Here's our summary of key economic events overnight that affect New Zealand with news of fractures emerging in the closure of the Strait of Hormuz, and of OPEC itself.
But first up today there was a dairy Pulse auction, but this one bringing few changes from the prior week's full event. Prices for butter, SMP and WMP were little-changed. But the AMF price did fall -4.4% to its lowest of the year so far.
In Australia, it is worth noting that bond markets are in full bear mode. They have driven their AGB benchmark 10 year bond yield to a 15 year high (price to a 15 year low), and these movements are replicated across the whole maturity curve. Expectations are high that the RBA is about to tackle inflation head-on with purposeful monetary policy actions starting next week. And there is spillover to New Zealand benchmark rates too.
In the US, their weekly ADP employment report signaled a third week of good payroll gains in the private sector.
And the Conference Board's survey of consumer sentiment was marginally better than expected in April. Most aspects deteriorated in this latest survey, except the labour market conditions that the ADP signals have picked up.
It was similar for the Richmond Fed's factory survey which was little-changed but with a hint of positiveness. And the Dallas Fed services survey was marginally less negative.
Across the Pacific, the Bank of Japan kept its short-term policy rate unchanged at 0.75% at its April meeting overnight, leaving borrowing costs at their highest level since September 1995. The widely expected decision passed by a 6–3 vote, amid uncertainty over the Iran conflict and surging energy prices. The three dissenters wanted a hike to 1.0%. In its quarterly outlook, the central bank raised its FY2026 core inflation outlook to 2.8% from 1.9%, citing higher crude oil prices that likely push up energy and goods costs. Overall, this review was more hawksih than expected.
Korean manufacturing business sentiment rose in April to its highest since June 2024, with improvements across the board.
India's industrial production is settling in with a growth rate of about 4%, the March level which it has been at (or above) for eight of the past nine months.
In Europe, there has been a very big jump in inflation expectations. Eurozone median inflation expectations for the next 12 months jumped to 4.0% in March in the latest ECB survey, the highest level since October 2023 and up sharply from 2.5% in February. This was the largest monthly increase since early 2022, when Russia’s invasion of Ukraine disrupted energy markets.
The UST 10yr yield is now just on 4.35%, up +1 bp from this time yesterday. The key 2-10 yield curve is now at +52 bps (-1 bp). Their 1-5 curve is now at +28 bps (+2 bps) and the 3 mth-10yr curve is at +71 bps (+4 bps). The China 10 year bond rate is now at 1.76%, down -1 bp. The Japanese 10 year bond yield is unchanged at 2.47% but still a multi-decade high. The Australian 10 year bond yield starts today at 5.07%, up +10 bps from yesterday to a 15 year high. The NZ Government 10 year bond rate is up +5 bps at 4.77%.
Wall Street is lower today with the S&P500 down -0.5% although that is off its record highs. Overnight European markets were mixed between London's +0.1% rise and Paris's -0.5% fall. Yesterday Tokyo fell back a full -1.0%. Hong Kong dopped -0.9% while Shanghai was down -0.2%. Singapore dipped -0.1%. The ASX200 ended down -0.6%. And the NZX50 retreated -0.9%.
The price of gold will start today down -US$83 at US$4599/oz. Silver is down -US$2 at just under US$73.50/oz.
American oil prices are up +US$3 at just on US$100/bbl, while the international Brent price is up +US$2, and now at US$111/bbl.
And the UAE announced overnight that it is quitting OPEC, chafing at the export restrictions the cartel uses to manipulate prices. Some see this as the beginning of the end of OPEC. We should also probably note that a Japanese supertanker has transited the Strait of Hormuz - with Iran's permission and in defiance of the US blockade.
The Kiwi dollar is down -20 bps from yesterday at this time at 58.9 USc. Against the Aussie we are down -30 bps at 82 AUc. Against the euro we are down -10 bps at just on 50.3 euro cents. That all means our TWI-5 starts today at just under 62.3 which is down -20 bps from yesterday.
The bitcoin price starts today at US$76,178 and down -0.8% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.2%.
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3 Comments
UAE breaking from OPEC is the news of the day.
More of Carney's 'the old order is gone'.
I was intrigued by the news. Has anyone read a rationale for it?
Edit; just found an article that suggests they want to up their oil production to fund internal development. Their problem is they are mostly inside the Persian Gulf. But they do have a small portion of coast outside the Strait. If they could put a oil terminal there is might work for them, but the terrain may not be favourable for a pipeline.
The India FTA seemed to be met with genuine enthusiasm in India. I think it will overall be a good thing for NZ.
But still interested in the breakdown of the US$20 billion investment target. It sounds like private sector investment that the Government will 'encourage' somehow. How will it be measured? What's included and excluded? E.g. what's a 'NZ' company? What if it's listed in Aus? Etc etc. would be good for Interest to do some digging
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