Here's our summary of key economic events overnight that affect New Zealand, with news that poor American data has seen risk aversion rise in financial markets with the USD falling, benchmark bond prices rising (yields falling), many key commodity prices either falling or showing weakness, and Wall Street underperforming global markets.
The poor data was important and widespread.
US mortgage applications fell last week for a third week in a row, this time by a solid -3.9% from the prior week but is +18% higher than year ago levels, even if year ago levels were quite weak. The benchmark 30 year mortgage interest rate dipped last week which makes the application levels look even weaker.
Meanwhile there was weakness in the US labour market. We get the non-farm payrolls report on Saturday (NZT) but the pre-cursor ADP Employment Report was out today and it was expected to show a +117,000 jobs gain in May. But in fact it only reported a +37,000 gain - and April data was revised lower. There is no evidence in this data that factories are hiring to meet reshoring demand.
And the widely watched ISM services PMI isn't showing much optimism either, slipping into a small contraction, its first since June 2024 with all the post-election hubris now evaporated. A feature of this report is the sharpness of the 'new business' component fall.
And staying in the US, vehicle sales tumbled in May, falling to an annual rate of 15.65 million units. That was well short of analyst's cut-down expectations of 16.3 million and the steepest monthly decline in nearly five years. In April, sales ran at a 17.25 million rate and that was itself below the 17.8 mln rate in March when buyers rushed to get ahead of anticipated tariff-tax price hikes. Although sales at a 15.65 mln rate isn't nothing, it does indicate the margins of this market is quite price sensitive.
So it will be no surprise to know that the US Fed Beige Book for May paints an uninspiring picture in most regions. Half of the Districts reported slight to moderate declines in activity, three Districts reported no change, and three Districts reported slight growth. All District reports indicated that higher tariff rates were putting upward pressure on costs and prices.
Things may not improve for the Americans. Trump is now whining that Xi won't take his call. (But he did call Putin who took his call.) And China seems to be on the verge of signing a massive aircraft deal with Airbus, at the direct expense of Boeing.
Finally, the Congressional Budget Office has calculated the fiscal impact of the big Trump Budget Bill - saying it will add US$2.4 tln to US deficits, the largest expansion of these deficits ever through gigantic tax cuts for the wealthy. It may be no surprise that Trump can't do basic math, but that the whole Republican congressional party votes for this type of economic damage is quite astounding.
In Canada, their central bank review of monetary policy settings left the policy interest rate unchanged at 2.75%, as was expected. They have inflation at 1.7% and an economic expansion of +2.2% in the March quarter, although that is not expected to last. They are watch for downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs.
And in the middle of the Pacific, it is probably worth noting that a ship carrying about 3,000 Chinese EVs to Mexico was abandoned after catching fire yesterday. EV battery fire risk is a real issue.
In Japan, the 2024 total number of births was 686,061, down -5.7% from the previous year. This was the first time annual births have fallen below 700,000 since record-keeping began in 1899.
Australia released its Q1-2025 GDP growth data yesterday. Their economy grew +0.2% in Q1-2025 from Q4-2024, slowing from +0.6% in Q4 and falling short of the +0.4% expected by analysts. This marked the 14th quarter of expansion but the softest pace in three quarters. On an annual basis, the GDP expanded +1.3%, holding steady for the second straight quarter but missing the expected +1.5% rise.
As at the end of March 2025, Australia had a positive net foreign equity position of +AU$730 bln (more investments offshore that foreigners had in Australia), but they had foreign debt liabilities of -AU$1.402 tln. So their net international investment position (IIP) was -AU$672.6 bln. On a per capita basis that is -AU$24,350. As at March 2024 it was -AU$26,250, so a sharpish 7.2% improvement.
The UST 10yr yield is now at 4.36%, and down -10 bps from yesterday. The key 2-10 yield curve is now at +49 bps. Their 1-5 curve is inverted by -15 bps. And their 3 mth-10yr curve now positive at just +8 bps. The Australian 10 year bond yield starts today at 4.28% and up +2 bps from yesterday at this time. The China 10 year bond rate is little-changed at just over 1.70%. The NZ Government 10 year bond rate starts today at 4.56% and down -5 bps.
Wall Street is slightly firmer with the S&P500 up +0.2% in Wednesday trade. Overnight, European markets gained about a bit more, up about +0.5% on average. Tokyo ended its Wednesday trade up +0.8%. Hong Kong rose +0.6% and Shanghai was up +0.4%. Singapore ended up +0.2%. The ASX200 was up +0.9% at the end of Wednesday trade and the NZX50 rose +1.4% and the best of the markets we follow.
The price of gold will start today at US$3,379/oz, and up +US$26 from yesterday.
Oil prices are down -US$1 in the US at just over US$62.50/bbl while the international Brent price is down -US$1.50 at US$64.50/bbl.
The Kiwi dollar is now at 60.4 USc, a +30 bps rise from yesterday at this time. Against the Aussie we are unchanged at just over 92.8 AUc. Against the euro we are up +10 bps at 52.8 euro cents. That all means our TWI-5 starts today at just on 68.2 and up +10 bps from yesterday.
The bitcoin price starts today at US$105,010 and down -0.9% from yesterday. Volatility over the past 24 hours has been modest at just under +/-1.0%.
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Finally, the Congressional Budget Office has calculated the fiscal impact of the big Trump Budget Bill - saying it will add US$2.4 tln to US deficits, the largest expansion of these deficits ever through gigantic tax cuts for the wealthy. It may be no surprise that Trump can't do basic math, but that the whole Republican congressional party votes for this type of economic damage is quite astounding.
Republicans go hardcore about the size of the US deficit when the Dems are in power and claim how irresponsible it is to not balance the books. As soon as they are in power though, borrow money to give tax cuts to the wealthy and screwing the poor (one of the worst parts of the bill is the removal of SNAP for heaps of poor people). Clearly they are bought and paid for by wealthy donors, this has got to be the latter stages of their "democracy" (actually plutocracy) as the masses will soon realise who the Republicans work for. Maybe time for the propaganda machines to go into overdrive.
California on its own has the fourth largest economy in the world. Texas, New York, Florida not far behind. Pennsylvania, Ohio, Illinois, New Jersey and others about the same size of Russia. NZ’s economy is about that of just one city, Phoenix, AZ. The whole US shooting box is looking increasingly impossible to be effectively controlled by one identity in an oval office in Washington DC.
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