Dairy prices stand out in a risk-off market mood

<p>Kia ora, </p><p>Welcome to Wednesday'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 Wall Street is back but in a restrained mood, concerned where the Fed is going. Commodity prices are weaker, bond yields are higher, and the USD is exhibiting a bit of a risk-off tone. Equities are little-changed as traders return.</p><p>But first up today, there was another <a href="https://www.globaldairytrade.info/en/product-results/" target="_blank"><strong>dairy auction</strong></a> this morning, after a three week gap this time. And this commodity isn't being hurt. Prices rose +4.0% overall in USD terms, although they were only up +1.2% in NZD terms, held back by a firming currency. This was a popular event with the most bidders in more than a year. The key WMP product rose +3.3%, SMP was up +7.3% and both butter and cheese each rose almost +4%. It also comes as the second firm auction in a row, bolstering the notion that dairy prices may be on a rising trend.</p><p>In the US, their logistics managers index (<a href="http://www.the-lmi.com/august-2021-logistics-managers-index.html" target="_blank"><strong>LMI</strong></a>) stayed unusually high in August, indicating continuing expansion of supply chain networks. It reflects firms stocking up on inventory in advance of Q4 and is a global feature. Transportation networks bring in goods from Asia are clogged. There is no sign of relief on the horizon for ports, as maritime bookings were up 40% from last August, giving more evidence that we are seeing the beginning of peak season quite early this year.</p><p><a href="http://www.customs.gov.cn/customs/xwfb34/302425/3858704/index.html" target="_blank"><strong>Exports from China surged</strong></a> almost +26% in August 2021 from a year earlier, far above market estimates of +17% and accelerating from a +19% rise in July. This is consistent with the strong demand we are seeing