Bad choices to haunt US financial markets; Japanese spending rises; China property woes back; EU house prices rise; Australian household spending rises; UST 10yr at 4.33%; gold up and oil flat; NZ$1 = 60.6 USc; TWI-5 = 67.9

Here's our summary of key economic events overnight that affect New Zealand, with news a more isolationist US is getting weirder by the week.

It's a holiday in the US so their financial markets are closed, no doubt absorbing the implications of the Trump Budget. Equity investors seem to like the short term prospects that the wealthy gained massively from this. But the bond market seems less sure, initially marking down US Treasuries (raising yields) on the worry the whole thing is more likely to crash & burn earlier than expected, leaving their UST paper worth less, even if it is guaranteed by the US taxpayer. This judgement will play out at the margins where international investors will drive the perspective from their 30% holding share. If they lose faith en masse, the result will be messy.

Just how far the integrity of the US is slipping is indicated by the fact their President wants to host UFC fight nights at the White House. This is not the action of someone looking out for their own country. Just him, and another profit opportunity.

Across the Pacific in Japan, household spending jumped +4.7% in May from a year ago, reversing a -0.1% fall in April and far exceeding an expected +1.2% rise. It was their fastest growth since August 2022, and that August 2022 was only good because it was off the very weak pandemic-affected base a year earlier.

In China, the train wreck that is Country Garden is getting worse. It defaulted last year and is working with creditors to restructure so it can pay its debts. But the Beijing stimulus that was supposed to support the housing market hasn't, and that support is running down. For Country Garden, their year-on-year sales are falling sharply again, down -35% from a year ago, according to their latest filings. The waiting creditors will be seeing this and likely conclude their patience for the workout plan is unjustified.

Meanwhile similarly distressed rival China Vanke has managed to get its controlling shareholder, the Shenzhen local government, to extend its operating life with ever more equity support.

Singaporean retail sales rose by +1.4% in May from a year ago, accelerating from a downwardly revised +0.2% rise in April. This was the third straight month of growth and the fastest annual increase since January. But to be fair, most of the increase was driven by car sales, a very expensive and exclusive corder of their retail sector.

Next, halfway around the world, EU producer prices eased again in May so that it is only +0.4% higher than year ago levels, less in the euro area. The past three months have delivered producer prices lower than in each of the prior months.

German factory orders dropped by -1.4% in May from April and that was weaker than expected, but the April gain was revised higher. The May weakness however came after some very large-scale computer, electronic and optical orders in April. From a year ago, these factory orders were up +5.3%.

And we should probably note that EU house prices are rising, up +5.7% from a year ago led by 10%-plus gains in Portugal (+16%), Bulgaria (+15%), Croatia (+13%), Slovakia (+12%), Hungary (+12%), and Spain (+12%).

In Australia, household spending rose in May and by more than expected with a good recovery from a weak month in April. This spending was up +4.2% from May a year ago. It was their best gain in 7 months.

The FAO food price index was little-changed in June from May, holding its gains from a year ago. Within that, both meat and dairy prices rose.

The UST 10yr yield is now at 4.33%, and down -1 bp from yesterday. That makes it up +6 bps for the week The key 2-10 yield curve is marginally less positive at +44 bps. Their 1-5 curve is inverted by -15 bps and unchanged. And their 3 mth-10yr curve is marginally flatter, now +9 bps positive. The Australian 10 year bond yield starts today at 4.19% and down -2 bps from yesterday, ip +1 bp from a week ago. The China 10 year bond rate is little-changed at 1.64%. The NZ Government 10 year bond rate starts today at 4.54%, unchanged from yesterday, up +2 bps from a week ago.

Wall Street is closed today for their national holiday, Independence Day. It ended their week at a new record high after booking a +2.1% weekly gain. Overnight European markets ended down about -0.6% except London which was unchanged. Tokyo rose a minor +0.1%. Hong Kong fell -0.6%, but Shanghai was up +0.3% in Friday trade. Singapore slipped -0.1%. The ASX200 ended its Friday trade up +0.1% for a +1.0% weekly gain while the NZX50 rose +0.5% on Friday for a +1.5% gain.

The Fear & Greed index is now in the 'extreme greed' zone from the 'greed' zone a week ago as investors eye large benefits from the Trump Budget.

The price of gold will start today at US$3,336/oz, and up +US$10 from yesterday. And it is up +US$64 or +2.0% over the past week

American oil prices are down -50 USc at just under US$66.50/bbl while the international Brent price is little-changed at just under US$68.50/bbl. Last week these levels were US$65.50 and US$68/bbl respectively.

The Kiwi dollar is now just under 60.6 USc, down -10 bps from yesterday. For the week it is up +20 bps. Against the Aussie we are up +10 bps at 92.4 AUc. Against the euro we are down -20 bps at 51.4 euro cents. That all means our TWI-5 starts today at just on 67.9 and down -10 bps from yesterday, and down the same for the week.

The bitcoin price starts today at US$107,803 and down -1.6% from this time yesterday. But it is up +0.9% from this time last week. Volatility over the past 24 hours has been modest at just under +/-1.2%.

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