Here's our summary of key economic events overnight that affect New Zealand with news two big central banks have been active in their signaling over the past 24 hours.
First up today, as many expected the US Fed sent a clear signal that they are more open to a September rate cut. That first came from changed wording in their no-change statement that was more balanced between the two aspects of their mandate: inflation and jobs. Powell then confirmed a potential September rate cut at his press conference.
Because this was largely what was assumed in advance, there has been no major financial market reaction, but the reactions there were, were 'positive'.
The US dollar slipped marginally on the news, the S&P500 rose after already being up sharply. The benchmark UST 10yr fell -3 bps.
The US ADP jobs report came in lower than the expected +150,000 gain. It reported a gain of just +122,000 in July. This is the precursor report to the official non-farm payrolls report which is expected to show a +175,000 gain when it is reported on Saturday (NZT). The ADP Report slowing is consistent with the Fed's expectation that the labour market is not pushing undue labour market pressure on the US economy.
The Chicago PMI also came in very much as expected, also not putting upward pressure on inflation from the heartland factory sector.
And neither are American pending home sales. They may have risen in June from May, but they are still lower year-on-year.
However, mortgage applications are still shrinking, despite mortgage interest rates staying well below 7%.
The Bank of Japan actually has raised its official policy rate, and from 0.1% to 0.25% with a +15 bps hike late yesterday. They also said they will cut their bond buying activity. This has been seen as an aggressive move that signals the central bank's growing confidence in the recovery of the domestic economy and its concern about the sharply weaker yen.
The yen appreciated significantly. Equities rose. Their benchmark bond yields rose.
Taiwan's GDP expanded +5.1% real in Q2-2024, high, but less than the very high +6.6% rate in Q1-2024. Both were the best results since the pandemic recovery, and back to their long golden economic expansion between 1994 and 2008.
China's official July factory PMI fell slightly into a further contraction. Their official services PMI fell to a very minor expansion. Both were about what was expected, but neither is very promising.
Perhaps we should also note the pressure by loss-making Temu on its suppliers has them pushing back in anger with a large-ish demonstration at the company's headquarters.
In Europe, their Euro Area inflation rate unexpectedly edged up to 2.6% in July from 2.5% in June, when forecasts expected it would slow to 2.4%. The larger economies kept it elevated, the smaller ones generally reported lower rates.
In contrast, Russian inflation hit 8.6% and well higher than the +6.3% rise in retail sales. War inflation is eating them up, which is why their central bank recently raised its policy interest rate to 18%. And it is not going to help that Russia is having to double its 'bonuses' for fighting in their invasion army.
The Q2-2024 CPI in Australia rose to 3.8%, exactly as analysts expected. Their June month inflation indicator came in at the same 3.8%. Markets seem to have focused on the 'trimmed mean' quarter-on-quarter rate of +0.8% which was lower than expected - and concluded the RBA is likely to hold rates unchanged next week.
The World Gold Council updated its Q2-2024 data yesterday with some interesting changes. Actual gold demand is weak, in fact, June quarter jewellery demand was the lowest since this series began in 2000 (pandemic excepted). Jewellery is the single largest category of demand for gold. Retail investor demand was uninspiring, back to a level first seen in March 2010. EFT demand was negative again (net outflow) and has been for nine consecutive quarters now. Industrial demand is always insignificant. And central bank demand came in its second lowest over the past two years. In fact it was almost half Q1 buying. Appetite by central banks may be tiring. So it is a curiosity that the gold price rose in the quarter to a record high. And that is an especial curiosity when you know that gold supply from mines and scrap is still hovering near its all-time high in Q2-2024.
The UST 10yr yield is now at just on 4.10% and down another -4 bps from yesterday. The key 2-10 yield curve inversion is deeper at -25 bps. Their 1-5 curve is now at -79 bps. But their 3 mth-10yr curve inversion is a little deeper at -128 bps. The Australian 10 year bond yield starts today at just on 4.14% and down -15 bps. The China 10 year bond rate is holding at its lows at 2.16%. The NZ Government 10 year bond rate is now just on 4.36%, and down -7 bps from yesterday.
Wall Street in Wednesday trade on the S&P500 is up +2.1% with some post-Fed change. Overnight European markets were all higher but nearly +1%. Yesterday Tokyo ended its Wednesday trade up +1.5%. Hong Kong rose +2.0%. And Shanghai rose +2.1%. Singapore was up +0.4%. The ASX200 rose +1.7% but the NZX50 only managed an insignificant +0.1% gain.
The price of gold will start today up another +US$20 from yesterday at US$2426/oz.
Oil prices are +US$3 higher at just over US$77.50/bbl in the US while the international Brent price is just over US$80.50/bbl. Rising Middle-East tensions are behind the move.
The Kiwi dollar starts today another +40 bps firmer at just on 59.4 USc. Against the Aussie we are almost +1c higher at 91.1 AUc. Against the euro we are up another +40 bps at 55 euro cents. That all means our TWI-5 starts today at 68.5 and up +40 bps from yesterday.
The bitcoin price starts today at US$66,595 and up +1.1% from this time yesterday. Volatility over the past 24 hours has been modest, at +/- 1.1%.
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