US consumers accept inflation will be lower; India CPI jumps; most commodity producers facing sharp pressures, some more than others; UST 10yr 4.19%; gold and oil lower; NZ$1 = 59.8 USc; TWI-5 = 68.5

Here's our summary of key economic events overnight that affect New Zealand, with news China's woes are affecting us, devaluing our currency to a nine month low. And the AUD is suffering similarly.

But first today, we can report that American inflation expectations continue to retreat, falling to their lowest since April 2021 and are now at 3.5% in July for the year ahead (and that is down from 3.8% in June). This mirrors the sort of levels we had noted in recent consumer sentiment surveys. Although this is not back to what the Fed says it needs, it is clearly on track, and consumers themselves seem to believe the Fed's actions won't bring a renewal of price pressure.

The same survey showed households’ perceptions about their current financial situations and expectations for the future improved. The share of respondents expecting to be better off a year from now is the highest since September 2021.

India however does not have control of inflation. Retail prices consumers face jumped to 7.4% in July, the highest since April 2022. A rise was expected, but nothing like that. It is a jump from 4.9% in June caused mainly by sharply rising food prices that were up +11.5%, their highest since January 2020, and in turn led by the cost of vegetables which were up an eye-watering 37% for the year.

As high as that may be, it is nothing like what the Argentines are facing. They just reported CPI inflation running at the rate of 116% and yesterday the Argentine peso was devalued sharply to 350 to the USD. This was all triggered when a wild-card hard-right populist took the top spot in a poll ahead of their upcoming presidential elections. They are in a sad spiral and that poll was probably the last straw; they are out of options and out of money.

Yesterday we noted the rapid devaluation in the Russian ruble. Well, today their central bank announced it will be holding an emergency meeting which will likely raise its policy rate sharply. It is currently at 8.5% and will probably go to at least 10% then. The ruble has devalued -27% so far this year amid a slowing economy, unbalanced currency flows, and capital flight.

In Australia, iron ore prices are falling, solely because of negative sentiment about the Chinese economy. We are seeing other commodity prices retreat too, including food commodities with declines for soybeans and wheat. Tomorrow morning, we have another dairy auction and everyone should hold their breath over that. As you know prices have been very weak recently, resulting in Fonterra cutting their payout forecast to well below break-even levels for most dairy farmers. The question that tomorrow will answer is how deep the current pressures will reveal. There is almost zero chance prices will hold or rise. Last week's WMP Pulse auction brought a -7% price drop and that probably foreshadows what is ahead tomorrow. Yes, the dairy sector is hurting, but the sheep and beef sector is finding it tough going too. Farmers will have shelved spending plans and the ripple effect on our whole economy will be significant.

The UST 10yr yield will start today at 4.19% and up +3 bps from yesterday and still near its October 2022 highs. Their key 2-10 yield curve inversion is a little deeper, now at -77 bps. Their 1-5 curve is still at -104 bps. Their 3 mth-10yr curve is still at -122 bps. The Australian 10 year bond yield is now at 4.23% and up +6 bps from yesterday. The China 10 year bond rate is down -2 bps at 2.64%. And the NZ Government 10 year bond rate is up +7 bps, now at 4.97%.

Wall Street has started its week with the S&P500 up +0.3%. Overnight, European equity markets were mixed with London down -0.2% and Frankfurt up +0.5% and Paris in between but positive. Yesterday, Tokyo ended its Monday session down -1.3%. Hong Kong ended down -1.6%, but Shanghai had a late recover and ended down just -0.3%. The ASX200 ended down -0.9%, but the NZX50 only slipped a relatively minor -0.1%.

The price of gold will start today at US$1910/oz and down -US$3 from yesterday.

And oil prices are a touch lower at just over US$82/bbl in the US. The international Brent price is unchanged at just on US$86/bbl.

The Kiwi dollar starts today essentially unchanged at just on 59.8 USc and near its lowest since November 2022. Against the Aussie we are a little softer at 92.1 AUc. Against the euro we are marginally firmer at 54.8 euro cents. That all means the TWI-5 is now at 68.5 and down -20 bps from this time yesterday.

The bitcoin price is also virtually unchanged today from this time yesterday and still at US$29,374 which is up +US$52 or +0.1%. Volatility over the past 24 hours has been very low at just on +/- 0.2%.

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