Here's our summary of key economic events overnight that affect New Zealand with news intensified clashes in the Persian Gulf has oil prices rising, little transit activity in the Strait of Hormuz, and significant disconnect from Trump's claim that both sides are still negotiating. Clearly they aren't.
In the world economy, and first in the US, mortgage applications fell again last week, a third consecutive weekly easing mostly driven by lower refinance activity. Mortgage interest rates eased back however even if they remain at close to one year highs.
Ahead of this weekend's US non-farm payrolls report (expect +85,000), private businesses added +122,000 jobs in May according to the ADP survey, a new high since January 2025, compared to a downwardly revised +105,000 in April and above forecasts of +117,000. Hiring was broad-based they report and say it augers well going into the summer hiring season.
But this isn't backed up by the US services PMIs for the US.
The May ISM services PMI reported a good expansion, about the average it has been in 2026 and slightly higher than expected. Good new order flows are behind the result. But the same firms reported contracting staffing levels and faster input cost pressures. The parallel S&P Global services PMI was less upbeat, noting a muted increase in business activity, optimism faltering and employment falling solidly. Overall, it is a jobless expansion, these PMIs both say.
US factory orders are reflecting some of the stockpiling effects we have noted earlier. In April these orders rose +13.0% in nominal dollar terms above year-ago levels. But without aircraft and defense orders, they were up +5.8% - still a good result but mostly accounted for by inflation. And remember PPI rose +6.0% in the same twelve month period.
American crude oil stocks fell again, for the sixth consecutive week and the largest fall in this period. Over the past year, it has fallen more only in three specific weeks but each of those were not in a continuing series. Their strategic oil stocks are now at their lowest in 22 years.
The US Fed's Beige Book surveys for May reported most of the 12 Federal Reserve Districts had slight-to-modest increases in growth, though a handful experienced flat or slightly declining activity. Labour markets remained tight but were cooling. Business respondents said rising input costs for non-labour inputs were largely able to be passed on to consumers. Consumer spending was described as mixed, heavily influenced by affordability concerns and shifts in discretionary income.
In Canada key housing markets in Ontario, new listings have fallen, as have prices, and more homes are selling but also, more are selling at a loss.
In Japan, their central bank will meet next in a bit over a week and their Governor has indicated that rate hikes will be discussed to weigh against rising inflation, even that pushed by higher energy costs.
According to the private S&P Global (RatingDog) services PMI for China, that sector is expanding on a faster basis, much stronger than as reported by their official data. New business is expanding and they are hiring faster. But they also face their highest cost pressure since October 2023.
Meanwhile, Australia released its Q1-2026 GDP data yesterday, saying their economy expanded +2.5% in real terms over the past year. But the growth rate slowed in the March quarter from the December 2025 quarter. Rising interest rates and significantly higher fuel costs in the March month likely created an environment for more cautious consumer behaviour. This resulted in reduced spending across a range of household expenditure categories. And exports fell. The unders and overs likely balanced out but the level of spending on equipment for new data centers was so large it might have accounted for all the Q1 gain.
The UST 10yr yield is now just on 4.49%, up +3 bps from this time yesterday. The key 2-10 yield curve is now at +41 bps (unchanged). Their 1-5 curve is now at +39 bps (+2 bps) and the 3 mth-10yr curve is at +82 bps (+5 bps). The China 10 year bond rate is holding at just over 1.71%. The Japanese 10 year bond yield is up +7 bps at 2.64%. The Australian 10 year bond yield starts today at 4.94%, up another +2 bps from yesterday. And the NZ Government 10 year bond rate is up +1 bp at 4.59%.
Wall Street has hesitated again today with the S&P500 down -0.5% from yesterday even if it is still near its record highs. The Nasdaq is -0.8%. European markets were between Frankfurt's -13% and London's -0.4%. Yesterday Tokyo ended up a strong +2.5%. Hong Kong fell back -1.6%. Shanghai ended up only +0.2%, while Singapore was up another good +0.8%. The ASX200 ended up +0.7%. But the NZX50 was down -0.4%.
The price of gold will start today down -US$45 at US$4437/oz. Silver is down -US$1.50 at just under US$73.50/oz.
Oil prices are up another +US$2.50 just over US$96/bbl in the US, while the international Brent price is now just over US$98/bbl and up +US$2. Hormuz remains shut.
The Kiwi dollar is lower from yesterday at this time at 58.6 USc, down -60 bps. Against the Aussie we are down -30 bps at 82.2 AUc. Against the euro we are down -40 bps at just under 50.6 euro cents. That all means our TWI-5 starts today at just under 62.2 which is down -50 bps from yesterday.
The bitcoin price starts today at just on US$65,847 and down another -2.4% from this time yesterday and still falling. Volatility over the past 24 hours has been modest however at just under +/- 1.9%.
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2 Comments
Since we had the blue cost cutting team in charge, and Aus the red spend up team, how much has our GDP diverged from theirs? They must have grown at least 5% more than us in the last 3 years. Yet the blue team doesn’t seem to have a plan to grow the economy, their answer is more cuts.
Putting aside the small bit about perpetual growth in a finite world being somewhat problematic, if you listen to Luxon, he thinks he is growing the economy.
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