Here's our summary of key economic events over the weekend that affect New Zealand, with news clashes in the Strait of Hormuz are unstitching the uneasy ceasefire and giving credence to sceptics who saw the 'truce deal' between the US and Iran as superficial and flawed. The US believes its own propaganda, thinking it is negotiating from strength, but no-one else does, least of all Iran. US allies in the region are starting to realise the US will throw them under the bus for its own ends.
Tankers (6), bulk cargo vessels (6) and other ships (4) are exiting the region, but most tankers are are heading to China, or in the Russian shadow fleet. Those who need insurance are holding back.
But first, this week will feature the usual monthly real estate update releases later in the week, including for building consents. Plus the big end-of-month data dump from the RBNZ.
In Australia, the focus will be similar where we will be looking for early signs of housing market reactions from their new Budget settings.
Elsewhere there will be important PMI updates from everywhere to give us indicators. In the US, their July 4 public holiday will happen on July 3 this year, so it will be a compressed week of labour market data there culminating in an early release of their June non-farm payrolls report when a +114,000 change is expected.
In China, they say artificial intelligence is reshaping the global labour market not by triggering mass layoffs of existing workers but by causing employers to pull back on hirings for new, entry-level positions.
China also reported industrial profits are recovering, up +21% in May from a year ago to ¥3.1 tln, and faster than the +18.8% rise for the first five months. The latest result reflects the ongoing AI investment boom and continued policy support for advanced industries despite lingering weakness in parts of the property-related sector.
In the EU, an ECB survey revealed that median year-ahead inflation expectations eased to 3.5% in May, the lowest level in three months, down from 4.0% in each of the previous two months which were the highest readings since 2023. Longer-term inflation expectations were steady, at 2.9% for three years ahead. Consumers also expect house prices to rise by 3.6% over the next year, slightly below 3.7% in April. Expectations for mortgage interest rates were unchanged at 4.9%.
According to the World Meteorological Organization they are saying the severe heat dome over Europe is expected to continue affecting much of Western, Central, and Southern Europe over the next two weeks. There are likely to be economic impacts soon, and as the summer progresses these impacts may well affect economic activity in a material way.
And the Bank of International Settlements said over the weekend global pressures from rising public debt to financial fragilities, and questions about the sustainability of the AI boom, are increasing systemic financial risks which they suspect could end in a bust. They warned of a complex mix of vulnerabilities, including strained fiscal positions, lingering supply shocks and the risk of a renewed bout of high and sticky inflation.
In the US their merchandise trade balance worsened in May. Imports rose +3.6% while exports fell -5.4%. These were much larger shifts than were anticipated. Clearly tariffs aren't working other than making imports more expensive and hurting exports. The net result was a -US$103.5 bln deficit for May, the largest in a year. And their largest May deficit ever.
And we should also note that US inventories are rising and quite quickly. In May, wholesale inventories were up +4.4% from a year ago, retail inventories up +3.1%. The stockpiling we noted in their PMI activity is adding deadweight to their logistics systems.
The University of Michigan Consumer Sentiment index was revised up to 49.5 in June, although that was less of a revision higher than expected. Still, sentiment improved from May which was the lowest level on record, supported in part by a moderation in petrol prices. And that is despite the fact they remain +31% higher than at the start of Trump's failed Iran adventure.
But this didn't stop shoppers at Amazon's 'Prime Day' four-day shopping event. Prime Day 2026 was exclusively for Prime members and ran June 23-26. The wrap-up shows more than US$26 bln was spent in the period, up +9.3% from last year, and expected to be half related to inflation, half a volume gain.
And in Australia, it seems that last week's auction results will show that they had their softest sales period in more than five years with many properties failing to sell. Also unfolding is the scale of mortgage fraud against banks by a surprisingly wide section of their mortgage broker community. To defend themselves, the banks are drawing up a black-list register so that brokers just don't go shopping around for vulnerabilities.
The UST 10yr yield is now just on 4.37%, unchanged from this time Saturday, down -12 bps for the week. The key 2-10 yield curve is now at +28 bps (unchanged). Their 1-5 curve is now at +20 bps (unchanged) and the 3 mth-10yr curve is at +70 bps (+1 bp). The China 10 year bond rate is up a very sharp +6 bps at 1.79%, up +4 bps for the week. The Japanese 10 year bond yield is down -1 bp at 2.60%, down -5 bps for the week. The Australian 10 year bond yield starts today at 4.73%, down -3 bps from Saturday and down -10 bps for the week. And the NZ Government 10 year bond rate is at 4.39% to be unchanged, down -7 bps for the week.
The price of gold has risen to US$4089/oz, up a net +US$15/oz from Saturday. That is down -US$66/oz from a week ago. Silver is now under US$59/oz, down -US$5.50 for the week.
Oil prices are little-changed from Saturday at just on US$69/bbl in the US, while the international Brent price is now just on US$72/bbl. A week ago these prices were US$77.50 and US$80.50 respectively. Hormuz transits have eased off noticeably after the recent flare up in fighting with just 16 crude or product tankers exiting over the past 24 hours (1 dark with transponders off) but 24 entering for new loads (3 dark). Over the past two days, more than two thirds of the exiting vessels were headed to China, 9% were Russian-linked, 5% headed for Singapore 4% to South Korea. There are still hundreds (459) yet to try their luck, no doubt inhibited by insurance issues.
The Kiwi dollar is unchanged from this time Saturday at just on 56.4 USc, down -100 bps from a week ago. Against the Aussie we are holding at 81.8 AUc. Against the euro we are also unchanged at just on 49.5 euro cents. That all means our TWI-5 starts today at just on 60.3 which is down -110 bps for the week, and still its lowest since the GFC in 2009.
The bitcoin price starts today at US$59,497 and down -0.5% from this time Saturday, and down -5.1% from this time last week. Volatility over the past 24 hours has been low at just over +/- 0.9%.
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23 Comments
Yes the US (Trump) burned NATO and Europe and they're going through a process of pivoting away from reliance on the US for as much as they can. Canada is doing that too, and now the ME nations will be realising that there are some friends you really just don't want. As European military industries step up, the US will learn that international exports of their military products will fall off a lot.
In the ME though it's much more complicated. Like NZ most western aligned ME nations have fallen to US sweet talking over the years, and become dependent on the US for their defence. For the US it is of course, about oil. Iran is demonstrating an adaptation to asymmetric warfare that is impressive and also makes it very difficult to gain peace there. Ideologically the current events could be argued to have made them stronger, reinforcing old Islamic divisions, the effects of which may endure for quite some time. Their current demand to govern the entire Strait of Hormuz runs rough shod over the rights of other gulf states, and international law. It's not going to be an easy fix at all.
I wonder if the US / Saudi / etc are building a secret pipeline or something and the ceasefire is just a delaying tactic. Surely building a pipeline would be cheaper than a war or reparations. Of course you then have to protect it too but it's hard to imagine that Iran has much left to throw at it.
How can you protect a pipeline and where will that pipeline terminate that will not be a target? And yes Iran has plenty to throw at it with 70% of their ballistic and drone inventory remaining. They will be doubling down on their manufacturing whilst their is a lull in hostilities
There are functioning pipelines in Saudi so it must be possible.
Translated: I need the magic
I don't think there will be any secret about it - I've heard commentary that the leverage from the Strait will be gone within 3-5 years due to the incentive to build various pipelines bypassing it. Any tolling obviously increasing that incentive.
Always the risk of pushing your leverage, the opposition will find a way to defuse that making it a temporary advantage.
Two things - insurance, and time-to-depletion.
Remember Ghawar peaked in 1980...
A pipeline has to terminate somewhere such as the east west pipeline in Saudi or the UAE Fujairah pipeline that was hit by the Iranians . The termination and storage factilities are an easy target. Also you are only focusing on oil. What about all the other commodities that come out of the region and food that has to enter the Persian Gulf?
Yes, and they will terminate as far away from Iran and Yemen as possible. They won't be impervious to attacks, but it would mean that Iran would need to go straight to a pretty nasty hot war in the future to get the same leverage they can currently get by sending a few messages and popping down a few mines.
24 ships heading in. In. Shows there is some confidence.
Here we go again...
Dubai is so screwed
Actually Ukraine wins from this, investment in Drone production.
Iran sources most of the chemicals for solid fuel rocket propellant from other countries. This mostly has to come via the sea route, often through other countries to avoid sanctions. This must be much more difficult now the US scrutinizes shipping through the SoH.
that BIS report is a bit TLDR
BlockBeats report: On June 28, the Bank for International Settlements (BIS) issued a stern warning in its annual economic report released on Sunday, cautioning that the surge in AI spending by major tech companies could end in a prolonged "investment slump," potentially impacting financial markets and the global economy. The BIS noted that the world’s five largest cloud providers are projected to collectively invest over $1 trillion by the end of 2026. However, if returns in the tech sector fall short of expectations, investors may rapidly tighten financing, causing a sudden reversal from a capital expenditure boom to a long-term investment downturn. The report cites historical precedents—the canal building boom of the 1830s, the British railway mania of the 1840s, and the late 1990s internet bubble—all sharing a common trait: "genuine technological breakthroughs attracted capital far beyond what commercial returns could sustain," ultimately ending in investment reversals that triggered economic recessions.
Just as the BIS issued a warning, signs of market frenzy appeared densely:
Shortly after SpaceX's record-breaking $86 billion IPO, it launched a $25 billion bond offering; Allianz's chief investment officer this week pointed to this as a sign that markets have entered a "bubble zone."
Tech companies are issuing massive amounts of debt in global credit markets, taking advantage of credit spreads near century-low levels, channeling tens of billions of dollars into AI projects.
The BIS further noted that, unlike in previous cycles, households currently have a higher exposure to equities relative to their wealth and income; a significant correction in AI-related stock markets could therefore have a more severe impact on the real economy. Meanwhile, AI companies’ substantial bond issuance to raise capital may also threaten financial stability. In addition, ongoing energy disruptions caused by the near-closure of the Strait of Hormuz continue to push inflation higher, placing global central banks under mounting pressure from persistent inflation, the sustainability of AI investments, worsening financial vulnerabilities, and deteriorating fiscal conditions.
Firstly, this phase was inevitable.
Secondly, we need to remove our 'wanna have' mindsets, from the discussion (that seems hard for some).
Thirdly, we need to see the bigger picture.
In that frame, the early-summer-but-record-already temperatures need to be seen along with the depleting quality of resources - particularly energy resources - and the running-down of global resilience/buffering-capacity. We are staring at the stars while shooting ourselves in the foot.
In big terms, the human enterprise is down (from where it would have been) 1 billion barrels of light sweet crude, plus other processed stock (fertiliser from gas - which in itself isn't scarce but which in processed form was just-in-time). The First World have outbid poorer others (partially via unrepayable debt) and run down their stored reserves, to cushion themselves. The 3rd World have suffered demand destruction. You cannot remove 1 billion barrels from the O/A system, without forgoing a commensurate amount of work. Some will have been discretionary - you don't NEED to drive to the supermarket, or to fly anywhere - but it all counts as 'economic'. And the word is: Less.
And it isn't 'resolved' - nor is there a clear pathway to resolution. The US can wipe out 'Iran' (bordered by crayon on a British map post WW1, courtesy of Mark Sykes) and the global result will be even less energy going into the total system. They know this - when they went into Iraq, museums were left to the looters but oil infrastructure was secured. So they know they're between a rock and a hard place, global-recession-wise.
Add into that their own entropy - collapsing as a society; crumbling infrastructurally and reducing in EROEI terms - and their inability to repay their ever-increasing debt.
Time we disassociated ourselves; time we moved to become more self-reliant, more resilient. Which clearly is a concept beyond all our current Parties.
The time to be more resilient was before COVID. But COVID highlighted the need, and still the pollies are in denial. Even now do you, or anyone hear them talking about becoming more resilient, more self sufficient? Instead they're pushing more of the same old mantras, all wrapped around that old mythical saw -"growth", that even the most obtuse must admit is an impossibility.
Countries realise the "US will throw them under a bus". Some people are just slow learners I guess? Pity our own evangelical Maga lites in government didn't have enough intelligence to conclude this same ultimate truth. Instead they want to privatise public land so they can convert our country into a rare earth mine for Trump's ministry of war. It's embarrassing!
Not just the government.
This was held on Friday - fully booked indeed oversubscribed almost immediately:
Welcome - The Reality of Everything
So far - anyone seen anything? - I haven't seen any reporting at all. But Morning Report cheerfully peddling growth-taken-for-granted this a.m, as usual.
Some interesting presenters there, If you google a few, most have podcasts etc around their main topics.
Aye - pity Mike Joy is just seen as a fresh-water specialist; he gets the whole thing.
One or two of the others I'd have said were a bit GND-ish - but I'll wait to see the video when it is put up. Maybe they've moved on...
I thought what he had to say about Canterbury water was probably all correct
India develop thermochemical hydrogen production from low temperature nuclear waste heat. Negating need for energy intensive electrolysis. Fast breeder enables them to utilise their vast thorium reserves.
DAE inaugurates the world's first hydrogen production facility at #IGCAR using the Copper–Chlorine thermochemical cycle powered by nuclear heat from the Fast Breeder Test Reactor.
https://x.com/DAEIndia/status/2070531605865898022
You're obviously not in Europe, Profile?
Are they building the reactors and moving the sand with self-generated electricity? @43%?
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