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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27 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.
I was thinking more petro-dollar to yuan. And relations with Pakistan...
Nations tend to leave when they stop being exporters - the E - Indonesia being an example - and become importers. But this isn't the case here - I wonder if it's resentment at being a non-actor in instigating the war, but the host of the instigator while also being the recipient of attacks. Seems like a bad deal to me. I've been wondering whether the surrounding nations would split from the US...
The tone of the article suggested OPEC constrained them in production totals too much, limiting the resources they had available for development.
This is along the line of previous discussions you and I had, where the resource is acknowledged as finite and the limits are closer than preferred, so use the income to fund development now while its available.
What they develop might be interesting. Didn't the sheik heading UAE set up a major research Uni some years back, and a hospital? If memory serves, the vision was impressively forward looking, and if he holds true to that stance, he'll be asking what's next after the oil is gone? With enough funds he could get well ahead of the pack in this. Something I've argued the oil companies should have been doing for the las twenty , if not 50 years.
"Hermes" has been one of the worst performing shares in 2026. Who buys the uber-expensive hand bags...? Arab customers from the Guklf counties of course.
Murray - they find, as do all who go there genuinely, self included, that ex carbon energy, you cannot maintain modernity.
So like BP - which for 25 years aimed to exist 'beyond petroleum' - they have reverted.
Which is a temporary stance, FF being finite and receding. Every oil country starts off as an exporter; every one grows their population as they deplete the resource, every one becomes an importer.
Which of course everyone cannot do...
But there is still the questioning of that. I would suggest, and I include myself here while accepting the need for a decline, that there remains the possibility of hitting a stable balance beyond FF. We don't know what that balance looks like yet because politics prevents it's exploration, but for most there remains hope.
Even if we revert to the horse and cart, I suggest we will find there is not enough resources to sustain the current population levels.
Agree fully with the last sentence
Catton's Overshoot is worth the read.
PDK. I have been wondering it the Gulf States are thinking that hosting American bases is more a liability than a protection. And quietly might ask to wriggle out of that arrangement.
Because USA/ Israel will continue to make trouble. Because they just do.
Given the current mess, I'd suggest that would be a very good probability. The question is who is worse the US currently or Iran if it remains the stirrer it has been?
"The question is who is worse the US currently or Iran if it remains the stirrer it has been?"
I think retired US Army Col. Douglas Macgregor answers this at 20:00...
https://www.youtube.com/watch?v=aQ8hS9w9FW8
"What is victory in this war? I think truthfully, victory is stability, and we have done everything we possibly can to destroy stability - stability in markets, trade, commerce, and in interstate confidence."
Tough call that one, as if they do this and the orange man decides to attack them (which wouldn't be very hard), the risk being their major infrastructure for their main export (oil) that they rely on for their standard of living, would take massive damage, and only strengthen the USA by other countries running to them for oil.
You conflate strength - which is a physical concept - with the holding of proxy.
My response was related to "I have been wondering it the Gulf States are thinking that hosting American bases is more a liability than a protection."
Strength wasn't implied or considered to be honest, more so the risk factor for possible decisions.
Gulf states have a temporary yet infinitely valuable energy resource they rely on for their standard of living. Should eject US military they could fesibly be bombed to heck and lose their oil infrastructure to extract, refine and transport their key resource, as well as it's byproducts like fertiliser, leaving them reliant on the rest of the world for aid and becoming even more of a vassal state to whomever is willing to provide assistance, and likely beholden to them with their oil.
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
..."encourage" - how?
Kiwisaver, Cullen fund or ACC perhaps?
the govt of the day picking "winners" again using Other Peoples Money: what could possibly go wrong
Think India is a 'winner'?
Rolande. Suggest not that much of a stretch to anticipate $20bn of investment given this includes final stage processing of NZ primary products and extracted resources through JV plants sited in India.
Fonterra (NZs biggest company) is both not in line to invest and its history of investment offshore led to its current strategy, and even when it was attempting JV in China its investment was a fraction of that 20 billionUS.
If we were to approach that level of investment (we won't) then it will require direct state investment from the likes of the funds mentioned.
If Kiwisaver is to invest in India it needs funds to do so. Currently it's minor. We need to make it muscular with a much bigger contribution cashflow.
I made it this far! See link
I'll read later, otherwise feel free to read and comment
https://www.mfat.govt.nz/assets/Trade-agreements/NZ-India-FTA/46.-Chapt…
Deaths are expected to outnumber births in the UK every year from 2026, according to projections from the Office for National Statistics (ONS).
...Previous projections suggested the population would continue to grow until 2096, but now "the population is projected to peak in the 2050s before decreasing
The place would be better with fewer people. Currently it's ridiculously overloaded with people.
As are most of the Middle East countries.
ex oil, they're in trouble.
Last sentence. Front runner for understatement of the year. In the late 70/80s the 747s used to put down there ex KL/Singapore on the way thru to Europe. Scarcely much there then beyond the airports and hotels with doubtful water and power supply. Most vivid memory the transit lounge at Bahrain airport, a very young skinny soldier, all in lovely white loose tunic and pantaloons, fast asleep, sprawled along a couch, with legs entwined around an AK47 or similar. Felt like there should be a sign alongside, something like - quiet please, do not wake up suddenly.
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