Here's our summary of key economic events overnight that affect New Zealand, with news the global economic expansion is losing pace, led by the US.
But first up today, the overnight full dairy auction pulled back, and expected, but perhaps not be as much as the derivatives markets suggested. In the end prices were down -1.6% in USD terms and -3.0% in NZD terms on a rising Kiwi dollar. It was a mixed picture across the commodities offered.
In the US, the weekly Redbook retail monitor pulled back last week to be 'only' +4.9% higher than the same week a year ago. That is a sharpish dip from the prior week's +6.1% and mid-April's +7.4%. Much of this may be attributable to tariff-tax increases, with sales volumes easing faster now.
Meanwhile, April job openings were little-changed but they did come in slightly higher than expected at 7.4 mln. We get the May non-farm payrolls report this Saturday (NZT) and that is expected to show a modest +130,000 rise.
Meanwhile April factory orders came in weak, down a sharp -3.7% following the boosted March gain of +3.4%. Between the two months, a slight easing that was setting in since November. From April 2024 these order levels are up +0.6% and that is before accounting for inflation.
The US Logistics Managers Index rose, but because inventory costs, warehousing utilisation, and transportation prices all rose at a faster rate, probably not the indicators that help their economy.
But the latest RCM/TIPP optimism survey did rise for 'positive' reasons, but only back to levels it was in November after retreating rather sharply from a February high. The tariff-tax staggers may be easing among investors and the surveyors say this indicates US "consumers are closer to optimism".
In Canada, Canadians have so heavily altered their travel plans to the US that the duty-free stores at the border seem to be on their knees in what is being called a 'collapse'.
In South Korea, the candidate of the more liberal Democratic Party seems to be the winner of Tuesday's snap presidential election. It is a clear break, with voters turning away from the conservative party, who’s previous President triggered their constitutional crisis. It’s a win for the rule of law. The other main candidate has conceded.
In China, they have delivered something of a surprise. The May Caixin China factory PMI unexpectedly dropped to 48.3, down from April’s expanding 50.4 and missing market forecasts of a faster expansion (50.6). This was the first contraction in the sector in eight months and the steepest since September 2022. Output shrank alongside a renewed drop in new orders, with foreign sales declining at a faster pace. The official factory PMI came in at 49.5, a small improvement (lesser decline).
Eurozone consumer price inflation eased to 1.9% in May, down from 2.2% in April and below market expectations of 2.0%. With inflation under control, that gives the ECB some room to trim interest rates further at their Friday (NZT) review.
Globally, the OECD has lowered its economic expansion forecasts as the Trump tariff-taxes bite, and the US an economy they see suffering as much as others from the impact.
That is spurring free trade talks among other nations, especially between Australia and the EU.
In Australia, their Fair Work Commission’s Expert Panel announced the National Minimum Wage and award wages will increase by +3.5% from 1 July 2025, following the 2024-25 Annual Wage Review. That means their National Minimum Wage will increase by +AU$0.85 to AU$24.95 per hour. (NZ$26.90/hr) The New Zealand adult minimum wage is currently $23.50/hr.
The UST 10yr yield is now at 4.46%, and unchanged from yesterday. The key 2-10 yield curve is now at +51 bps. Their 1-5 curve is inverted by -10 bps. And their 3 mth-10yr curve positive at +19 bps. The Australian 10 year bond yield starts today at 4.26% and down -5 bps from yesterday at this time. The China 10 year bond rate is little-changed at just under 1.71%. The NZ Government 10 year bond rate starts today at 4.61% and up +4 bps.
Wall Street is firmer again with the S&P500 up +0.6% in Tuesday trade. Overnight, European markets gained about the same. Tokyo ended its Tuesday trade down -0.1%. Hong Kong rose +1.5% and Shanghai was up +0.4%. Singapore ended up +0.1%. The ASX200 was up +0.6% at the end of Tuesday trade but the NZX50 fell -0.7%.
The price of gold will start today at US$3,353/oz, and down -US$22 from yesterday.
Oil prices are up +50 USc in the US at just over US$63.50/bbl and the international Brent price is up +US$1 at US$66/bbl.
The Kiwi dollar is now at 60.1 USc, a -10 bps dip from yesterday at this time. Against the Aussie we are down -10 bps at just on 92.8 AUc. Against the euro we are unchanged at 52.7 euro cents. That all means our TWI-5 starts today at just on 68.1 and down -10 bps from yesterday.
The bitcoin price starts today at US$105,965 and up +1.6% from yesterday. Volatility over the past 24 hours has been modest at just on +/-1.2%.
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24 Comments
So when Trump told Zelensky at the White House he has no cards to play
He obviously didn't see the ones saying things like "bomb the Kerch Bridge" and "remotely destroy 1/3 of Russias strategic nuclear bombers" that Zelensky had in his back pocket.
It's starting to look increasingly expensive for Russia. And nothing but silence from Putin.
And commenters are beginning to suggest that Trump is increasing being expected to take action against Putin. He's backed himself into a corner on this one. TACO might come to the fore again.
There is no doubt that the face of warfare has changed significantly, and the level of innovation is such that even the most innocuous devices may be made into a weapon. Asymmetric warfare has taken on a new appearance, presenting new challenges to dominant powers.
Russia will never be able to safely occupy any part of Ukraine. They will need to realise that.
Tricky position for Putin. For years, the message has been that as a strongman (sexy and shirtless, riding a horse), Russian citizens can be politically apathetic. No need to kick up a fuss, no need to question, just leave it to Putin and things will be well. And it's mostly worked true.
So backing down becomes an increasingly dangerous proposition for his legitimacy. But also, continuing the conflict, and having these sorts of acts occur on Russian territory, raises questions about his ability to uphold security internally.
The added issue is, after around 30 years of solidifying Putins power, by eradicating opposition and fostering that political apathy, there are no serious alternatives than some sort of power grab by his lackeys.
One of the best explainers I've listened to, and he's got Trumps motivations sussed -
Kerch bridge bombing shows Putin 'cannot win' against Ukrainian asymmetric warfare | Malcolm Nance
Nance is an intelligence and foreign policy analyst who frequently discusses the history, personalities, and organization of jihadi radicalization and al-Qaeda and the Islamic State of Iraq and Levant (ISIS), Southwest Asian and African terror groups, as well as counterinsurgency and asymmetric warfare.[2] He has learned Arabic and is active in the field of national security policy[3] particularly, in anti- and counter-terrorism intelligence, terrorist strategy and tactics, torture and counter-ideology in combating Islamic extremism. In 2016, he published the book, Defeating ISIS: Who They Are, How They Fight, What They Believe,[4] and published The Plot to Hack America
The EU a couple of weeks ago, and now Trump hinting to, threaten greater sanctions. To date existing sanctions have not altered Putin’s ambitions an iota so the question then is if what exactly will be the new sanctions and if they are to be so potent, why have they not been imposed before.
I doubt that any sanctions will work. The axis of powers that Putin belongs to (do they have a collective name?) have made big on getting around the sanctions. No one seems to be being held to account in any meaningful way for busting them. Trump likes to talk big about the US military, perhaps it is now time for him to put his money where his mouth is? The US military would be well able to secure Ukrainian borders, as would the Europeans. But Trump and his lackeys, including the GOP, have lost sight of what made the US great and seem afraid to do anything but pose and posture.
A minor digression, on the weekend I saw a video from the Sydney Morning Herald of an interview with someone (I don't recall his name), he was very well spoken and pointed out that the US seems to have lost the will to use it's military strength where it is genuinely needed. He indicated this started with Obama.
It has been stated in the past that an old Russian/Soviet tactic is to bluff big and it is clear that Trump does that too. But they seem to be afraid to call each others bluffs. Sort of ironic isn't it?
What may alter the stake is the extent of American activity in extracting the apparent minerals on offer and what they may see fit to do to protect those interests. That could possibly encourage the establishment and protection of a demilitarised zone. The elephant in the room is Russia’s nukes which Putin and underlings have been bellicose about right from day one. The only rider on that has been that use would be in the face of an existential threat to Russia and its territory. In turn most likely that will now include what has been seized in Ukraine.
Trump could re-direct some of the weapons destined for Israel to Ukraine, that would change the course of the war in Ukraine, but unfortunately Trump won't do that.
Sanctions on Russia are good but at the same time a waste of time. As commentator "profile" pointed out the other day, even Europe are still buying gas etc from Russia.
The only thing to do now is for all supporters of Ukraine to throw all the munitions they can to Ukraine. Trump is looking weaker all the time. Now is his chance to show the World he is a defender of the free World and get into defending Ukraine. Ahhh wont happen he's useless.
He is actually scared of a fight. Putin always wispers in his ear about nukes and WW3 and Trump runs scared. As we all know, there comes a time when a real bully has to be tackled. And hard.
The other thing is that Trump has no problem arming Israel against a feeble foe, a true sign of a cowardly bully.
Israel is surrounded by hostile Arabic nations yet not one has put one soldier’s boot on the ground to fight alongside Hamas. Furthermore the Hamas incursion, and the Israeli response, caused Hezbollah to need to change direction which in turn saw the toppling of Assad in Syria and the dissolution of Iranian influence there. Any declaration of war on Israel needs to first consider its nuclear weaponry the use of which, President Putin of Russia has handily defined as being fully justified in the face of an existential threat.
Here is some chunky information from Instanbul. More than we will ever get from our media.
The Russian proposal is there. Interesting one is that the Ukrainians should not suppress the orthodox church.
It is Russian sourced but you will be able to balance the perspective
https://www.southfront.press/russia-ukraine-negotiations-in-istanbul-ne…
The Russian memo has been discussed at length. In a nutshell it demands Ukraine's surrender of what Russia has already grabbed, and other limitations on Ukraine. It's never going to happen.
Russia is up front and not prepared to back off or change it's stance, as many have already indicated. They're committed to an all or nothing position. The Ukraine is Russia fighting in Afghanistan all over again. they couldn't win there, they won't win in Ukraine. Trump's greed will see the US fail in Europe too. This will become a European fight which Russia will lose in the long run. How much everyone else pays is the big question.
I think it's even worse than that - it asks that Ukraine hand over the entirety of Zaporizhzhia and Kherson which are only partly occupied, in fact the capital cities of both regions are in Ukrainian hands.
That together with requiring Ukraine to maintain neutrality (i.e. sit quietly and wait until we have rearmed and want more) make this very one-sided.
Where's Trump with his 'end the war on the first day' negotiating tactics?
Russia wants all of Kherson as that gives them territory on the west bank of the Dnieper which is in itself a historical and formidable line of defence. In the early stages Russia did get forces across at Kherson but the Ukrainians for good reason forced them to evacuate.
A lot of that territory is russian speaking. Not that there is a clear dividing line.
Thoughts from The Don. Clearly he has been reading interest.co. Just not the spruikers.
https://www.bassettbrashandhide.com/post/don-brash-why-get-on-the-housi…
Well said and studied Don Brash!!
He speaks of the case of systemic and irrefutable poison to property spruikers/REAs and home hoarders.
This will have a toppling effect of yet another, new barrage, of Kryptonite artillery, to the currently still, far too high, property prices.
I see 60% being knocked of property values by 2028. No doubt about it.
FHBs must buy wisely and offer very low, to not be future victim of a decade of negative equity, as prices are set to leg down again and crash further......look out below!!
What state to do you see the national economy in, in 2028?
Sounds like we're 3 years from Armageddon.
Time to plant some more crops
BBQ bragging about property values should be be the economy. It's a false economy designed to enrich global banking interests and the limited gamblers that can access it.
For those that think it is, off to education camp.
If you think the property markets the only part of the economy that's false
You could be in for a big surprise
And if you're talking economics at a bbq, find better mates
"I see 60% being knocked of property values by 2028. No doubt about it"
Don't you mean 6,000 % Gecko 🤣😅🤣
Except that i think he may have missed a strong point that the current government is not addressing - the problem of the commercial banks. When the markets were deregulated in 1984 that included the banks and today they have the ability to effectively print money and ultimately control its vector into the economy. This is an abrogation of governmental responsibility in managing how much money is in circulation, and the environment is which it is applied. The housing market as many indicate is not a productive economy for the country. I would suggest that any move the government makes without addressing the problem of the banks will not be fully effective.
Great post by Don Brash, thanks for sharing KH.
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