Here's our summary of key economic events overnight that affect New Zealand, with news the US-Iran deal temporarily reopens the Strait of Hormuz, and offers major concessions to Tehran. Tehran probably can't quite believe its luck here. Trump is battling widespread claims his Iran deal is worse (much worse) than the Obama deal he tore up.
In economic matters in the US, their central bank kept its policy rate range unchanged at 3.50%-3.75% for a fourth consecutive meeting, in a unanimous decision and as expected. But updated dot plot projections show that 9 officials foresee at least one quarter-point hike this year, with 6 anticipating at least two. Another 9 expected no move or a cut. They see core inflation rising from 2.7% at their prior forecast to 3.3% by the end of the year, and removed their easing bias. And the next move will be up. This uncertainty got the market's attention.
Wall Street retreated, bond yields rose, and the USD rose. Gold fell.
But Kevin Warsh's influence can be seen in the fact that the decision announcement had very little detail or context. He is not a fan of central bank transparency.
Separately, US mortgage applications fell last week and across the board even though the benchmark interest rate was unchanged (at 6.60%).
However American retail sales rose in May from April and by more than expected to be +5.2% higher than year-ago levels. But most of this was due to higher fuel prices. Without fuel, these sales were up +3.6% when inflation was up +4.2%.
US pending home sales rose more than expected too, with sales volumes up +4.8% from May a year ago. That is two months in a row of good gains although on the back of quite weak results a year ago.
US crude oil stocks fell an outsized -8.3 mln barrels last week, the largest weekly fall in eight weeks and the most concentrated drawdown of the strategic reserve levels since the pandemic. In fact, their strategic reserves are at their lowest level now since March 1985, a 40 year low.
Japan said its exports were up +17.0% in May from a year ago to US$59 bln and its imports were up +12.5% over the same period. Export customers were dominated by China (+17.9% growth ), the US (+12.5%), ASEAN (+20.0%), and the EU (+14.5%).
Meanwhile Japan reported its machinery orders were strong too, up +15.6% in April from a year ago, up +8.7% from March. Japan really has its mojo back.
In Singapore, they said their exports rose a whopping +38% in May from a year ago to a record high S$87 bln (US$51 bln) in the month, a far larger increase than anyone saw coming. It is clear that despite the US shenanigans on tariffing trade, global trade is in fine shape without them.
In China, they are tightening their grip on the rare earth minerals sector with new regulations that cover everything from mining rights and production, to stockpiling and environmental restoration. Everything in the sector is now a national security priority.
It might also be worth noting that Russia said its economy shrank in Q1-2026, its first admission of a retreat outside the pandemic period. And the downturn occurred despite sharp rises in the prices of key Russian exports, including oil, natural gas, coal, industrial metals, and grain.
The UST 10yr yield is now just on 4.46%, up +4 bps from this time yesterday immediately after the Fed decision announcement. The key 2-10 yield curve is now at +36 bps (-1 bp). Their 1-5 curve is now at +30 bps (-1 bp) and the 3 mth-10yr curve is at +78 bps (unchanged). The China 10 year bond rate down -1 bp at 1.73%. The Japanese 10 year bond yield is down -4 bps at 2.60%. The Australian 10 year bond yield starts today at 4.77%, down -1 bp from yesterday. And the NZ Government 10 year bond rate is down -7 bps at 4.41%.
Wall Street is didn't like the Fed's decision with the S&P500 down -0.5% and the Nasdaq down -0.4% immediately following it's announcement. Overnight, European markets closed between Frankfurt's +0.1% rise and Paris's -0.2%. Tokyo ended its Wednesday session up +0.7%. Hong Kong however fell -0.7% but Shanghai was up +0.4%. Singapore rose +1.2%. The ASX200 ended its Wednesday session up +0.5. But the NZX50 dipped -0.2%.
The price of gold has retreated -US$68 from yesterday to US$4273/oz after the Fed decision. Silver is down -US$2 at US$68/oz.
Oil prices are up +US$1 from yesterday at just under US$76.50/bbl in the US, while the international Brent price is now just on US$79/bbl and up +50 USc. Hormuz transits are picking up with eight crude or product tankers exiting over the past 24 hours and 16 entering for new loads. (Normal is 60 in each direction.)
The Kiwi dollar is down -20 bps from this time yesterday at just on 58.2 USc. Against the Aussie we are down -30 bps at 82.3 AUc. Against the euro we are down -10 bps at just under 50.2 euro cents. That all means our TWI-5 starts today at just under 61.8 which is down -20 bps from yesterday.
The bitcoin price starts today at US$66,016 and up +0.2% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.3%.
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30 Comments
The black gold is flowing again. But I hope our government (and voters) have learnt a lesson and will reduce our reliance on imported energy. LNG could be a big issue this election, surprised the Nats haven't given up on it, obviously it's very important to someone
They won't have learnt anything. Like the way much of the population think, we are on the way "back to normal". Willis uses that term all the time when talking about the energy crisis.
LNG is a band aid, for our rapidly decreasing gas supply, but very little thought has been given to what comes after that? Energy security should be the No.1 election topic but it won't be. There will be BS about growth and GDP etc, but none of it will happen without energy and we are running out.
Some positive steps in the right direction.
https://www.rnz.co.nz/news/business/598333/industrial-leader-goes-all-i…
Might go some way to solving the process heat issue
The question is: Will those strategic reserves ever be re-built to where they were?
At the expense of which flow?
JJ is quite correct; we need to be insulated from external supply-chains. But he needs to understand that roughly 30% of our energy is generated locally, and that still needs imported feedstock to be kept running. Add in the need to mitigate for weather events; add in parrying entropy (Cook Straight cable replacement; ferries, road/water/sewer maintenance) none of which is done with the locally-generated energy.
Then add in the existing fleet of tractors - still being sold new. And trucks. And diggers. The required change is bigger than anything ever attempted. And I'd have said we currently have the least-brave collection of leaders ever assembled. Hamstrung by an ill-informed populace. What could possibly go wrong?
That question, in itself, has no answer that is a solution, does it.
Oh you mean a national resilience plan?
Will the SPR be rebuilt? Where from is the question? There's been cheerleading about a US oil glut and US being a nett exporter for years now. Oddly, none of that oil seemed to find it's way into the SPR? Now the US owns Venezuelan oil resources maybe it'll come from there eventually? The expectation is that companies receiving oil from the SPR will return oil at a ratio of 1.25 to 1.5 for barrels removed. Can this be achieved in an incredibly tight oil market? Demand destruction may hold prices back in the nearish term now the US surrender to Iran has resulted in potentially stabilised Hormuz tanker traffic. OTOH Ukraine is dismantling the Russian oil industry so there's that little glitch in the matrix.
Will peace hold to actually create an environment of cooperation? History says no.
The fact that prices haven't gone much higher despite the huge Hormuz disruption suggests the market isn't as tight as we all thought. Last speculation I heard is China had much deeper reserves than thought and have been drawing them down, hence they have been importing much less oil in the last few months.
The other side of that coin is that some of the previous Chinese demand was to build reserves rather than for use in the general economy.
Demand destruction, releases from global reserves, supply redirected across land to avoid Hormuz and hopium addiction. Prices can't physically increase beyond a certain point without collapsing the global economy. $120 may be that point currently.
Before Trumps war.
https://www.reuters.com/business/energy/low-global-diesel-supplies-supp…
This MOU is a major win for the Iranians. No doubt Trump will still try and put lipstick on that pig.
The phrase 'rearview mirror' was telling. He needs to move on.
The $$$$$ will be the sticking-point. Most such promises seem never to be actually 'paid'; few thieves return their booty.
If he doesn't move on voluntarily, then the voting populace will ensure he does. For such an egotist, I struggle to think if he has the mental capacity to understand, or possibly accept that he doesn't have the country behind him any longer.
The US $300 billion will be paid by the Gulf States who will see it is small price to pay to allow shipping to move freely through the strait. The bigger concern for USA and Israel is that the Gulf States will now begin to align themselves more and more with Iran. Also the billions that will now flow into Iran, including oil and gas sales that will no longer be sanctioned, will allow Iran to strengthen Yemen and Lebanon (and likely in the future Syria and Iraq) so they a prepared for the holy war with Israel that must be fought.
It goes back someway further too.The overthrow of Saddam Hussein strengthened Iran by the weakening of Iraq and skewed the balance of power in the region. Iran’s resilience here, demonstrating that neither the present regime nor its sovereignty has been seriously threatened further cements Iran as being in itself, a strategic power with which all its neighbours are now going to need to reset.
Add in the rise of China, vis-a-vis the US (and by inference, us and the rest of the old First World).
Iran is of the future. We are currently shackled to the past.
And we have to note that de-growth is the future, globally. Physically it cannot be any other way. So those with less distance to fall, will be least impacted.
We have a long way to fall, and a narrative which eschews parachutes...
Iran is of the future? Not sure Mrs Foxglove would be enamoured with the prospect of living under the strictures of Iranian governance and undoubtedly that would go for millions globally, male and female. As Yogi Berra said - the future ain’t what it used to be, but certainly that type of livelihood would be repugnant to most folk living in what’s described as the free world.
It is not 'free' and is increasingly getting more unfree.
Democracy - at least, at greater than Dunbar's Number - appears to have been the child of surplus energy.
The structures you should be worried about aren't human vs human - they are planet vs our species. And life in lesser-consuming, less specialised societies, has less adaption required to fit lesser resource throughputs. Don't mess the logic with displacing a physical impasse with human desires - the Titanic analogy holds.
My concern is that the psychopaths rise to the surface in big populations in times of stress (Iran is no different to Israel or the US, in that). They don't see to gain traction below Dunbar's Number - so cities obviously need to think on that carefully. They are untenable where we are going, laud them though economists do...
And right up to the beginning on my/your generation, we were subject to a fair amount of fire/brimstone from our version of the pulpit, remember...
"Democracy appears to have been the child of surplus energy. " An interesting comment. I'd suggest that it's not really democracy, but the surplus energy allowed distraction from the corruption that was creeping in. It's an age old power problem. Irrespective of the nature of a regime, somehow they have to keep their populations in check. Doing it by force costs a lot and is precarious at best, loosening the leash keeps them happier for longer, but there needs to be balance. "Surplus energy" is the means of loosening the leash. Most countries do it this way. Leads to improved living standards but the cost is increased consumption. A happier population is less likely to look too close at what their politicians (leaders) are up to, and/or feel threatened by their activities.
So it's not democracy, rather distraction. And that is at risk of coming to an end.
Was it coincidence the popularity of slavery declined with the rise in burning geologically stored carbon? Another question might be, will slavery become popular again when there's less to burn?
"that type of livelihood would be repugnant to most folk living in what’s described as the free world."
You might be surprised how popular theocratic techno authoritarianism is in the "free world" among the general population. Time has moved on. Of course many supporters are particularly clueless about what that particular rat hole will deliver them but FAFO seems synonymous with human nature. Neocon/liberalism from the centre right and left hasn't delivered anything except fertile ground for religious/fascist activists.
No but alongside Iran is Afghanistan the status of which arguably demonstrates where an extreme application of totalitarianism would end up under similar governance. To single out one aspect it would be hard to imagine any woman being receptive to being forced into such subjugation?
pdk,
Iran is of the future. Can you explain what you mean by that?
Don't worry about the Yanks. They will find someone new to pick on and feel good again. American positivism.
Who next? Maybe some small country in the South Pacific nobody cares about.
"No Nukes you say. Well we can fix that" "Maybe Bibi can help"
Cuba next…. Anything to distract from the Epstein skeletons in his closet
"It might also be worth noting that Russia said its economy shrank in Q1-2026, its first admission of a retreat outside the pandemic period. And the downturn occurred despite sharp rises in the prices of key Russian exports, including oil, natural gas, coal, industrial metals, and grain."
They won't be helped by the collapse in Urals crude oil now the Iran war is winding down. Largely back to pre-war levels, assuming they can even get tankers out around the Ukranian drone attacks.
Why Iran won
"During a speech in Evian, the president said, “also we run out of reserves in about four weeks, you know there are reserves all over the world and we would really run out, and there would be a time when you wouldn’t be able to get it, and you wanna see bedlam.”
https://nationalsecurityjournal.org/we-run-out-of-reserves-in-about-4-w…
At this stage it looks inevitable that the Republicans will lose control of both houses in the mid terms, and likely to be something of a towelling at that. The President does not look to be in prime condition and the resultant restrictions and challenges to his power will be telling. Some pundits think he will give up and toss it in. Vice President Vance does not, on present form, demonstrate any great ability to succeed where Trump has failed. The 2028 election therefore could result in the Republican Party being broken, severely diminished which is what is rather predictable when you place your one big egg in one big basket.
I have been disappointed to see the Republican's odds of keeping control of the Senate increasing, and they are now favourites on polymarket (56%).
The House is a lost cause - Democrats 83% to win, and Democrats are now up to 59% to win the Presidency in 2028.
If the 4 week timeline is correct then we are stuffed. It will take more that 4 weeks for tankers to get to refineries if/when the strait reopens and then more time to refine the oil and ship it out. If USA thought deficits were bad wait till they have shortages!
Prof. Pape, a very brave American academic from Chicago Uni, outlines Trump's monumental own goal and the way he has paved the way for Iran to become a fourth world power.
https://www.youtube.com/watch?v=s88aryNUMhE
At 8:40 - Trump has just been made to choose which way to turn when he met this critical fork in the road.
...paraphrased/quoted...
#1 Either, escalate the war (a war the US has already lost).
#2 Or, go down the road of surrender, and allow Iran to become the fourth center of world power, where it achieves, over a period of a year or two, regional primacy.
Trump has accepted #2, not to just get out of a deal, he has basically drawn a roadmap for Iran to become the world's fourth centre of power.
Remember how Trump said that the Obama deal was a roadmap to an Iranian nuclear weapon, well this is a bigger roadmap - this is a roadmap to Iranian primacy - a regional hegemony for as far as the eye can see, which BTW, down the road, may also include nuclear weapons - that is not foreclosed here by any stretch.
Point 6 of the "agreement" - The US undertakes, together with its regional partners, to create a comprehensive plan agreed on by both parties, ensuring financing of at least $300 billion.
Now that doesn't say that America will certainly finance it, but it does say that America is good with it, and for Iran becoming a regional hegemony, man, you can't ask for better than that right now, and their leverage is only growing over the next 60 days.
And it will stay there through the end of the year, because it will take that long before we will have enough surplus to put more reserves back in our oil well inventories.
As long as we don't have the inventories, we don't have the cushion for even a short period of time, and if Iran decides to temporarily block the straits, you are going to see much more panic here in the markets.
At 13:00 - The reason it is a complete surrender and capitulation by Trump, just as a factual matter, is before the war we fought a war to weaken Iran's power - we wanted to weaken it by crippling it's regime - we wanted to weaken its missiles - we wanted to weaken its ability to threaten its neighbours - this is the opposite outcome, and now Trump is signing on the dotted line.
You have to recall that on February 28, he wanted unconditional surrender by Iran - this is the opposite - this is unconditional surrender by the US..."
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