Investors turn 'risk-on' as good data flows everywhere

Kia ora,

Welcome to Wednesday’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.

Today we lead with news that is surprisingly positive today.

Even though there are likely large influences on New Zealand from events halfway around the world, there are some locally too. Later this morning the Q3-2024 labour market report will be released. And we will have full coverage. But before that we have had another dairy auction, and this one will have analysts reaching for their pencils. It was a good one, with overall prices rising +4.8% in USD terms, up +6.2% in NZD terms. That takes them to their best level since late 2022.

The gains were widespread, led by butter's +8.3% jump. Demand out of China is the extra push this market got, and it could well bring upside to farm-gate payout forecasts. In the background, animal health concerns in both the US and EU, and weak domestic raw milk prices in China, are driving lower production expectations globally, just when New Zealand production is in an expansion state.

But the economic good news didn't stop there.

The Redbook tracking of retail sales in the US delivered a +6.0% rise last week from the same week a year ago. That was its best since mid 2022.

The American logistics report for October revealed a small rise from a strong September, taking this index to its best expansion since September 2022. Growth is increasing at an increasing rate in all the right metrics.

The ISM services PMI for October was sharply positive too, and its most expansionary level since August 2022. Encouragingly, this sharp turnaround was driven by strong new order growth. This survey basically confirmed the expansion in the S&P/Markt services PMI version and its drive in new order growth.

US merchandise exports slipped slightly in September from August, but we need to recall that the August level was a record high - and that Boeing's strikes and production woes will have had an effect here. US imports were strong, as you would expect with most sectors of their economy firing on all cylinders.

We should note that the strike at Boeing is over, with a startling +44% pay hike over four years (+38% plus compounding). The catch-up will no doubt drive future export results.

There was a well-supported UST 10yr bond auction earlier this morning, and that delivered a yield of 4.29%, which compares with the 4.01% at the equivalent event a month ago.

Not to be outdone, the Canadian services PMI turned up sharply to expansion as well, also driven by new order growth.

In China, the October Caixin services PMI largely mirrored the official version, but recording a better expansion than the official version, in a better-than-expected result.

In Australia, as expected their was no change by the RBA to their policy interest rate. But they warned that another interest rate rise was still a possibility, conceding they had been surprised by the scale of the rise in government spending. They are also surprised that housing demand is staying up, despite their highish interest rates.

The UST 10yr yield is now at just on 4.34% and up +4 bps from this time yesterday.

The price of gold will start today at US$2738/oz and up +US$5 from yesterday.

Oil prices are up almost +US$1 at US$72.50/bbl in the US while the international Brent price is now at US$76/bbl.

The Kiwi dollar starts today at 60 USc and up another +20 bps from this time yesterday. Against the Aussie we are down -30 bps at 90.5 AUc. Against the euro we are up +10 bps at 55 euro cents. That all means our TWI-5 starts today at just on 68.7, littel-changed from yesterday at this time.

The bitcoin price starts today at US$70,108 and up +3.5% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.8%.

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 on tomorrow.