US factories slower but service sector rises; Canadian retail rises; India PMIs rise; India & UK sign trade deal; ECB ends rate cut cycle; container freight rates dip; UST 10yr at 4.41%; gold lower, oil stable; NZ$1 = 60.4 USc; TWI-5 = 67.8

Here's our summary of key economic events overnight that affect New Zealand, with news there are more tariff-deals being done, of the free trade type, but just not with the US and their mutually punitive style.

In the US, jobless claims dipped last week, mainly on seasonal factors. There are now 2,016,000 people on these benefits, +5.3% more than the 1,914,000 on them this time last year.

Sales of new single-family homes rose marginally in June from May’s seven-month low to be well below what market expected. The number of unsold homes on the market rose to 511,000, the highest since October 2007 and now almost ten months of supply at the current sales pace.

The July US S&P Markit factory PMI fell back into contraction which was very unexpected because a rise in the expansion was expected. However, this was masked by a strong rise in their service economy in July.

The Kansas City Fed factory survey slipped back into contraction in July after its rare expansion in June. They reported increased factory activity but new order growth was weak and order backlogs fell sharply.

In Canada, their advance estimate of retail sales suggests that sales increased +1.6% in June. That more than makes up for the -1.1% fall in May and is much better than the -0.3% fall expected.

Meanwhile in Japan, the same S&P Global/Markit factory PMI unexpectedly contracted in July from June’s 13-month high but minimal expansion. A small rise was expected.

In India, they are starting to see rising international demand in their factory sector, and this pushed up their July factory PMI to a strong expansion.

And India has signed a free trade deal with the UK, one touted to bring NZ$10 bln in mutual benefits.

Also expected soon is a China-EU trade deal.

In Europe, the eurozone PMI for July reported a further increase in business activity during the month, with the pace of expansion quickening to the fastest for almost a year amid a stabilisation of new orders. Output growth was at an 11 month high for them. Cost inflation is easing.

Meanwhile, as expected the ECB rate review decision delivered no change. This effectively marks the end of its current easing cycle after eight cuts over the past year that brought borrowing costs to their lowest levels since November 2022. And don't forget, they remain in a tightening phase because they no longer reinvest maturing bonds issued during the pandemic emergency.

In Australia, the S&P Global/Markit factory PMI expanded slightly faster in July, on the back of the sharpest overall rise in new business in over three years. This was despite export orders still contracting. The same report shows price pressures intensified, hinting at higher inflation in Australia in the coming months.

And staying in Australia, research by the RBA shows that international students play a significant role in the Australian economy. They contribute to demand through their spending on goods and services and are an important source of labour for some Australian businesses. When there are large swings in international student numbers or when the economy has little spare capacity, this means that changing international student numbers can affect macroeconomic outcomes, particularly in sectors of the economy where supply cannot respond quickly. The rapid growth in international student numbers post-pandemic likely contributed to high inflation over this period, but was not a major driver. But they do push up rents.

Container freight rates dropped another -3% last week to be -57% lower than year-ago levels, although to be fair the year-ago levels were unusually high. Outbound rates from China to the US are the weakest routes at present. But bulk cargo rates rose another +11% over the past week to be +13% higher than year-ago levels.

The UST 10yr yield is now at 4.41%, up +2 bps from yesterday at this time. The key 2-10 yield curve is less steep at +48 bps. Their 1-5 curve is still inverted at -14 bps. And their 3 mth-10yr curve is holding +10 bps positive. The Australian 10 year bond yield starts today at 4.36% and up +3 bps from yesterday. The China 10 year bond rate is firm again at 1.73%, up +3 bps. The NZ Government 10 year bond rate starts today at just on 4.61% and up +5 bps from yesterday.

Wall Street is up +0.2% in Thursday trade on the S&P500 and a new record high. Overnight European markets were mixed with London up +0.8% but Paris down -0.4%. Yesterday Tokyo ended up another strong +1.8% do from the close of trade on Tuesday before the US tariff deal was revealed, it is up a remarkable +7.9%. Hong Kong was up +0.5% and Shanghai rose +0.7%. Singapore was up +1.0%, a big gain for them. The ASX200 ended down -0.3%. And the NZX50 was little-changed, up +0.1%.

The price of gold will start today at US$3,369/oz, down -US$18 from yesterday.

American oil prices are marginally firmer at just under US$65.50/bbl but the international Brent price is still at just on US$68.50/bbl.

The Kiwi dollar is now at 60.4 USc and unchanged from yesterday. Against the Aussie we have dipped -10 bps to 91.6 AUc. Against the euro we are holding at 51.3 euro cents. That all means our TWI-5 starts today at just on 67.8, up +10 bps from yesterday.

The bitcoin price starts today at US$119,232 and up +1.2% from this time yesterday. Volatility over the past 24 hours has been low at just under +/-0.9%.

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