Investor Sentiment Dims Amidst Growing Economic Uncertainties

Markets recoil on rising risks; US Govt deficit balloons; Warsh equivocates; Ueda clear; Singapore exports surge; India street protests spread; Scaramucci record broken; UST 10yr at 5.09%; gold holds and oil jumps; NZ$1 = 56.5 USc; TWI-5 = 60.3

Markets recoil on rising risks; US Govt deficit balloons; Warsh equivocates; Ueda clear; Singapore exports surge; India street protests spread; Scaramucci record broken; UST 10yr at 5.09%; gold holds and oil jumps; NZ$1 = 56.5 USc; TWI-5 = 60.3

Here's our summary of key economic events overnight that affect New Zealand, with news the oil price is rising sharply again just as computer chip and AI-related shares are coming under new pressure as investor enthusiasm cools rapidly. (For example, SpaceX stock is down -12% this week and is still trading below its June 13 float listing price.)

Higher costs and evaporating stock market gains are a combination likely to attract the bears.

In the US, industrial production was up +2.2% in September, better than August's +1.6% and better than expected. A significant part of the gain was the +6.7% rise in "business equipment" where the data center buildout activity is covered. Production of "consumer goods" were actually -0.1% lower than a year ago (and that includes cars), although construction and mining had good gains too.

Not positive was the New York Fed's services survey which reported that business activity declined significantly in October with firms especially pessimistic about the outlook ahead.

The latest US federal government accounts show a -US$2 tln deficit in the fiscal year ended September. This is its highest level since the pandemic, as spending on their military, social programs and interest on their ballooning debt dwarfed the Trump administration’s cost cuts.

Perhaps sensing the outlook turning darker, Fed boss Warsh declined to signal whether another interest rate hike is on the table this month in an overnight IMF conference event. He said hotter-than-expected inflation had not altered his assessment of the US economy. But to hold rates he has to convince 12 other voting members this is 'blind eye' approach is warranted. Still, traders reacted and scaled back expectations of an October rate hike.

At the same Bangkok IMF conference, Japanese central bank boss Ueda said that their underlying inflation is already quite close to it's 2% target and that "we cannot tolerate it rising any further." Higher interest rates are his tool to prevent that.

Canadian housing starts rose in September to their highest annualised rate since May with a better than expected upturn. However they were down sharply from the unusually high year-ago level.

Alberta goes to the polls this weekend on its referendum to leave Canada. It is expected to be soundly rejected.

Singaporean (non-oil) exports surged a massive +25% in September from August to be +68% higher than year-ago levels which themselves were already elevated and up +21% at that time. They rose from S$61.5 bln in September 2025 to S$93.2 bln in September on the back of electronics and machinery. A big destination was "Hong Kong", so a back-door for AI gear into China. Meanwhile their imports rose +48% from a year ago.

In India, the street protests by disgruntled youth is still very active, even expanding, despite (or because of?) arrests of the movement's leaders.

In Australia, their home building industry is reporting that new home sales fell by -17.5% in the September quarter 2026, reversing the recovery that commenced in 2025. New home sales are now at their lowest quarterly level in 18 months. All states recorded a decline in the latest September quarter. The largest decline was in Queensland (-26%), followed by Victoria (-23%), New South Wales (-17%), South Australia (-7.6%) and Western Australia (-1.7%). They blame rising interest rates, tax changes, and general economic uncertainty.

And for some weekend irony/humour, we should note that the Scaramucci record of only 11 days as the shortest Trump press secretary has been beaten. Katie Zacharia is out after only five days.

The UST 10yr yield is up +1 bp to 5.09% for a net -12 bps weekly fall. The 30 year yield is at 5.44%, up +2 bps for a net -16 bps weekly retreat. The key 2-10 yield curve is now at +36 bps (+2 bps). Their 1-5 curve is now at +46 bps (+2 bps) and the 3 mth-10yr curve is at +109 bps (+2 bps). The China 10 year bond rate is down -1 bp at 1.64% and down -4 bps for the week. The Japanese 10 year bond yield is now at 2.94%, up +2 bps from yesterday but down -6 bps from this time last week. The Australian 10 year bond yield starts today at 5.26%, up +4 bps from yesterday but down -12 bps for the week. The NZ Government 10 year bond rate is now at 5.03%, up +6 bps overnight, down -6 bps for the week.

Wall Street is -1.2% lower today on the S&P500 to be -2.1% down for the week, and the Nasdaq is down -2.3% today and a -4.5% weekly slide. Overnight, European markets were all higher between Frankfurt's +0.9% and Paris's +0.3%. Yesterday, Tokyo ended up +1.4% to end the week down a sharp -4.4%. Hong Kong was up +0.5% on Friday for a weekly -1% fall. Shanghai rose +0.2% to end its week for a weekly -2.4% retreat. Singapore ended up +0.2%. It is also probably worth noting a -15% fall in the Jakarta stock market index this past week, and that may be due to the threat it will be dropped from some international benchmarks. The ASX200 closed its Friday trade up +1.0% for a +0.8% weekly gain. But the NZX50 was down -0.6% on Friday for an unchanged week.

The Fear & Greed index is now back in the 'extreme fear' zone, from being in the 'neutral' zone a week ago.

The price of gold is at US$4157/oz and up +US$10 from yesterday but down -US$39 from last week. Silver is unchanged at just on US$57/oz and down its own -US$4 for the week.

Oil prices have risen another +US$3.50 from yesterday to just under US$101.50/bbl in the US, while the international Brent price is up +US$4 at US$110/bbl.  The release of strategic reserves is about to happen, but this isn't trimming prices. A week ago these prices were US$91.50 and US$104.50/bbl so a +5% jump in a week. Hormuz transits have stayed very low today with just four ships exiting over the past 24 hours, 3 tankers escorted (2 dark with transponders off) and only 2 entering for new loads but no tankers  (0 dark). The Red Sea activity is staying lower both ways at the Yemen chokepoint.

The Kiwi dollar is up another +40 bps from yesterday, back to just under 56.5 USc, up the same for the week. Against the Aussie we are up +20 bps at 81.4 AUc. Against the euro we are up +30 bps at just on 50.3 euro cents. That all means our TWI-5 starts today at just on 60.3 and up +30 bps from yesterday, up +40 bps for the week.

The bitcoin price starts today at US$81,247 and down -0.9% from yesterday at this time, down -1.7% for the week. Volatility over the past 24 hours has been modest at just under +/-1.2%.

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