Here's our summary of key economic events overnight that affect New Zealand with news the bond market doesn't like where the global economy is heading. War-driven inflation is worrying them. It wants a higher reward for the risks that are building. And small economies like ours are being downgraded - and our much lower exchange rate will bring a dose of extra inflation on imported goods and services.
The takeaways from the Beijing summit meetings between Xi and Trump have been underwhelming. Trump is touting a 200 plane order for Boeing and big agricultural purchases, but it is notable that the Chinese have made no mention of these. Even the orders Trump says he has are less than what was expected.
Meanwhile, the 'negotiations' between the US and Iran seem to have stalled completely. So no resolution to the Strait of Hormuz blockades. Oil prices are rising on fears of a much broader energy crisis.
The US seems cornered on all fronts, and while its President is enriching himself, China finds itself essentially unchallenged. The US's role in the immediate future may be all about being a source of elevated global risk. It is a very fast transition.
In the US, April industrial production jumped +0.7% from March to be +1.4% higher than year ago levels, and much more than expected. But it is all "business equipment" (read: AI data centers). This will be 'good' if it generates lasting increased productivity, but the rest of their factory sector is going backwards, even with 'tariff protections'. Consumer goods manufacturing shrank in April (-0.2%) from a year ago, construction stalled in April.
In the New York region, there is a scramble to stockpile ahead for fast-rising cost increases. Business activity grew strongly there in May. The headline general business conditions index climbed to its highest level in more than four years. New orders and shipments increased considerably for the second consecutive month. Unfilled orders rose. Delivery times lengthened substantially, and supply availability worsened somewhat. Employment levels and the average workweek both continued to increase. All this is because the pace of input price increases and selling price increases picked up sharply.
US stockpiling may end up giving their Q2-2025 economic activity data a boost for the quarter.
In Canada, housing starts jumped an impressive +17% in April from March to an annualised 279,300 units in April from the previous month, well above market forecasts of 240,000 units. But it is just back to year-ago levels (281,800).
In Japan, machine tool orders surged +45% in April from a year ago, far exceeding market expectations. It maintains the much higher level it reached in March which was an all-time record, and by quite a margin. Both domestic and foreign orders leapt the at the same pace.
Japan’s producer prices rose +4.9% in April from a year ago, a surge from an upwardly revised +2.9% increase in March. Markets had expected a +3% rise. The usual suspects were the cause.
Indian exports rose sharply in April, and were near their record high levels in March 2022. They had very good increases in both goods and service exports. Imports rose fast too, probably related to the rising cost of oil. Overall, their trade deficit shrank slightly in the month.
The Russian economy is contracting, again. It is giving all the signs it is exhausted by its war on Ukraine, and this is despite its higher oil revenues. Manpower is a serious and probably unsolvable issue now that they have suffered excessive battlefield deaths.
In Australia, the reform bravery of the latest Federal Budget is on full display by the ferocity of the pushback by vested interests. The loss of tax-free or low tax benefits is likely to transform how their property market works and how trusts are used by those that can afford them, to enrich themselves in ways others cannot. The generational battle lines are being drawn more clearly. It does seem odd, from a distance, that those who squeal loudest claiming "I paid my dues" actually didn't pay their taxes to the level of benefits they had been getting. The adjustment to put their social and economic system back on a sustainable path comes with sharp costs. Best not to make it unsustainable in the first place. New Zealand politicians of all stripes will be watching how this plays out. It is very rare that genuine reform happens without an acute crisis. Australia is giving it a go.
The UST 10yr yield is now just on 4.60%, up +14 bps from this time yesterday. For the week this is a +24 bps jump, one of the largest one-day jumps for quite some time. It is back to early 2024 levels. The key 2-10 yield curve is now at +52 bps (+5 bps). Their 1-5 curve is now at +44 bps (+12 bps) and the 3 mth-10yr curve is at +94 bps (+14 bps). The China 10 year bond rate is now at 1.75%, unchanged from yesterday or the week. The Japanese 10 year bond yield is up +9 bps at 2.72% and a new 30 year high. The Australian 10 year bond yield starts today at 5.11%, up +12 bps from yesterday, up +14 bps for the week. The NZ Government 10 year bond rate is up +2 bps at 4.78%, up +6 bps for the week..
Wall Street is lower today with the S&P500 down -1.2%, to end its week up +0.3%. Overnight, European markets were all lower between Paris's -1.6% and Frankfurt's -2.1%. Tokyo ended its Friday session down -2.0% for a -2.8% weekly drop. Hong Kong was down -1.6% on Friday for a weekly retreat of -1.3%. Shanghai was down -1.0% for a weekly -1.6% fall. Singapore was down only -0.1% however. And the ASX200 ended down a minor +0.1% in Friday trade to end its week down -0.7%. The NZX50 fell -0.5% in its Friday trade for a -1.6% weekly decrease.
The Fear & Greed index is still in the 'greed' zone where it has been for the past four weeks.
The price of gold will start today down -US$124 at US$4554/oz and down -US$169 for the week. Silver is down -US$8 at just under US$77/oz, down -US$3.50 for the week.
American oil prices have jumped +US$4 to just over US$105.50/bbl, while the international Brent price is up +US$3.50 at just under US$109.50/bbl. A week ago these prices were US$99.50/bbl and US$101/bbl respectively.
The Kiwi dollar is down -80 bps from yesterday at this time at 58.4 USc, down -120 bps for the week. Against the Aussie we are up +20 bps at 81.7 AUc. Against the euro we are down -40 bps at just under 50.3 euro cents. That all means our TWI-5 starts today at just on 61.9 which is down -60 bps from yesterday, down -90 bps for the week to its lowest since early April..
The bitcoin price starts today at US$79,177 and down -2.9% from this time yesterday, down -1.1% from a week ago. Volatility over the past 24 hours has been moderate at just under +/- 2.0%.
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7 Comments
"Could the ban be responsible for the present situation because it chilled the market, leading to less investment in new development? It’s certainly a theory worth exploring – but it doesn’t hold up under investigation.
In the five years before the ban was introduced, the industry drilled 37 development wells at a cost of $1.4 billion. In the five years after the ban, the industry drilled 54 such wells at a cost of … $1.4 billion.
That does not give the impression of a chilled market, by any means."
https://newsroom.co.nz/2026/05/15/the-mystery-of-the-disappearing-gas-r…
"It is becoming increasingly apparent that New Zealand just doesn’t have a great gas resource. It’s there, it just by-and-large costs more to produce than people are willing to pay for it.
We got lucky with Maui and have done well with what was available from Pohokura, Kupe and a handful of other large fields. But billions of dollars have been spent looking for more and we just haven’t found it."
I have a friend in the industry , says that many would have stayed and looked for gas if they where not restrained by small permit areas. They believe there is gas out there, but where tightly restricted where they could drill. I am not in industry, would be interested in other opinions on this?
Anything oil and gas is hugely expensive, especially here in little NZ. Aside from the ban, the current opposition have made it very clear they will remain opposed to O&G exploration therefore the industry is dead in the water.
The cliche "We are open for business" rhetoric we continually here is most certainly not the case, and unfortunately that doesn't only apply to oil & gas.
If this is true, you’d have to say the ban was a smart move. It gives the appearance of a country dedicated to emission reduction, with no negative effect.
It’s all a bit of a mess isn’t it. Nobody tells President Trump what to do and now President Trump is maybe, beginning to understand that only Russians tell Russia what to do and ditto for Iranians vis a vis Iran. All that potency of the powerful US Navy, rendered virtually impotent by swarms of whizzing speed boats. Consequently the US Navy is restricted to manoeuvring in circles at the mouth of Schitt Creek, unable to engage because just one incident of real damage and numbered casualties will be a political downfall back home.
Xi holds all the trumps. Trump was stupid enough to hand him the lot.
When we look back this visit marks the inflection point. Once the USA was top dog, now it's China.
Xi gives Trump a couple of nice dinners, smiles and Trump is helpless. That's it. End of the era.
And it will only get more so.
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