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 geopolitical risks remain high but they don't seem to be escalating from here, and markets are taking that as a positive signal. But benchmark interest rates are back rising again.

First up today, global banking giant HSBC has announced a doubling of its profits in Q3-2023. They made NZ$13 bln in the three months to September, benefiting from higher global interest rates.

Second, General Motors has apparently settled its dispute with its union who have been on strike, the last of the big three American carmakers to resolve the dispute. It appears, like the other settlements, the UAW has prevailed in all its substantive claims.

In Japan, all eyes are on their central bank who later today are expected to make a significant shift in policy and let some of their interest rate targets rise.

The World Bank has been assessing the prospects for commodity prices. It sees oil prices falling away - assuming we avoid a sudden supply-constrained geopolitical shock. Their base case has oil falling from here, to the low US$80/bbl range. But in their worst-case scenario they see US$150/bbl oil. They also see food prices falling as rising supply more than makes up for rising demand. An exception is for rice. But they are not seeing price being a threat to future global food security out to 2025. In the current circumstances, they have a very sanguine outlook - with the usual caveats about unexpected shocks.

Meanwhile, EU sentiment continues to weaken. It recorded a slight decrease from the previous month and came in lower than expected even if the change was minor. This is the weakest it has been since November 2020. The combination of persistent inflationary pressure and the ECB's extended policy tightening has exerted a dampening effect everywhere. In a week or so we get the next ECB inflation expectations survey.

And there might be some relief in store. In Germany, and with the help of easing food inflation, their October CPI inflation rate fell to 3.8%, sharply lower than the September 4.5% rate. The October rate is their lowest inflation level since August 2021.

Meanwhile, the German economy was expected to shrink by -0.3% in Q3-2023 but the actual result was a -0.1% retreat - and prior quarter falls were revised into slight rises. This was a very much 'better' result than expected, despite its negativeness, and markets were 'impressed'.

In Australia, September retail sales rose more than expected to be +2.0% higher than a year ago, pumped by the +0.9% rise in September from August. The year-on-year result is far less than inflation but the more recent rise is sharpish and may encourage the RBA to hike, thinking that along with earlier +5.6% monthly inflation indicator data, the risks of waiting for are not worth taking.

The UST 10yr yield is up +4 bps from this time yesterday, now at 4.89%. 

The price of gold will start today at US$1998/oz and down -US$6/oz from this time yesterday.

Oil prices have fallen -US$3 today to be now at just over US$82/bbl in the US. The international Brent price has fallen a bit more now just under US$86.50/bbl.

The Kiwi dollar starts today at 58.3 USc and marginally firmer from yesterday. Against the Aussie we are softish at 91.6 AUc. Against the euro we are still just on 55 euro cents. That all means our TWI-5 starts today again unchanged at just under at 68.2.

The bitcoin price starts today at US$34,473 and up just +0.2% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.0%.

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.