Weak FDI extends in China; weaker US data leading to recession signals; many central banks review rates; iron ore demand wavers; UST 10yr at 4.38%; gold and oil hold; NZ$1 = 59.7 USc; TWI-5 = 67.7, cryptos dip

Here's our summary of key economic events over the weekend that affect New Zealand, with news the world's two largest economies are showing outsized vulnerabilities - geopolitical, economic, and environmental.

First in China, the eye-catching retreat of foreign direct investment in April (a net outflow -US$4.8 bln) was arrested in May, positive by +US$17.8 bln for the month even if it was off the unusually declining base in April. Still, year to date, foreign direct investment into China remains unusually low, barely +US$50 bln in those five months and well below the almost US$70 bln in the same five months of 2024. For either year, these are not large amounts for a country the size of China. In 2023 the five month inflow was +US$84 bln, in 2022 it was +US$88 bln. It is a negative track that is sensitive for them.

Separately, excessively hot weather and unusually heavy rain are affecting large parts of central and southern China.

In Japan, May CPI inflation edged lower to 3.5%, the lowest annual rate of the year. Energy costs remained elevated, but dipped in the month. Also elevated and also dipping were food prices, now running at a +6.5% rate. However within that rice prices are almost double year ago levels, a very high profile marker that worries everyone.

In the US, weekend data shows the Philly Fed's factory index booked another retreat, the third in a row although only a small one. They aren't yet benefiting from reshoring. New order levels fell. And price increases reported continued at a high level although the pace eased somewhat in this latest update.

That data was just a part of the Conference Board's leading economic indicator series. And this slipped yet again in May, with the April index being revised sharply lower. They say this is "triggering the recession signal." Industrial production was the weakest contributor to the index in May. Readers may not be surprised that a Trump tariff-tax recession is on the way for the US, but we probably should brace for global consequences in 2025. It could be tougher than anticipated.

At least one influential Fed governor thinks the FOMC will have to start cutting interest rates soon to lean against the recession threat. A July cut is what he suggested, saying “I think we’ve got room to bring it down, and then we can kind of see what happens with inflation.” Recession threats trump inflation threats for him.

But inflation threats may just be starting. Until now, importers have been paying some of the tariff-taxes. But that can't last.

And inflation isn't the only thing heating up in the US. Forecasters warn that dangerously hot and humid weather will blanket nearly 200 million people this coming week as a phenomenon known as a heat dome trap builds.

Elsewhere, the weekend brought a raft of other central bank rate review decisions. In Turkey, their central bank left its policy rate unchanged at 46%, as expected. You may recall they raised it +350 bps at their May review.

Meanwhile, at the Bank of England their governors voted 6-3 to keep their policy rate steady at 4.25% at its June meeting. Although this was the result expected, the three dissenters wanted a -25 bps cut and that was one more dissenter than was expected.

In Norway however, they cut their policy rate by -25 bps to 4.25%. That was their first cut in five years.

Taiwan held its official rate steady at 2%.

The Philippines cut theirs by -25 bps to 5.25%.

In China, their central bank left its Loan Prime Rates unchanged at their record low levels after the -10 bps dip last month.

Meanwhile, Aussie miners are looking at some surprisingly weak May data for steel production in China. May and June are usually their peak months for production, but not this year. The May data shows it -6.9% lower than the same month in 2024, at 86.5 mln tonnes. That represents a very large fall away in looming iron ore requirements if it holds in June, a more than -6 mln tonne shortfall per month. (Steel production data can be seen here.)

In the week ahead, we are watching for what a raft of early June PMIs tell us about the global economy. In Australia, the focus will be on the monthly CPI Indicator on Wednesday although little change at 2.4% is anticipated. Here, there will be key updates for the mortgage market activity on Friday. And in the US, Fed boss Powell will be testifying before Congress, and Trump is sure to have his attack dogs primed for that. Data on American durable goods orders are due (recovering from the sharp April drop expected), along with the May trade deficit update (no improvement expected).

The UST 10yr yield is now at 4.38%, and unchanged from Saturday. A week ago it was 4.41% for a net -3 bps dip. The key 2-10 yield curve is holding at +47 bps. Their 1-5 curve is now inverted by -11 bps. And their 3 mth-10yr curve more positive at +23 bps. The Australian 10 year bond yield starts today at 4.20% and down -1 bp from Saturday but up +3 bps for the week. The China 10 year bond rate is unchanged at 1.64%. The NZ Government 10 year bond rate starts today at 4.60%, also unchanged but down -4 bp from this time last week.

The price of gold will start today at US$3,367/oz, and up +US$2 from Saturday.

American oil prices are little-changed from Saturday at just on US$74/bbl while the international Brent price is now just over US$77/bbl.

The Kiwi dollar is now just on 59.7 USc, little-changed from Saturday. Against the Aussie we are holding at 92.5 AUc. Against the euro we are still at 51.8 euro cents. That all means our TWI-5 starts today at on 67.7 and unchanged from Saturday.

The bitcoin price starts today at US$99,713 down -3.5% from Saturday, its lowest since early May. Volatility over the past 24 hours has been moderate at just over +/-2.2%. The fall in the bitcoin price is the least of what other crypto prices are shifting. Generally stablecoins are holding with only very minor losses, but Binance is down -5.8% from a week ago, Bitcoin Cash is down -1.8% on the same basis, the official Trump coin is down -14.8%, and Ether is down -14.0%.