Risk off as key uncertainties rise

<p>Kia ora,</p><p>Welcome to Thursday’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>Today we lead with news the sharp dive in crypto prices, especially bitcoin, has induced a risk-off tone in markets today.</p><p>And financial markets are bracing for tomorrow's release of American CPI data. They expect it to stay high with the headline rate at 8% which will trigger another outsized Fed rate hike on December 15 (NZT). That is currently priced in at +60 bps, with their policy rate expected to top out at over 5% in mid 2023. The risks are to the upside however, unless inflation comes down soon.</p><p>American <a href="https://www.mba.org/news-and-research/newsroom/news/2022/11/09/mortgage-applications-decrease-in-latest-mba-weekly-survey" target="_blank"><strong>mortgage applications fell again</strong></a> last week, but this time the retreat was small. But from year-ago levels they remain down more than -40%. Their benchmark 30-year interest rate rose to 7.14% plus points.</p><p>US <a href="https://www.census.gov/wholesale/pdf/mwts/currentwhl.pdf" target="_blank"><strong>wholesale inventories rose</strong></a> barely in September from August as firms work to control the recent run-up, but they remain +24% higher than year ago levels so there is more to go to get them back under control. The inventory-to-sales ratio remains elevated in the perspective to 2021 levels, but on a longer term perspective isn't unusual.</p><p>However, there are increasing reports of substantial job layoffs underway in both the tech and finance industries in the US. The economic slowdown the Fed is trying to engineer might be underway.</p><p>US election outcomes are too close to call this morning. It will take a while for the dust to settle. But there hasn't been a big swing either way, which is unusual in US mid term elections.</p><p>China's annual <a href="http://www.stats.gov.cn/tjsj/zxfb/202211/t2