First world recovering better than emerging economies

Kia ora,

Welcome to Wednesday's Economy Watch where we follow the economic events and trends that affect New Zealand.

I'm David Chaston and this is the International edition from Interest.co.nz.

Today we lead with news markets are waiting for some US Fed tapering signals.

In the meantime we should note the IMF has trimmed their global growth estimates for 2021. Basically they see the developed world handling the Delta pandemic better because of substantial income and fiscal support measures, and they expect this group of advanced economies to fully recover in 2022. But the story is not positive for the emerging economies, for China, nor the low-income developing world. The rich/poor fault-line is worse now, they say.

The IMF's review does seem to be good news for Australia and their minerals sector. It identifies nickel, copper, lithium and cobalt as the top four energy transition metals likely to see surges in prices and production as the world works towards net zero emissions by 2050.

The IMF also reappointed its managing director after questions were asked about her role in the now-disgraced World Bank "Doing Business" report.

After hitting an all-time high in July, US job openings shrank in August and by more than expected. It was their first decline in eight straight months of expansion.

US consumer inflation expectations rose again in September to a series-high 5.3%, the eleventh consecutive monthly increase. This news weighed on Wall Street.

The monthly USDA assessment of their agricultural commodity outlook sees higher dairy prices and lower production in the US. And it sees higher beef production but other meat products reducing. They have raised their beef import expectations in this outlook.

There were two large US Treasury bond auctions today and both  resulted in higher yields. The three year Note was up to 0.60% median yield and a sharp rise from 0.40% last time. $141 bln was bid for US$62 bln on offer. The ten year Note was up to 1.54% median yield and up from 1.29% the previous time. US$101 bln was bid for the $41 bln on offer. The Fed took only minor volumes from these two events.

In China, their car sales tumbled -20% in September to an annualised rate of 18 mln/year, and while that keeps it still the world's largest car market, it is back to 2014 levels. The share of electric vehicles being sold is rising fast. And demand for vehicle recharging is adding to their power crisis which doesn't seem to be going away. They have loosened the ability of generators to charge higher prices, but weather, very low coal supplies, and national policy changes are all conspiring to extend this crisis.

The power crisis in India isn't getting better either. Coal supplies are at the center of its problems too.

In Germany, business confidence is declining, falling for a fifth straight month. Profitability is being hit by persistent supply bottlenecks for raw materials, and these along with cost increases show no real sign of abating.

Meanwhile, business confidence is bouncing back strongly in Australia, at least according to the widely-watched NAB business sentiment survey for September. Early signals in NSW's October 'reopening' suggest a very strong retail rebound is underway.

The UST 10yr yield opens today down -3 bps at 1.58% on the re-opening of the US bond markets. 

The price of gold will start today up +US$5 at US$1761/oz.

And oil prices are lower by a minor 50 USc to be just over US$80/bbl in the US, while the international Brent price is now at US$83/bbl.

The Kiwi dollar opens today just marginally softer at just on 69.4 USc. Against the Australian dollar we are little-changed at 94.3 AUc. Against the euro we marginally firmer at 60.2 euro cents. That means our TWI-5 starts today unchanged at just on 73.2, and still right in the middle of the 72-74 range of the past eleven months.

The bitcoin price has retraced a little today from this time yesterday, down -2.4% to be now at US$55,972. Volatility over the past 24 hours has been modest at just over +/-1.8%.

You can find links to the articles mentioned today in our show notes.

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again tomorrow.