Shanghai drops another -5%; Wall Street another -2%; US CPI eases back; real US wages hardly move; China raises funds easily in test; NZ holds high ranking; UST 10yr down at 3.14%; oil drops, gold jumps; NZ$1 = 65.2 USc; TWI-5 = 69.2

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Here’s our summary of key events overnight that affect New Zealand, with news Wall Street is following Shanghai sharply lower.

In Shanghai yesterday, shares tumbled more than -5%. On Wall Street this morning, trading had briefly stabilised, helped by the US CPI report for September showing muted inflation. But in mid afternoon trading stocks are falling again and are now down more than another -2% on top of yesterday’s -3% drop. And the selloff is accelerating.

Those US inflation numbers pegged the price rise rate back to +2.3%, down from +2.7% in August. Core inflation (without food and petrol) held steady at +2.2%.

This lower inflation managed to boost real wage gains with US real earnings up at a +0.3% pa rate from August. But over the whole year things are not so bright. Real average hourly earnings increased just +0.5% in the year to September 2018. To get that, Americans actually had to work longer hours, and with those extra house they got a +1.1% real increase in average weekly earning in the year.

Also not so bright was an unexpected jump in the level of unemployment claims last week.

And staying in the US, it has been announced that retirees will get a +2.9% rise in Social Security benefits in 2019, boosting these payments to 62 mln people. This is the single largest component of the deficit spending.

For all the trouble China is facing in its economy, it has defied predictions and had a very successful bond market issue. China sold US$3 bln in US dollar bonds, raising money easily and cheaply in the midst of the global markets selloff. The amount is immaterial – this is just a test of their market standing. This tender had bids for US$17 bln and achieved a 3.63% yield on its 10yr offering, a +45 bps premium to equivalent USTs. This is much better than was expected and hardly a premium to its equivalent yuan 10yr.

In the latest HSBC ranking of the best place to live and work, Singapore came in as number one. And New Zealand came in at number two, matching its 2017 ranking. We are not so high on the earnings scale, but bat very high on most other aspects. Australia slipped one place to sixth. And France was a big mover up the rankings as it positions itself to benefit from the Brexit fallout.

The UST 10yr yield has slumped -9 bps today to 3.14%. Their 2-10 curve is now back at +30 bps. The Aussie Govt 10yr is at 2.74% and down -3 bps from this time yesterday. The China 10yr is at 3.62%, down -1 bp, while the NZ Govt 10yr is at 2.65%, down -4 bps.

Gold is sharply higher this morning at US$1,221/oz, gain of +US$32 overnight.

US oil prices are down sharply again by another -US$2 today at now just over US$71/bbl. The Brent benchmark has fallen a bit more to just over US$80.50/bbl. Unexpectedly large rises in both US crude stocks, as well as petrol inventories, is driving today’s retreat.

The greenback has retreated. The Kiwi dollar is starting today at 65.2 USc and that is up +½c in the past 24 hours. That takes us back up to where we were ten days ago. On the cross rates we are firmer as well at 91.6 AUc and at 56.3 euro cents. That pushes the TWI-5 up to 69.2.

Bitcoin has dropped sharply and is now at US$6,245 and down almost -US$300 since this time yesterday. Along with the rising Kiwi dollar, in our currency the fall is more than -NZ$500. This rate is charted in the exchange rate set below.

This chart is animated here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Daily exchange rates

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USD 

NZD

End of day UTC
Source: CoinDesk

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