US growth slips; Canada growth holds; Japan reports impress; EU inflation rising; China sanitises its data; India debt low; Hayne shames finance industry; UST 10yr 3.06%; oil and gold up; NZ$1 = 66.3 USc; TWI-5 = 70.3

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Here’s our summary of key events overnight that affect New Zealand, with news we should keep an eye on the world’s third largest economy because new data shows it can still impress.

But first, updated estimates suggest the American economy is expanding at a +3.6% annualised rate in the third quarter. This is a retreat of -½% from the Q2-2018 rate. This update follows the release of August data on domestic consumption and income. Wall Street is closing with a small loss on the day, and a small loss on the week.

In Canada, a small slip was expected in their July economic growth rate, but it didn’t occur, coming it at +2.4% pa, the same as for June. That probably sets the stage for another Bank of Canada rate hike.

In Japan, and in somewhat of a market surprise, retail sales there turned up strongly in August. Factory output data came in positive as well. Their unemployment rate fell to 2.4%, and new data shows that 70% of Japanese women of working age are now employed, a new high. All these positives has seen the Tokyo stock market roar higher, up +1.6%. Oh, and by the way, Japanese housing starts in August rose much more than was anticipated. All up, this suggests Japan is the other large economy that is helping drive world economic growth at the moment.

In Europe, inflation rose above +2% in September, and above the ECB target. A sharp rise in fuels costs was the key driver, but food costs also contributed.

In China, there is growing evidence authorities there are censoring their economic data, sanitising out the signs of stress. One thing that is obvious however, outbound investment fell in August for the first time ever. Mostly, that was a sharp pullback from investing in the US, but there is a redirection towards the EU. The pressure to only deliver good news is so intense, it reaches into core research and now their military is wary.

The Shanghai stock exchange was up another +1% yesterday, but you do have to wonder if the markets there are operating with all relevant information.

In India, updated data shows that their external debt is falling and that their exposure to the sorts of pressures other emerging economies are facing is actually very low. And their foreign exchange reserves to total debt is an impressive 80%. For all their issues, they are in a strong position.

In Australia, their banks have been shamed for their sales culture which bred ‘greed’ according to the interim report from their Royal Commission into financial services. But the long-running inquiry stopped short of recommending any penalties, sending bank shares rallying. A report summary is here. The main sectors in the Hayne crosshairs are advisers and brokers, as well as insurers.

The UST 10yr yield is softer today at just on 3.06%. Their 2-10 curve is just under +24 bps now, -2 bps lower in the week. The Aussie Govt 10yr is at 2.67% (down -1 bp overnight), the China Govt 10yr is at 3.65% and down a chunky -6 bps, while the NZ Govt 10 yr is at 2.64%, also down -6 bps. New Zealand swap rates have been flat over the past week, only slipping slightly at the long end.

The VIX is still its average over the past year of 12. And the Fear & Greed index has moved sharply back to neutral, a quick face away from the heavy ‘greed’ position of last week..

Gold however is up from yesterday by +US$7, now just on US$1,191/oz in New York, but -US$5 lower from this time last week..

US oil prices are up sharply today from yesterday by almost +US$1.50 and now just under US$73.50/bbl. The Brent benchmark is now just over US$82.50/bbl. The US rig count was unchanged this week.

The Kiwi dollar is ending the week unchanged at 66.3 USc, but down +½c in the past seven days. On the cross rates we are little changed at 91.8 AUc, but up strongly at 57.1 euro cents – in fact that is the highest we have been in a month. That puts the TWI-5 at 70.3, the same as last week and almost at its average over the past 3 months.

Bitcoin is now at US$6,693 and that is a net gain of +3.2% over the past week. This rate is charted in the exchange rate set below.

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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