US car sales weaken; US factory PMIs moderate, mirrored in Canada, Mexico and China; China faces currency crisis; Aussie house prices dropping; UST 10yr at 3.14%; oil drops and gold jumps; NZ$1 = 65.5 USc; TWI-5 = 70.4

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Here’s our summary of key events overnight that affect New Zealand, with news the international stresses are taking a toll on factory expansions worldwide.

Firstly in the US, car sales rose only marginally in October, held back by rising interest rates and inflated vehicle prices. Ford said it sees slipping consumer confidence behind its lower sales volumes, indicating sales would continue wind back in 2018.

That is consistent with two factory PMI reports out overnight. The ISM one described demand as “moderately” strong, a downgrade from “robust” in the previous months. It also said consumption had “softened, with production and employment continuing to expand, but at lower levels compared to September.” The Markit one, which scores lower, was virtually unchanged.

In Canada, their PMI slipped to a 22 month low. In Mexico, their factory expansion weakened in October as well. In China, factory growth stalled in this private sector PMI report, much like the official one.

And staying in China, their currency has hit a ten year low of 6.967 to the US dollar and authorities are worried. Their central bank has stepped up measures to defend the currency to try and prevent it going over 7. If that psychological barrier is breached, many worry that the decline will become a stampede. Chinese companies who have borrowed in foreign currency are particularly vulnerable even if they are in the business of exporting.

In the US, their President may fire cheap and insulting attacks at their central bank, but in India it is actually worse, with the central bank isolated and defending its independence. The central bank wants to rein in the cowboys in the non-bank financial sector because of the risks to India’s financial stability. But industry and the government are determined to ensure these dodgy financial channels remain open and protected from tighter scrutiny.

In Australia, their factory PMI climbed to a four month high showing reasonable expansion at a faster rate of growth in October. That is consistent with rising growth and booming exports. But that boost isn’t being reflected in their housing market, especially in their big cities. Sydney property prices have fallen -7.4% over the past year, the largest annual decline since 1990 as credit curbs intended to slow investor buying also hit other buyers. In Melbourne, prices are down almost -5%. Analysts are expecting this downturn to be a long one.

The UST 10yr yield is little changed at 3.14%. But their 2-10 curve is up to just under +29 bps. The Aussie Govt 10yr is at 2.65% (up +2 bps), the China Govt 10yr is at 3.52% and down -1 bp, while the NZ Govt 10 yr is up +3 bps to 2.60%.

Gold jumped to US$1,236 and a gain of +US$22/oz.

US oil prices are sharply lower today, down more than -US$2.50/bbl and now just over US$63.50/bbl. The Brent benchmark prices are just under US$73/bbl. Rising supply and falling economic growth are factors pushing the price lower.

The Kiwi dollar is starting today a little firmer at 65.5 USc. On the cross rates we are at 92.4 AUc, and much stronger at 58.3 euro cents. That puts the TWI-5 back to 70.4 and its highest in more than two months.

Bitcoin is unchanged at US$6,321. This rate is charted in the exchange rate set below.

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

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Source: CoinDesk

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