Wall Street positive earnings surprises spread; eyes on US CPI, China muzzles downbeat analysts; air cargo demand softens; UST 10yr 4.08%; gold and oil lower; NZ$1 = 61 USc; TWI-5 = 69.5

Here's our summary of key economic events overnight that affect New Zealand, with news investors are upbeat, positioning that the economic threats will mostly be diffused.

First up today, a look at the US Q2 corporate earnings being reported. So far Q2 earnings for the S&P 500, are down sharply from the same period a year ago. But both the number of companies reporting positive earnings surprises and the magnitude of these earnings surprises are above their 10-year averages. So as the current Q2 earnings reporting builds, more results that are better than expected are coming through. This is helping keep Wall Street equity trading in an upbeat mood. And Warren Buffet's company is one of those and has posted record results.

But the threat from commercial real estate revaluations keeps on building and has the potential to rock Wall Street at some point.

American consumers are facing sharply lower inflation now. It came in at 3.0% in June and we will get the July rate on Friday NZT. Analysts expect that to inch up to 3.3% then although recent data on used car prices have them down almost -12% from a year ago. Now research at the San Francisco Fed shows that "shelter inflation" may in fact turn negative nationwide as rents stumble. So there may be risks to the downside in the upcoming US July CPI.

And American consumers are taking out modestly more consumer debt. The growth in this has been restrained for some time with a modest increase of +US$7 bln in May reported. That rose +$18 bln in June, up +4.3%. These balances have been rising less than +2% pa recently. Prior to 2023 rises of about $30 bln per month were normal and rises of about +5% year-on-year.

Across the Pacific, China said its foreign exchange reserves rose to US$3.2 tln in July, although the change was minor, it was more about the exchange rate than anything else, and about what was expected. Foreign direct investment is tumbling, so their FX reserves may now be at a high point.

And staying in China, seven well-regarded economists told the Financial Times that their employers had told them some topics were off-limits for public discussion. The China Securities and Regulatory Commission, the stock regulator, has accused brokerage analysts of playing up risks facing the economy, which is suffering from weak consumer demand, declining exports and an ailing property sector. Two think-tank scholars and two brokerage economists, all of whom serve as government advisers, said there was pressure to present economic news positively to increase public confidence.

Meanwhile, 48 Chinese Local Government Financing Vehicles (LGFVs) were overdue on commercial paper in July, up from 29 in June, according to a report that referenced data from the Shanghai Commercial Paper Exchange. Their missed payments amounted to ¥1.86 bln (NZ$423 mln), versus ¥780 mln in June. This will aggravate concerns about the financial health of LGFVs, which are mostly tasked with building infrastructure projects that may take years to generate investment returns.

Moving on to Europe, although we earlier noted a heady rise of factory orders in Germany in June, German industrial production hasn't responded yet. In fact it came in lower than expected, slipping -1.5% from May and was down -1.7% from June 2022.

Globally, air cargo demand fell by -3.4% year-on-year in June, the smallest decline since February 2022. Year-to-date this cargo activity is down -8.1% below last year’s level. The declines were similar in the Asia/Pacific region but that actually means the region has gone backwards faster than others from May.

The UST 10yr yield will start today at 4.08% and up +4 bps from yesterday. Their key 2-10 yield curve inversion is less at -68 bps. But their 1-5 curve is still at -119 bps. Their 3 mth-10yr curve is less as well at -131 bps. The Australian 10 year bond yield is now at 4.09% and up +3 bps from yesterday. The China 10 year bond rate down -2 bps at 2.67%. The NZ Government 10 year bond rate is now at 4.82% and down -6 bps.

Wall Street has started the week on a positive note with the S&P500 up +0.7%. Overnight European markets were all little-changed. Yesterday Tokyo ended its Monday session up +0.2%, Hong Kong was essentially unchanged, but Shanghai shed -0.6% (Shenzhen was down -0.8%). The ASX200 ended Monday down -0.2% and the NZX50 ended down -0.1%.

The price of gold will start today at US$1936/oz and down -US$7 from yesterday.

And oil prices are down -US$1 and now at US$81.50/bbl in the US. The international Brent price is just under US$85.50/bbl.

The Kiwi dollar starts today marginally softer at just on 61 USc. Against the Aussie we are unchanged at 92.9 AUc. Against the euro we are firmish at 55.5 euro cents. That all means the TWI-5 has basically held at 69.5 and up a mere +10 bps in a day.

The bitcoin price is slightly lower today since this time yesterday and now at US$28,917 which is down -0.5%. Volatility over the past 24 hours has also been low at just under +/- 0.9%.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».