Here's our summary of key economic events overnight that affect New Zealand with news a quiet data week is bringing more focus to larger systemic issues.
Today, in the absence of key data releases, we should note that after the GFC, regulators moved aggressively to get banks out of holding riskier assets. But that space has been filled by non-bank financial institutions. In fact more than half the world's financial assets are held in these non-bank institutions. The risks from that sector are enormous. And the irony is that these non-banks are funded in large part by ... banks. It is a systemic risk catching the attention of bank regulators. If you want to scare yourself, read this analysis from the NY Fed.
That is not the only risk the Fed is watching. Now that they can see inflation returning to its policy range, a softer labour market could bring its own risks. Their labour market is not at that risk point yet they say, but they are watching.
Meanwhile, the US Dallas Fed factory survey in America's oil patch was little-changed and uninspiring in their June results. But if there is a change worth noting it is that expectations regarding future manufacturing activity pushed up notably this month. The future production index jumped 10 points, and the future general business activity index surged 16 points to its highest reading since early 2022.
Across the Pacific, the Chinese government plans to set up a rescue fund for struggling financial institutions, aiming to prevent a financial crisis triggered by the real estate market slump. Unlike similar funds that were created to protect customers, the purpose of the new fund is to prevent financial institutions from collapsing suddenly, given that bankruptcies of these huge enterprises could cause turmoil in their financial markets.
Taiwan said its retail sales rose a modest (but better) +2.4% in May, but their industrial production was up an impressive +16% from the same month in 2023.
In Europe, the Ifo Business Climate indicator for Germany unexpectedly declined in June from May, but remains higher than what it has been for most of the past year.
Perhaps we should also note that the price of lithium carbonate has fallen back to levels first reached in 2018.
The UST 10yr yield is now at 4.26% and unchanged from this time yesterday. The key 2-10 yield curve inversion is still at -48 bps. Their 1-5 curve is still inverted by -83 bps. And their 3 mth-10yr curve inversion is still inverted by -105 bps. The Australian 10 year bond yield is holding at 4.26%. The China 10 year bond rate is down -1 bp at 2.26%. The NZ Government 10 year bond rate is now at 4.65% and down -3 bps from yesterday.
On Wall Street, the S&P500 has started the week virtually unchanged from where it closed on Friday. But overnight, European markets closed mostly higher. London was up +0.5%, Frankfurt was up +0.9%, and Paris was up +1.0%. Yesterday Tokyo closed +0.5% higher. Hong Kong closed essentially unchanged after being in deficit for most of the session, but Tokyo closed down a sharpish -1.2%. Singapore ended up +0.2%. The ASX200 ended down -0.8% and the NZX50 was down -0.5%.
The price of gold will start today up +US$12 from yesterday at US$2332/oz.
Oil prices are up +$1 from yesterday at US$81.50/bbl in the US while the international Brent price is still just under US$85.50/bbl.
The Kiwi dollar starts today unchanged from yesterday at 61.2 USc. Against the Aussie we are down -20 bps at 92 AUc. Against the euro we are also -20 bps lower at 57.1 euro cents. That all means our TWI-5 starts today down -10 bps at 70.8.
The bitcoin price starts today at US$60,160 and down a very sharp -6.1% from this time yesterday. Volatility over the past 24 hours has high at just under +/- 3.6%.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.