Here's our summary of key economic events overnight that affect New Zealand, with news inflation is hard to beat and the US Fed is unsure it has done enough yet.
First up today, the US Federal Reserve raised its benchmark interest rates by +25 bps to 5.25%-5.5%, in line with market expectations. It was a unanimous decision. That takes them to their highest levels since January 2001. At this level it matches the RBNZ OCR.
Because it was expected, there was little reaction in financial markets on the announcement, with equity, bond and currency markets deciding the increase was already priced in. Perhaps the bond market is showing some caution however after the press conference. Even though markets don't expect it, the Fed did leave the door open for more increases because they seem unsure they have done enough to quash inflation.
Elsewhere in the US, mortgage applications eased -1.8% last week, the first drop in three weeks. That fall came despite mortgage interest rates being essentially unchanged.
Sales of new single-family houses dropped -2.5% in June, retreating from May's 15-month high. The June level was lower than expected. Sales in the West were down -14%, while those in the Midwest tumbled -28%. On the other hand, sales in the South rose +4.3%, and those in the Northeast surged +21%. It was an unusually mixed picture regionally.
Across the Pacific, Singapore's industrial production rose in June from May, reversing a soft patch earlier in the year. It was a bigger gain that anticipated, and trimmed the year-on-year retreat to a smaller level than expected.
In June in the EU, bank lending to households rose +1.7% from a year ago, the lowest growth rate since May 2016. On the other hand, lending to companies grew by +3.0%, but it still marked the slowest rate of growth in seven years. The overall private sector credit growth, encompassing both households and non-financial corporations, decelerated to +2.0% in June, representing the slowest expansion since August 2016.
And even these levels may be hard to sustain. An ECB bank survey showed that loan demand is falling sharply now as the ECB tightening bites harder. Some shifts in this survey seem quite large, but in the past such big shifts (either way) don't end up in actual lending. However, it is still a worrying signal.
In Australia, CPI inflation rose +6.0% in the June quarter from the same period a year ago. (Expected: 6.2%.) But it is slowing; it only rose at the rate of 3.2% annualised from the March quarter to the June quarter. New Zealand has already released its June CPI rate and that was up +6.0% as well. Australia also tracks CPI inflation monthly, and the year-on-year June month rate was 5.4%, down from 5.6% in May. Housing and food costs are keeping inflation elevated in Australia.
Also part of the pressure holding inflation up is electricity prices. In the background, wholesale electricity prices increased +31% in June over the March quarter, even if they weren't as high as last year’s record levels.
The UST 10yr yield will start today at 3.85% and down -6 bps from this time yesterday. Their key 2-10 yield curve inversion is deeper at -102 bps. Their 1-5 curve is unchanged at -122 bps. And their 3 mth-10yr curve is also unchanged at -148 bps. The Australian 10 year bond yield is now at 3.99% and down -7 bps from yesterday. The China 10 year bond rate down -2 bps at 2.69%. The NZ Government 10 year bond rate is up +1 bp from yesterday to 4.68%.
On Wall Street, the S&P500 has opened its Wednesday trade up +0.1% and taking the news of the Fed rate hike in its stride. Overnight, European markets were mixed between -0.2% in London and -1.4% in Paris. Yesterday Tokyo ended essentially unchanged again. Hong Kong fell -0.4% in Wednesday trade. Shanghai ended down -0.3%. The ASX200 ended its Wednesday session up +0.9%. And the NZX50 rose +0.2% on the day.
The price of gold will start today at US$1968/oz and up +US$6 from yesterday.
And oil prices are down -50 USc at just under US$79/bbl in the US. The international Brent price is now at US$82.50/bbl.
The Kiwi dollar starts today unchanged at just on 62.2 USc. Against the Aussie we are slightly firmer at 91.9 AUc. Against the euro we are down nearly -½c at 56 euro cents. That all means the TWI-5 has held at 69.9.
The bitcoin price has firmed slightly again since this time yesterday. It is up +0.2% and now is at US$29,311. Volatility over the past 24 hours has been low at just over +/- 0.5%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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