Markets on edge

<p>Kia ora,</p><p>Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the international edition from Interest.co.nz.</p><p>And today we lead with news the fall in bond prices (rise in bond yields) is biting even harder today. Equity market valuations are taking a hit from the pressure on capitalisation as rates rise.</p><p>And a looming US government shutdown isn't helping sentiment either. JP Morgan boss Jamie Dimon is now <a href="https://timesofindia.indiatimes.com/business/india-business/index-inclusion-to-bring-25billion-foreign-inflows/articleshow/103944233.cms" target="_blank"><strong>worried</strong></a> the Fed could take its policy rate all the way up to 7% and the world is "not prepared" for that.</p><p>The US <a href="https://www.redbookresearch.com/" target="_blank"><strong>Redbook retail sales index</strong></a> we follow was up +3.8% last week from a year ago, barely holding on to inflation-adjusted gains.</p><p><a href="https://www.census.gov/construction/nrs/pdf/newressales.pdf" target="_blank"><strong>New home sales</strong></a> were expected to slip in August, but in the end they fell more than expected from July. But they are still running at a +5.8% rate higher than year-ago levels. The slip from July does not take it out of the overall trend higher however.</p><p>September <a href="https://www.conference-board.org/topics/consumer-confidence" target="_blank"><strong>consumer sentiment</strong></a> as tracked by the Conference Board was also expected to slip from August, and it too retreated more than expected. But that retreat only took it back to levels it has held since mid-2022 until the more recent rises. The survey did find little-change in present conditions but that the political situation and higher interest rates are affecting future expectations.</p><p>Improving present conditions is helping the <a href="https://www.richmondfed.org/-/media/RichmondFedOrg/region_communities/regional_da