Global Markets Show Mixed Trends as Bond Yields Ease and Commodities Fluctuate
The global financial landscape saw mixed signals overnight, with key economic indicators showing varied trends. The overnight dairy auction in New Zealand saw prices rise by 1.2% in USD terms and 3.6% in NZD terms from the prior full event three weeks ago. Skim milk powder (SMP) led the gains with a 4.3% increase, while whole milk powder (WMP) rose by 1.2%. However, milk fats saw declines, with butter down 1.1%, cheddar down 3.7%, and mozzarella down 3.9%. Despite the mixed results, the overall outcome is likely to confirm Fonterra's recent raising of its payout forecasts.
In the US, the ADP Employment report recorded a modest rise of 23,750, continuing a trend that began in mid-August. Meanwhile, the US logistics industry continues to face challenges, with the LMI index rising to its second-highest reading in four years. This surge is driven by high inventory levels and rising transport costs, indicating persistent supply chain pressures. The US merchandise trade deficit for August worsened to a monumental US$105.6 billion, the worst since the pre-pandemic rush in 2015, exacerbating the situation post-tariff introduction.
Canada reported its largest trade surplus since 2022, driven by a strong surplus with the US. In Asia, the World Bank updated its growth forecasts, noting that many countries in the region are benefiting from AI adoption investments. However, China's growth is expected to slow, with forecasts of 4.3% in 2027 and 4.2% in 2028. Indonesia, Vietnam, Malaysia, and the Philippines are projected to outperform China. Meanwhile, German factory orders tumbled 10.6% in August from July, though they remain 2.7% higher year-over-year. Australian consumer sentiment remains grim, with the Westpac-Melbourne Institute survey indicating the worst period of weak sentiment since the early 1990s.
Global bond yields saw a slight easing, with the UST 10-year yield at 5.26%, down 8 basis points from the previous day. The 30-year yield stands at 5.65%, down 5 basis points. The key 2-10 yield curve remains unchanged at 48 basis points. Wall Street saw gains, with the S&P500 up 0.7% and the Nasdaq up 0.6%. European markets were mixed, with London up 0.4% and Frankfurt up 0.8%. Asian markets also showed gains, with Tokyo up 1.1%, Hong Kong up 1.0%, and the ASX200 up 0.6%. The NZX50 ended little-changed.
Commodity prices showed mixed movements, with gold up US$27 to US$4157/oz and silver up 50 US cents to just under US$61.50/oz. Oil prices eased, with US crude down 50 US cents to just over US$89.50/bbl and international Brent down US$1 to US$100/bbl. The Strait of Hormuz remains essentially shut, with only eight ships exiting in the past 24 hours. The Kiwi dollar rose to 56.2 US cents, up 30 basis points from the previous day. Against the Australian dollar, it is up 20 basis points at 80.5 AU cents. Against the euro, it is up 10 basis points at just on 50 euro cents, bringing the TWI-5 to just under 60, up 30 basis points from the previous day.
In the cryptocurrency market, Bitcoin starts the day at US$85,687, up 0.5% from the previous day. Volatility over the past 24 hours has been low at just over +/-0.8%.