Terms of trade rise despite long-term slide


Export prices lifted by 3.5% in the September quarter, after a rise of 1.4% in the June quarter.  

Import prices, meanwhile, fell by 1.0%, after a similar-sized fall in the previous quarter.  These results translate into an increase in the terms of trade.  

The terms of trade index since late 2011 has mostly fallen quarter to quarter.

Share Markets: 

Expectations that easy monetary policy will be withdrawn continued to be a major catalyst for financial market movements.

Key data overnight included stronger-than-expected GDP data from the UK which pared expectations of a rate cut by the Bank of England.

Share markets in the US weakened - the Dow closed 0.2% lower while the S&P500 dropped 0.3%.

Interest rates: 

Global bond yields tracked UK yields higher after GDP data beat forecasts and lowered expectations of monetary easing in the UK. US 10-year bond yields rose 6 basis points to 1.85%.

Australian bond yields (based on futures) similarly lifted. The 3-year rose 2 basis points to 1.75% and the 10-year lifted 3 basis points to 2.35%.

Foreign Exchange:

The US dollar strengthened, continuing to be supported by expectations the Federal Reserve would raise official interest rates.

GBP only strengthened temporarily after the UK's stronger-than-expected GDP result, but then weakened afterwards.

The stronger US dollar weighed on the AUD, which weakened from close to 76.5 US cents yesterday to 75.9 US cents this morning. 


Prices of most commodities strengthened. Commitments by OPEC members to cut production helped to prop up oil prices although there remain doubts as to whether the cuts will be implemented.


Profits of China's industrial corporations rose by 7.7% in the year to September, after a 19.5% increase in the year to August.  The annual rise in August had been the biggest in three years. 

Steel and refining have given industrial profits a boost. 

New Zealand: 

The monthly trade deficit for goods widened from NZ$1.24 billion in August to a record NZ$1.44 billion in September.  It is the third consecutive deficit recorded.  Exports fell by 5.7%, led by a sharp decline in meat and offal exports. 

The meat export industry is retreating from highs reached last year when beef exports hit a record due to a shortage in the US.  Imports advanced 1.8% in the month, boosted by the importation of aircraft in the month.  Excluding aircraft, imports fell 0.8%. 

United Kingdom: 

The UK economy grew 0.5% in the September quarter, which was better than the 0.3% expected by consensus and despite worries that the Brexit vote would hamper activity.

Services were the main driver of growth, while construction and production weakened.

The annual pace of growth edged up from 2.1% to 2.3% over the year to the September quarter.

United States: 

Durable goods orders slipped 0.1% in September, following a 0.3% increase in the previous month. The soft result continues to signal weak business spending into the September quarter.

Pending home sales rose 1.5% in September, following a 2.5% decline in the previous month.

Sales appear to be trending sideways, suggesting minimal upward momentum in housing. Nonetheless, ongoing job growth continues to suggest that housing demand will remain well supported.

Initial jobless claims slipped 3k to 258k for the week ending 22 October.

The four-week moving average 253k, and remain significantly below 300k, suggesting that the labour market continues to be in good shape. 

The Kansas City Fed manufacturing index stood at 6 in October, unchanged from September.

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