Here's our summary of key economic events overnight that affect New Zealand, with news markets seemed relieved that the Iranians responded in a localised and 'measured' way to the US attack. They took this as a sign the conflict will stay regional. Even the oil price eased back. To financial markets, 'normal' doesn't look like it is being threatened.
But that is not to say 'normal' is great. And it looks like markets are stubbornly refusing to price in geopolitical risks, even when they are obviously high. If they have this collective judgement wrong, then the correction could be sharp.
Meanwhile, the S&P Global/Markit PMIs for the US report that the factory sector held at a small expansion, one underpinned by a small rise in new orders, even if new export orders fell rather notably. More notable was the sharpish rise in costs and prices. This sector is losing its international competitiveness. Their service sector is expanding but the modest pace slowed in June.
US existing home sales however brought a surprise surge in May from April to a sales rate exceeding 4 mln/year. However that is still lower than year-ago levels, and listings surged even more. Still, the average price rose to US$422,800, although to be fair that is only back to about the level it first achieved in June 2022.
The US heatwave, which we noted yesterday may affect 200 mln people there, is worrying their electricity grid operators. They anticipate a 14 year high for electricity demand in the US north east. So it will be no surprise to know that they have issued warnings about supply interruptions.
In China, Bloomberg is reporting that Beijing regulators are instructing state-owned developers to avoid defaulting on publicly issued debt. It is the latest attempt by authorities to keep a lid on their property crisis that just won't end or get properly resolved. There are about 20 SOE developers, all large, and all troubled. Clearly credit risk is still worryingly high.
In Japan, although new order growth wasn't flash, their manufacturing sector expanded on a stock-build. And that was their first expansion in over a year. Meanwhile their services expansion extended, now for more than 12 months consecutively, and that was driven by new orders. These conclusions come from the early June PMI released by S&P Global/Markit.
In India, their advance June PMIs show gains in both their factory and service sectors from already very good levels of expansion.
In Europe, the same June PMIs show new order declines have basically ended, and in Germany in particular they rose for the first time in more than three years. Cost inflation is down, and now no longer an issue. Business sentiment rose. Their factory sector is expanding while their services sector stopped contracting in June. While none of this is vigorous, if it is a turning point, it is turning in the right way for them
Meanwhile the modest expansion the S&P Global/Markit PMIs report in Australia extends this modesty to six straight months there. They haven't had a run like this since late 2022. While an expansion will be hard to notice on the ground, it is encouraging that both the factory sector and the service sector are moving in the same upward direction.
The UST 10yr yield is now at 4.33%, and down -5 bps from this time yesterday. The key 2-10 yield curve is holding at +48 bps. Their 1-5 curve is now inverted by -13 bps. And their 3 mth-10yr curve has fallen away to just +16 bps. The Australian 10 year bond yield starts today at 4.17% and down -3 bps from yesterday. The China 10 year bond rate is little-changed at 1.64%. The NZ Government 10 year bond rate starts today at 4.60%, also little-changed.
As the futures market had signaled, Wall Street opened its week with a +0.8% rise on the S&P500. However European equity markets were soft in Monday trade, down an average of -0.4%.. Tokyo ended yesterday down -0.1%. However Hong Kong was up +0.7% and Shanghai up +0.6%. Singapore dipped -0.1%. The ASX200 ended its Monday trade down -0.4%. And the NZX50 ended down -0.3%.
The price of gold will start today at US$3,381/oz, and up +US$14 from yesterday.
American oil prices are down -US$4 from yesterday at just under US$68/bbl US$74 while the international Brent price is now just over US$72.50/bbl and down a bit more.
The Kiwi dollar is still just on 59.7 USc, little-changed from yesterday. Against the Aussie we are holding at 92.5 AUc. Against the euro we are down -20 bps at 51.6 euro cents. That all means our TWI-5 starts today at under 67.7 and just marginally softer than yesterday.
The bitcoin price starts today at US$102,349 and back up 2.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/-2.0%. There was a general recovery yesterday across most cryptos, but they are still down sharply from a week ago.
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11 Comments
Beijing regulators are instructing state-owned developers to avoid defaulting on publicly issued debt.
to avoid social unrest , which is coming as broke means broke.
Responding to PDK's comments from yesterday issue, I was away from my computer yesterday, I have long had a problem with Israel's actions in the ME, but in the US the Jewish lobby has always held too much weight with the political elites. The Jewish voting block has been too powerful for them to ignore (did they influence the vote for Trump?). Having said that, over the weekend I saw an Iranian American lawyer being interviewed on a site called 'Trigger Nometry'. she talked about the Iranian government structure and identified that Iran set up Hezbollah in Lebanon (and the fact the Hezbollah committed atrocities there against anyone and everyone who opposed them), Hamas in Gaza and the Houthis in Yemen. She identified that the Iranian plan is based on an Islamic prophecy which states to the effect that there will not be peace and justice in the ME until the last drop of Israeli blood has fallen. She also stated that their plan includes high civilian casualties. She indicated that a leaked document from Yahya Sinwar indicated that the plan desired the highest possible civilian casualties.
Trump was both stupid and predictable. With religion mixing with politics there can be no effective solution in the ME. Yes oil is important to the world economy, but oil would be accessible without religion and politics, and just a focus on trade. The Americans have been puppets to ME politics essentially since WW2, and have aslo tried to shape them somewhat, although not very successfully. How this pans out is anyone's guess at the moment, but it is likely not going to be a good outcome.
Historically Iran as Persia considered itself as being quite distinctly seperate from its Arabic neighbours, and somewhat superior too, and that is reciprocated. The attacks on Iran by Israel and the USA must have now stirred up much of that regional history and discord. The thing is, as PDK pointed out some days ago, any nuclear strike’s fall out will envelope the region regardless of borders. The Iranian attitude, as expressed in your comment, resonates then with that prospect doesn’t it.
Yes it very much does. And if any of them read at all they'll know that a nuke bomb doesn't have to go 'bang' to be effective. I think it is Tom Clancy in Clear and Present Danger who details the use of a dirty bomb in the ME where an wide area is contaminated with highly radio active material that take a huge effort to clean up.
Egos and politics. Trump's ego will make him a puppet of a few players inside and outside of the US.
Jeffery Sachs in one of his interviews talks about the US having an military and the will to use it to maintain peace. That of course is a flawed statement as it very much relies on the ego and character of the President who signs the executive order.
I also noted over the weekend that Trump broke US law (again!) when he authorised the strike. Under US law he is required to notify the Gang of 8 (the Gang of Eight includes the leaders of each of the two parties from both the Senate and House of Representatives, and the chairs and ranking minority members of both the Senate Committee and House Committee for intelligence as set forth by 50 U.S.C. § 3093(c)(2)) But he only told the Republicans. Again it amazes me that no one at those levels in the administration are acting to protect what the US supposedly holds sacred! Clearly the corruption is deeper and more ingrained than we all suspected.
The USA has penned the concept of the Axis of Evil namely, Russia,China,Nth Korea and Iran and that was well before this administration. Nuclear warheads are transportable. Such as Nth Korea would undoubtedly be interested to establish if and/or how their ones work especially from a safe distance. It is very obvious that the prospect of catalysing a regime change in Iran has hardly been much in the background and Iranian strikes on its Arabic neighbours’ American bases, add further considerations.
FG. To the contrary, I suggest. The other predominately Sunni ME states will be quietly relieved that Tehran's ambitions to establish a Shiite caliphate have been significantly degraded by Israel's bombing of the Iranian military infrastructure and destruction of its proxy Hamas/Hezbollah forces. The muted Arab response to US hobbling of Iran's efforts to build a nuclear bomb is telling.
No nothing contrary, we are on the same page. Iran has never been an easy neighbour. There is no need to scratch very deeply to arrive at the centuries of regional conflict and animosities. For instance, in the present time, the Saudis deeply resent Iran’s meddling in Yemen. There is now a prospect of upheaval in Iran and that started with the ousting of the Assad regime in Syria and it is arguable that all the dominoes started to tilt as soon as the Israelis responded to the Hamas assault. As an aside, for all the opposing rhetoric and bellicose posturing, as soon as the USA chooses to bring down the hammer, there is suddenly much silence in the room.
Silence? Team Helen Clark continues to stridently assert that 'diplomacy' and 'negotiation' are the solution, despite this approach having failed repeatedly.
That was a good read. Being friends with the US is so frikkn hard.
100% they have form.
In moments of madness I often wish we could hold former politicians and players to account for the harm they have caused which reach across time. Unfortunately that's not possible.
It looks like Mossadegh was a politician most populations would appreciate. 50's Iranian (Persian) version of Trump? Iran first?
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