Here's our summary of key economic events overnight that affect New Zealand with news commodity markets are signaling more intense stress with copper and sulphur jumping to new all-time highs and aluminium jumping to near its brief pandemic spike. Tightening supply from the Middle-East standoff is driving the cost of these fundamentals up.
Today, Trump is in Beijing where heavily choreographed set pieces are play out ahead of the formal discussions. Trump got welcomed by a non-Politburo member, the first time China has done that. So far he is being treated just like any other visiting head of state, rather than the special senior welcomes by his predecessors.
And China is organising one of its tankers to exit the Strait of Hormuz in defiance of the US blockade, right at the time these meetings take place.
US mortgage applications were little-changed last week, but with this week's push higher in benchmark interest rates, they are likely to fall when reported next week.
American producer prices were up +6.0% in April from a year ago, getting a +1.4% shove in April from March. Distorted input costs from Trumps Gulf War are embedding uncompetitive pricing in American-made goods. Only the pandemic surge has been greater (also on Trump's watch.) It isn't clear right now why American producer prices are rising faster than just about everywhere else, but history will eventually explain that.
US crude oil stocks took another outsized tumble last week according to official EIA monitoring. Petrol stocks there fell sharply too. (These sharp drops are confirmed by industry data too.) The industry is raking in record profits on these lower volumes. Why the US, a net petroleum producer, is feeling the brunt of these price hikes is a classic study in oligopoly power. (And see this investigation.)
Meanwhile, UST 30yr bond yields have risen above 5% on secondary markets. Apart from the pandemic spike, this is the first time they have done so since 2007, so a two decade high. The overnight US Treasury 30 year bond auction delivered a medium yield of 4.99% (top bid 5.05%), up from 4.82% at the prior equivalent event a month ago.
And we should note that Kevin Warsh is now the Fed Chairman. But ex-boss Powell is still there. Given the Trump-induced inflation surge, he is unlikely to be able to deliver on Trump's demand for lower US interest rates.
In Canada, their central bank says they see no evidence that AI is having a material impact on their jobs market - yet, anyway. For them, the benefits are outweighing the costs.
EU industrial production rose in March from February, but that wasn't enough to counter the outlier faster rise a year ago, so it ended down -1.0% year-on-year. An outsized fall in Germany twisted these results.
In its May monthly report, OPEC cut its forecast for global oil demand growth in 2026, joining other forecasters such as the IEA in cutting expectations due to the Iran war.
In Australia, the wealthy are reeling after their latest Budget signaled a levelling of the tax playing field and the wind-down of concessions for wealth. To be fair, these are to be unwound over many years, but the big end of town is furious they are losing their perks. Certainly, those dependent on the property market can see an end to the gravy train.
The UST 10yr yield is now just on 4.47%, unchanged from this time yesterday. The key 2-10 yield curve is now at +48 bps (+2 bps). Their 1-5 curve is now at +34 bps (+1 bp) and the 3 mth-10yr curve is at +82 bps (up +3 bps). The China 10 year bond rate is now at 1.74%, down -1 bps from yesterday. The Japanese 10 year bond yield is up +4 bps at 2.60% and a new 29 year high. The Australian 10 year bond yield starts today at 5.07%, dipping -1 bp from yesterday. The NZ Government 10 year bond rate is up +4 bps at 4.78%.
Wall Street lower today with the S&P500 up +0.8%. Overnight, European markets were all higher between Paris's +0.4% and Frankfurt's +0.8%. Tokyo ended its Wednesday session up +0.8%. Hong Kong was up +0.2% with Shanghai up +0.7%. Singapore was up +1.2%. But the ASX200 ended down -0.5%. And the NZX50 slipped a minor -0.1% in its Wednesday trade.
The price of gold will start today up +US$12 at US$4690/oz. Silver is up +US$3 at just over US$88/oz.
American oil prices are holding up at just over US$101.50/bbl, while the international Brent price is at just over US$106/bbl, which is down -US$1.50.
The Kiwi dollar is down -10 bps from yesterday at this time at 59.3 USc. Against the Aussie we are down -60 bps at 81.7 AUc. Against the euro we are unchanged at just under 50.7 euro cents. That all means our TWI-5 starts today at just on 62.6 which is down -10 bps from yesterday.
The bitcoin price starts today at US$79,447 and down -1.3% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.7%.
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10 Comments
Please don't always blame Trump, DC.
He is a symptom, not a cause.
How about we discuss the cause?
No PDK, in the moment he is the cause and the catalyst. Yes there are bigger issues behind him that enabled him, or someone like him to get where he is. That doesn't absolve him from what he is doing.
I don't accept that what we are facing, the extent of it was inevitable at this time. Possibly later on down the track, but there is no real shortage of energy yet, so we are not at the precipice due to a shortage of resources. We are there because of endemic corruption, greed and ego's. Power plays by those trying to maintain their grip on power when it was becoming increasingly apparent that the general populations have had enough of the corruption and inequities flowing out from government.
If you think disparity is bad in NZ, America takes it to a whole new level. And Trump was good at creating villains to blame and persecute.
It doesn't matter if you accept it or not - the question is: what drove Trump#2? Because he wouldn't have had a look-in pre, say, 2000.
Energy Consumption and Inequality in the U.S.: Who are the Energy Burdened?
PS InstaDog 15 16x9 AUS OLV Master
Then globally:
THE CHALLENGE | Surplus Energy Economics
'This perspective is a practical one – nobody conversant with the energy-based interpretation was much surprised, for instance, when Donald Trump was elected to the White House, when British voters opted for “Brexit”, or when a coalition of insurgents (aka “populists”) took power in Rome. The SEE interpretation of prosperity trends also goes a long way towards explaining the gilets jaunes protests in France, protests than can be expected in due course to be replicated in countries such as the Netherlands. We’re also unpersuaded by the exuberant consensus narrative of the Chinese economy. The proprietary SEEDS model has proved a powerful tool for the interpretation of critical trends in economics, finance and government.'
As to your 'inevitable later but not now' comment: Dr. Albert Bartlett: Arithmetic, Population and Energy (transcript) - Global Public Media
'Second Question; if you were an average bacterium in that bottle at what time would you first realise that you were running of space. Well let's just look at the last minutes in the bottle. At 12 noon it's full, one minute before it's half full. 2 minutes before its ¼ full then 1/8th then a 1/16th. Let me ask you, at 5 minutes before 12 when the bottle is only 3% full and is 97% open space just yearning for development, how many of you would realise there's a problem?'
(sorry if the intellectual comparison offends :)
And it's even worse for those who see things through 'financial' glasses, of course - they are even slower to react. The signs are everywhere: student loans/debt; LA rates outpacing 'incomes' (an EROEI digression, nothing more); and the everything bubble; the collection of forward bets now beginning to unwind (as it was inevitably going to). There is an exponential curve going upward - demand for physical resources. There is an exponential curve going downwards: resources remaining. There is another exponential curve going upwards: maintenance demands of existing infrastructure. And remember that the 'resources' include remaining sink capacities (which the Government here is having to ignore, in a doomed attempt to prolong exponential resource-consumption growth.
I didnt get into reducing quality/concentration of resources - it too, is an upward exponential. We are at the inflection-point, or near enough that the pressures are manifesting as angst at the bottom and middle (Trump/Farage supporters) and as conflicts over 'what's left'.
So China is already speaking to Trump through the nature of his welcome. That message is a powerful one. Even if Trump misses the significance, his advisors won't. Xi will likely try, and possibly succeed, to bludgeon Trump into submission. Trump's ego, unleashed by the US Republican Party will cost the world it's stability and balance. Taiwan is right to be very concerned, but we should all be. What Trump gives away today could affect all of us.
To put it in the context of an old one, Trump has led with his chin.
Whereas they're addressing him from lower down and behind...
I disagree he's led with his chin. I think another appendage is more appropriate and it's about to get chopped off!
Perhaps not that extreme, but certainly get lashed somewhat.
"US crude oil stocks took another outsized tumble last week according to official EIA monitoring. Petrol stocks there fell sharply too. (These sharp drops are confirmed by industry data too.) The industry is raking in record profits on these lower volumes. Why the US, a net petroleum producer, is feeling the brunt of these price hikes is a classic study in oligopoly power. (And see this investigation.)"
Not paywalled...
https://thedailyoverview.com/americas-biggest-oil-field-is-becoming-a-d…
Huge backdown arising from the Trump administration’s miscalculation of the US beef market which will most likely see both tariffs and quotas suspended. US domestic beef production is down and consumption is up. The USDA and other agencies have very good data tracking that identifies early such trends but obviously that had been ignored. Said it before, and say it again don’t fiddle the price upwards of the Big Mac& Co if you want to keep Americans happy.
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