Markets pretend geopolitical risks won't affect them

<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 investors are ignoring the geopolitical risks.</p><p>The main talking point today is how little financial and commodity markets have reacted to the sudden Gaza-Israel conflict threats. Yes, bond markets are having a 'flight to safety' with yields falling somewhat, but is it limited. Yes, oil prices have risen, but they are are hardly back to week-ago levels yet. Equity markets have hardly reacted. And yet geopolitical risks have clearly risen and the world is a much more dangerous place. Rogue nations are chancing their arm for positioning in a multipolar world. Things are getting messier as authoritarians see their chance.</p><p>But markets are yawning. Investors are sidelining those risks, 'happy' they don't involve the major economic blocks in North America, Japan, the EU or even China.</p><p>However, there <i>are </i>risks to worry about, especially in China.</p><p>It was a national holiday there last week. There is evidence that travel-related activity was quite strong, but that retail activity was not especially strong. Levels this year barely exceeded 2019, it seems.</p><p>And the return to work there isn't starting with great signals. China is a very big place so it is possible to find evidence of all trajectories. But there is one that accentuates the drag of a stuttering property market. <a href="https://tradingeconomics.com/commodity/steel" target="_blank"><strong>Steel rebar futures</strong></a> fell to their lowest since August (which itself was a false dawn) and threatening 2017 levels. Confidence construction activity will recover isn't high. That doesn't augur well for New Zealand sales of logs to China.</p><p>And in China a copper billionaire has '<a href="https://www.bloomberg.com/news/articles/2023-10-09/chinese-copper-tycoon-goes-missing-believed-