US to buy its way out of the Iran conflict; US data weaker; Canada housing turns up; China data mixed; Japan hikes, Australia holds; UST 10yr at 4.42%; gold up and oil down sharply again; NZ$1 = 58.4 USc; TWI-5 = 62

Here's our summary of key economic events overnight that affect New Zealand, with news it seems Iran is going to come out of the current 'peace deal' with a very large reconstruction commitment. To end the standoff, the US is offering Iran substantial funding even if via convoluted means so that Trump can claim the US isn't involved.

The overnight dairy auction brought lower prices than at the prior full event, but not as low as at the prior Pulse event, nor what the derivatives market were expecting. Still, it was a -2.8% retreat in USD terms, down -1.4% in NZD terms and to the lowest overall level since early February. Generally the powders were softer than expected, the milk fats not as soft as expected.

In the US, their weekly ADP employment update signaled a slightly slower pace of hiring, the softest since early March. But this signal is still expanding, just slower.

The New York Fed's regional services sector survey found softer conditions in June than at the prior survey with declining activity and firms not very optimistic.

Meanwhile the US national housing start data for May revealed sharply lower activity, down -8.7% from the same month a year ago. In fact, apart from the pandemic period, this is the lowest level in 17 years and the GFC.

All eyes now turn to the US Fed and their meeting tomorrow. Many economists are betting on higher rates as Kevin Warsh takes the reins at the Fed. But it is no certainty as financial markets see no-change in their rates tomorrow, despite the high US inflation measures.

In Canada, their real estate market seems to be recovering led by Toronto and Ontario markets, with national sales rising at a rate in May not seen since 2024.

In China, new home prices were -3.5% lower in May from a year ago, matching April’s pace and that extends their consecutive decline to almost 3 years. Second hand home prices fell at a faster rate in the 70 major cities that their official data tracks. But there are new pockets where increases are starting to show up, even for pre-owned homes.

China said its industrial production expanded +4.5% in May from a year ago, better than the +4.1% in April and better than the expected +4.3%. And their electricity production rose +4.2% in the same period, giving some cred to the industrial production claims (which has been occasionally absent in previous months).

But China's retail sales actually fell -0.6% in May from the same month in 2026, following an easing pattern that started in March, and the first decline in retail sales there since December 2022. But much of this weakness is due to lower car buying which was down -16%. Sales of home appliances and audiovisual equipment was also down -16%, home improvement down -11%, gold and silver jewelry down -9%, and furniture down -8.7%. Turning up sharply were beverages and tobacco, clothing and cosmetics, comfort items popular when things are stressful.

As expected, the Bank of Japan raised its policy rate by +25 bps to 1.0% yesterday in a 7-1 majority decision. This new rate is its highest in 31 years.

In Australia, momentum in their manufacturing sector stalled heading into mid-year, with conditions slipping back neutral after a short-lived recovery. The Middle East conflict is reigniting cost pressures across the industry, according to the latest update of ACCI-Westpac Business Survey for the June quarter.

And late yesterday, the RBA agreed unanimously to hold their cash rate target at 4.35% as was widely expected.

On the commodities front we should note that while urea prices have fallen (with oil), that is not the case for sulphur, nor bitumen. Many commodity prices may stay elevated for a long time yet.

The UST 10yr yield is now just on 4.42%, down -4 bps from this time yesterday. The key 2-10 yield curve is now at +37 bps (-4 bps). Their 1-5 curve is now at +31 bps (-3 bps) and the 3 mth-10yr curve is at +78 bps (-2 bps). The China 10 year bond rate down -1 bp at 1.74%. The Japanese 10 year bond yield is up +7 bps at 2.64%. The Australian 10 year bond yield starts today at 4.78%, down -7 bps from yesterday. And the NZ Government 10 year bond rate is up +4 bps at 4.48%.

Wall Street is taking a breather with the S&P500 down -0.1% and the Nasdaq down -0.5%. But SpaceX is up again pushing it +32% above its listing price. Overnight, European markets were positive between Frankfurt's +0.1% rise and Paris's -0.8% retreat. Tokyo ended its Tuesday session up +0.1%. Hong Kong however fell -1.4% with Shanghai down -0.1%. Singapore rose +0.8%. The ASX200 ended its Tuesday session unchanged. But the NZX50 rose by +0.5%.

The price of gold has recovered further, up +US$20 from yesterday to US$4341/oz. Silver is unchanged at US$70/oz.

Oil prices are down another -US$5 from yesterday at just over US$75.50/bbl in the US, while the international Brent price is now just over US$78.50/bbl. Hormuz transits are still minimal with only six crude or product tankers exiting over the past 24 hours. Oddly however its seems the US is using an Iranian ship-transfer tactic to get some cargoes through.

And we should note that construction and other costs for electric battery storage stations have fallen below that of gas-fired power plants for the first time, as overproduction in China and a shift away from electric vehicles drove battery prices down -40% in 2025, while a turbine supply crunch is making new gas plants more costly.

The Kiwi dollar is up +10 bps from this time yesterday at just on 58.4 USc. Against the Aussie we are up +20 bps at 82.6 AUc. Against the euro we are unchanged at just under 50.3 euro cents. That all means our TWI-5 starts today at just under 62 which is up +10 bps from yesterday.

The bitcoin price starts today at US$65,878 and down -1.5% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.1%.

And we should also note that reports suggest Binance is about to lose its license to operate in the EU. Binance is controlled by Changpeng Zhao (CZ) who was convicted of money laundering in the US (and of course got pardoned there by Trump).

The easiest place to stay up with event risk is by following our Economic Calendar here ».