NEW ZEALAND BUSINESS NEWS
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US producer price inflation came in at 6.3% for September, well above the 5.3% expected and a steep step up from the 5.6% recorded in August. The surprise has raised expectations that the Federal Reserve will act firmly at its 29 October meeting, with the alternative read as a signal that it is not serious about tackling inflation.
The figure sits alongside a US retail sales increase of 6.3% in September compared with a year earlier, most of which reflects goods inflation rather than higher volumes. Those price rises are being reinforced by the tariff taxes now being paid at the US border.
Government bond markets moved sharply. The US 10-year Treasury yield fell 10 basis points to 5.08%, and the 30-year dropped a net 10 basis points to 5.42%. The shorter end held up much better, producing what bond traders describe as a bull flattening — long yields falling faster than short ones, a signal that worries traders even as the face value of their bonds rises.
The 2-10 yield curve sits at +34 basis points, down 5; the 1-5 curve at +44 basis points, down 7; and the 3-month to 10-year curve at +107 basis points, down 16. Investors are showing a preference for holding US Treasuries over AI-related debt, which they see heading for a reckoning.
Other sovereign yields also fell. The Australian 10-year starts the day at 5.22%, down 13 basis points, the Japanese 10-year is at 2.92%, down 9, and the New Zealand Government 10-year is at 4.97%, down 5. China’s 10-year rate is unchanged at 1.65%.
The tariff regime is insulating American manufacturers from global competition, giving them room to raise prices. The latest Philadelphia Fed factory survey remained positive in October despite some easing, with sharp rises in prices received offset by rising prices paid. The New York Empire State survey also recorded increasing activity, again under very elevated cost and price pressures.
The logical result, over time, is industries that cannot compete in export markets. The US labour market, meanwhile, showed initial jobless claims little change last week, at 190,600, an increase attributed to seasonal factors. There are now 1.47 million people on these benefits, down 11% at the same time a year earlier, as tighter eligibility restrictions push people off the support.
Australian employment fell by 39,300 in September, below expectations of a 20,000 gain, following a 29,300 increase in August. The fall was distorted by a 73,700 drop in part-time jobs, partly offset by a 34,400 gain in full-time positions. The number of unemployed people rose only marginally and the jobless rate held at 4.7%, still a five-year high.
Analysts still expect the Reserve Bank of Australia to raise rates again on 3 November, with inflation the larger concern.
Global container freight rates rose again last week and are now 166% higher than a year ago, driven by demand from China to the US, some demand to the EU, and end-of-year holiday trade builds. Bulk freight rates fell 11% over the week and are 33% above year-ago levels.
For New Zealand exporters and importers, the combination of a weaker kiwi dollar and elevated freight costs adds to landed costs. The kiwi is up 40 basis points from yesterday at just on 56.1 US cents, up 110 basis points against the Australian dollar at 81.2 Australian cents, and down 10 basis points against the euro at just on 50 euro cents. The TWI-5 starts the day at just on 60, up 40 basis points.
Oil has risen another US$2 to just under US$98 a barrel in the US, while international Brent is down 50 US cents at US$106 a barrel. A large release of strategic reserves is about to happen, but it is not trimming prices. US crude stocks fell 1% last week, more than expected, and the Strategic Petroleum Reserve is unchanged at 283 million barrels, down 31% on a year ago and equal to about 17 weeks of use at the current rate.
Gold is at US$4147 an ounce, up US$67, and silver is up US$1.50 at just under US$57 an ounce. Bitcoin starts the day at US$81,997, essentially unchanged, with volatility over the past 24 hours at just under ±1.7 %.
Equity markets were mixed: Wall Street was little changed on the S&P500 while the Nasdaq fell 0.4%, European markets closed between Frankfurt’s 0.3% gain and London’s 1.1% gain, Tokyo ended down 4.9%, Hong Kong fell 1.0%, Shanghai dropped 1.6%, Singapore closed down 0.4%, the ASX200 slipped 0.1%, and the NZX50 firmed 0.4%.
NZ Business News reports on the decisions, deals and numbers shaping New Zealand business — the companies making them, the policy and market conditions they work within, and what it means for the people running businesses here.