time yesterday. Against the Aussie we are unchanged at 92.9 AUc. Against the euro we still at 56.3 euro cents. That all means our TWI-5 starts today still at 69.5.

The bitcoin price has moved fractionally lower from this time yesterday, and it is now at US$26,247 and is down only -0.3% from then. Volatility over the past 24 hours has been low at just over +/-0.6%.

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.