Here's our summary of key economic events overnight that affect New Zealand with news oil prices have tumbled as the US seems to give up on most of its stated objectives, including the promise of safe-passage for shipping, in a u-turn to extract itself from a losing hand. Crude oil prices are down more than -10% on the news, although it needs to be noted that the Strait of Hormuz remains closed. It is just market euphoria. We now need to start worrying about a permanent Iranian transit tax after the US walks away. The Gulf States who supported the US are about to be thrown under the bus. Financial markets don't care of course and like the end of the adventure.
US mortgage applications fell again last week as interest rates rise, both for refinance activity and new home purchases. This takes this activity back to September 2024 levels.
The US ADP employment report said their private labour market added +109,000 jobs in April, marginally more than the +99,000 expected. This sets the official non-farm payrolls report up for an expected +60,000 rise, with upside. Most of the new jobs are coming from aggressive hiring in their healthcare sector.
After the prior week's outsized fall, this week the EIA reports another notable fall in US crude oil stocks. In fact, every metric fell other than US crude oil imports. There is certainly no relief at US petrol pumps yet, with prices now up more than +50% from their pre-Trump Gulf War levels.
We have earlier noted the politicalisation of US official data, especially of the Bureau of Labor Statistics who produce CPI, PPI and labour market data. We weren't the only ones. A new analytical report has been looking at how this has affected the quality of their data and concluded there is a worrying impact from this trend. So we need to be sceptical, and the next of their big set piece reports is the April non-farm payrolls. This means we will need to rely more on other non-Trump Administration high frequency market data.
In Canada, their widely-watched Ivey PMI surged into a strong expansion in April and by more than expected.
In China, new analysis shows Chinese companies are reporting lackluster earnings, with overall net profit declining in 2025 for the third consecutive year as the property slump dragged on and more retailers posted losses, hurting employment and the economy as a whole.
Meanwhile, China's Golden Week holiday has just ended, and reports are that there was less air travel this year - but very much more high-speed rail travel. Overall domestic holiday activity was up +3.5% with air travel falling -5.7% year-on-year to 10.5 million passengers between May 1 and May 5, railway journeys up +4.6% to 1.06 billion.
And staying in China, their non-official S&P Global services PMI reports that their services sector expanded faster as new business picked up in April and the year-ahead outlook improved. Cost pressures remained modest from this giant sector.
In India, their services sector saw new orders and output expand at a quicker pace supporting hiring activity. They also reported a mild reduction in inflationary pressures.
(Things aren't so good in the Russian services sector.)
In the EU, they report rising cost pressure for producers, all related to higher fuel prices. Overall they are up +2.0% in April from a year ago, but up +3.2% from March. There is quite a wide range of impacts depending on the country.
Internationally, a new report tallying global debt found it at US$353 tln, and a strong shift away from US treasuries and toward big new demand for Japanese and European government bonds. They also found the overall debt:GDP ratio remained stable.
The UST 10yr yield is now just on 4.35%, down -7 bps from this time yesterday. The key 2-10 yield curve is now at +48 bps (unchanged). Their 1-5 curve is now at +27 bps (-5 bps) and the 3 mth-10yr curve is at +71 bps (-5 bps). The China 10 year bond rate is now at 1.76%, up +1 bp. The Japanese 10 year bond yield is unchanged at 2.50%. The Australian 10 year bond yield starts today at 4.91%, down -5 bps. The NZ Government 10 year bond rate is up +1 bp at 4.69%.
Wall Street is ending its Wednesday with the S&P500 up +1.4% and a new record high. Overnight, European markets were up between Paris's +2.1% drop and Frankfurt's +2.9% rise. Yesterday Tokyo was closed for a holiday. Hong Kong was open and was up +1.2%. Shanghai also rose +1.2% and Singapore was up +0.1%. The ASX200 ended up +1.3%. And the NZX50 ended up +0.8%.
The price of gold will start today up +US$121 at US$4680/oz. Silver is up +US$4 at just over US$77/oz.
American oil prices are down -US$6.50 at just on US$95.50/bbl, while the international Brent price is down -US$8.50 and now at US$101.50/bbl.
The Kiwi dollar is up +60 bps from yesterday at this time at 59.5 USc. Against the Aussie we are up +30 bps at 82.3 AUc. Against the euro we are up +30 bps at just on 50.7 euro cents. That all means our TWI-5 starts today at just under 62.8 which is up +50 bps from yesterday.
The bitcoin price starts today at US$81,399 and up +0.1% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.3%.
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8 Comments
If Trump does pull out there will be some big winners. Obviously Iran who get to toll the strait, but higher global oil prices sound like a big win for a certain country that produces loads of electric cars.
"US says it has attacked Iranian-flagged ship as Israel launches air strike on Beirut"
https://www.bbc.com/news/live/c152zyj0599t
Breath holding not advised
Firstly, define 'win'.
Secondly, show me a grid not fossil-energy-backed.
But DC mentions the biggie, but not why. The other Gulf states are indeed going to be thrown under the bus - have already. The next taxi along takes a different-format ticket; the most important point of them all. What we have just witnessed, is the last big hooly initiated by a failing hegemony. It's proxy is on the way out - with HUGE implications for NZ (tied to said failing hegemony, think: Kiwisaver, ACC...).
Iran might not get to toll the strait. Yesterday i saw a report where the USN announced it had cleared one lane for shipping traffic on the strait (notably it didn't say which way, but context suggests for outbound traffic) and are working to clear another. These will be close to the western side, away from Iran, providing a bigger buffer to guard against Iranian fizz boat attacks and provide more depth to enable effective defense. To toll any ships Iran will have to go into UAE waters.
Electric vehicles are coming now anyway. They always were considering the manipulations of OPEC and the likes. Now there's more reason as the uncertainties around fuel are underlined and in bold. But EVs have lots of uncertainties too if a lot of the technology is coming out of China. This is a long way from being over.
“Democracy” Was Never Designed to Work — But Something Better Is Emerging
Some folk are thinking ahead...
The idea of a form of 'sortition' appeals....the only concern is whether it can operate at speed when needed.
Excellent article which poses questions.
"Elections also select for the wrong qualities: charisma, wealth, ambition, and connection — a dangerously unrepresentative sample of the population." I suggest the author could delete the word "also". While a few politicians might intend to do the right thing, I suspect most just say what they think the constituency wants to hear, to get them into government and slurp up the trough..
But the author leaves a bigger question unposed and unanswered. Above all of it there still requires some form of government to lead and manage the processes he lays out. That government, i suggest much smaller than now, still needs to be elected if you will, and have a set of rules which restrains them and makes them accountable to the people. How do we stop corruption creeping in insidiously in this governing body and trying to usurp the processes of democracy?
Seems the invisible hand gives the thumbs up to alternative facts these days? Perhaps it needs to cut back on it's social media addiction?
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