G7 meets amid war and tariff turmoil; US data weak; Canadian housing strong; China data very mixed; Airbus wins early at Paris air show; UST 10yr at 4.46%; gold eases and oil stays high; NZ$1 = 60.7 USc; TWI-5 = 68.4

Here's our summary of key economic events overnight that affect New Zealand, with news there are hopes, early ones at this stage, that Iran is looking for an off-ramp in its fight with Israel, or at least, so says Trump. That was enough to bolster equity markets today. But the USD is falling and bond yields are rising.

But it is shaky with the G7 summit talks starting in Banff, Canada, and all participants having starkly different viewpoints from the US which seems to be trying to get Putin's Russia back into the group. Included in those sidebar meetings is one between Trump and Australian prime minister Albanese. It's going to be a weird experience, but weird is what the US does these days on public policy.

Back focusing on economic data, so far there are few signs of manufacturing reshoring in the New York region. Business activity continued to decline in New York State in June, according to firms responding to the Empire State Manufacturing Survey. The headline general business conditions index fell seven points to a deeper contraction. New orders and shipments both declined. However, the outlook of firms surveyed brightened to 'less negative'.

There was another long bond auction of US Treasuries earlier today, for the 20 year bond. This drew -13% less demand so the recent investor appetite pullback is extending. It delivered a median yield of 4.88% which was actually lower than the 4.97% at the prior equivalent event a month ago.

A recent review by the New York Fed of "who is paying the tariffs" found about 90% of manufacturers and about three-quarters of service firms import some goods, with the average imported input share among all firms at around 30%. And so far most businesses are passing on most of these additional costs to their customers. And relatively quickly. So it is a bit of a puzzle why the tariff taxes haven't yet shown up in consumer price indexes.

In Canada, housing starts stayed very high again in May after the unusual jump in April, coming it at almost +280,000 annualised rate when only +248,000 were expected. This was almost the best month since September 2022 and the best two month gain ever. Canadian new house building is on a roll, especially in Montreal (+11%) and Vancouver (+10%). It would be interesting to know how much this is being driven by political refugees from the US, but we have no indications on that.

Bolstering the rise in housing starts is that home sales rose in May, their first rise since November.

India released its May trade data overnight and its exports delivered an unremarkable result, reinforcing that the rise of Indian manufacturing is not being export-led. Its imports actually eased lower in the month.

There was important Chinese released yesterday showing electricity production was only up +0.5% in May from the same month a year ago, maintaining the weak gains that started in November 2024. This is hard to square with their data claim that industrial production was up +5.8% on the same basis.

China also reported that its May retail sales rose a very healthy +6.4% from a year ago, well above the +5.0% expected and the +5.1% gain in April. It is a 15 month high. At face value this is a surprisingly strong gain.

In their housing markets, China reported that new house prices fell -3.5% but the least year-on-year fall in a year. Month on month they say more gains are now showing. Prices for resales were down more year-on-year, and there are no major cities where they are rising.

And recent remarks by Chinese Premier Li seem to confirm that their residential property development market is not improving, and perhaps at a new dangerous stage. Beijing is facing a new round of bailouts to prevent collapse in the sector, once a star of the Chinese economy.

In the EU, they reported that wage growth in Q1-2025 was up +4.1%, less in the euro area. This was a slowing from the recent peak of +5.7% in Q1-2024. These is a rather fast cooling-off in Germany, Italy and the Netherlands, whereas wages are rising faster in Spain and France.

Off to a very strong start, Airbus has announced huge orders at the Paris air show. The troubles at Boeing have meant that their CEO is a notable no-show. Also of interest is that France has shut down the Israeli presence at the trade event.

The UST 10yr yield is now at 4.46%, and up +5 bps from yesterday. The key 2-10 yield curve is now at +48 bps. Their 1-5 curve is now inverted by -8 bps. And their 3 mth-10yr curve still positive at +24 bps. The Australian 10 year bond yield starts today at 4.24% and up +6 bps from yesterday. The China 10 year bond rate is down an unusual -5 bps at 1.63%. The NZ Government 10 year bond rate starts today at 4.63% and up +7 bps from yesterday.

Wall Street has started its week with the S&P500 up +0.8%. Overnight, European markets were mostly higher by about +0.7%, although London only gained +0.3%. Yesterday, Tokyo closed up +1.3%, Hong Kong was up +0.7% and Shanghai was up +0.3%. Singapore ended down -0.1% however. The ASX200 ended its Monday trade virtually unchanged while the NZX50 booked a good +1.1% gain.

The price of gold will start today at US$3,392/oz, and down -US$38 from yesterday.

American oil prices are still in a higher zone, although down -US$1 from yesterday at just on US$72/bbl while the international Brent price is now just over US$73/bbl.

The Kiwi dollar is now just under 60.7 USc, up +½c from yesterday. Against the Aussie we are up +10 bps at 92.8 AUc. Against the euro we are up +40 bps at 52.5 euro cents. That all means our TWI-5 starts today at on 68.4 and up +50 bps from yesterday.

The bitcoin price starts today at US$107,915 and up +2.0% from yesterday. Volatility over the past 24 hours has been modest at just on +/-1.6%.

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