China's property contagion at a key point

<p>Kia ora,</p><p>Welcome to Tuesday's Economy Watch where we follow the economic events and trends that affect New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news all eyes are on China's bond markets today.</p><p>But first, it is Columbus Day in the US, a Federal holiday but not one observed everywhere and markets are operating on a subdued basis.</p><p>They have had time to reflect on the 'disappointing' non-farm payrolls report and are <a href="https://www.nytimes.com/2021/10/08/upshot/jobs-report-september.html" target="_blank"><strong>coming to the conclusion</strong></a> it wasn't as bad as the headline number suggested. That revision has markets with more conviction the Fed is still on its tapering path.</p><p>And in turn, some key commodity prices are rising today. Crude oil is up to a seven year high, and aluminium prices are now at a 13 year high. Even chocolate prices are rising fast again.</p><p>In Japan, their <a href="https://www.jmtba.or.jp/wp-content/uploads/sokuhou2109bnfr.pdf" target="_blank"><strong>machine tool orders</strong></a> for September came in very strong, up +79% from the same month a year ago, and up +46% from September 2019. By any measure this is a strong pandemic recovery and indicates the world's factories are investing in new equipment. In fact, apart from the peak at the end of 2018/early 2019, this is back at an historically high level and augers well for Japanese technology firms.</p><p>In China, bond yields are rising fast, even infecting the yields on official Beijing bonds. Driving the ruckus are property firms with it now clear Evergrande will miss a third round of bond payments and almost certainly go into default when the grace periods expire. The Fantasia problems are mounting. Now Modern Land and Sinic have become the latest to scramble to delay bond payment deadlines. As you might expect, none of this is playing out in Chinese media - even the Hong Kong media is ignoring the pressures. But inv