Here's our summary of key economic events overnight affect New Zealand, with news renewed Hormuz attacks are raising oil prices and interest rates today, not helped by a pullback in tech stocks.
But first today, there was another dairy auction overnight, a full one with new season volumes returning. But this one came in sharply lower, down -4.9% on USD terms although only a -2.5% retreat in NZD terms. Among the results, there was a notable -4.4% fall for WMP, a -7.0% fall for SMP, a -5% fall for butter and a large -12.3% fall for cheddar cheese. A few of the minor categories gained. But these falls were larger than the futures market was pricing in, so you have to say they are 'larger than expected'. While the new lower levels aren't that special in a longer perspective, the speed of the falls is concerning and analysts will be re-assessing their payout forecasts.
In the US, the RealClearMarkets/TIPP Economic Optimism Index rose in July to a better than expected level but it is still well below the average over the past year and below its long term norm.
Meanwhile, American consumer inflation expectations rose when a small dip was anticipated. It is now at 3.7%, its highest since September 2023 and is rising even though expectations for lower petrol prices are included in these results.
The weekly private jobs growth monitoring by ADP shows a smaller rise last week than they have recorded in the past 15 week, since mid-March in fact. And the trend has been down for seven straight weeks. This is consistent with the easing that the official non-farm payrolls report showed for June.
The US Logistics Managers Index rose again in June and to its highest since March 2022, driven by three factors; anticipation of more tariff action from Trump, stockpiling to get ahead of inflation, and an expectation that the end of year retail season will be 'normal'.
US exports weakened in May and imports rose in the same time in the broader trade result that includes both goods and services, delivering a sharp rise in their deficit and their highest in over a year. This result matched the recent report of merchandise trade but brings their services trade into the picture.
Meanwhile Canada reported rising exports and stable imports to give them a larger trade surplus in May.
China said its foreign exchange reserves dipped slightly in June from their unusually high May levels. Part of this was due to the retreat in the gold price. But their central bank continued its gold-buying streak for a 20th month, with reserves reaching 75.44 million troy ounces by June’s end, up from 74.96 million in May.
China’s excavator sales are rebounding, up by more than a third in June from a year ago, driven by major projects.
New data out yesterday paints a much improved picture for Japanese household spending in May as households started to get their mojo back. And don't overlook that this was in the middle of the Trump Gulf War uncertainties.
The UST 10yr yield is now just on 4.54%, up +6 bps from this time yesterday. The key 2-10 yield curve is now at +37 bps (up +1 bp). Their 1-5 curve is now at +28 bps (-1 bp) and the 3 mth-10yr curve is at +88 bps (+7 bps). The China 10 year bond rate is unchanged at 1.73%. The Japanese 10 year bond yield is now at 2.84%, up +1 bp and at new 30 year-high levels. The Australian 10 year bond yield starts today at 4.84%, up +3 bps from yesterday. And the NZ Government 10 year bond rate is at 4.46%, up +1 bp from yesterday.
Wall Street has been softish on the S&P500, down -0.6% while on the Nasdaq it is down -1.3%. Overnight, European markets were mixed between London's +0.1% and Frankfurt's large -1.4% fall. Yesterday Tokyo ended down an even larger -2.1%. Hong Kong dipper -0.5% while Shanghai was down -1.3%. Singapore was up +1.6% however. The ASX200 ended its Tuesday down -0.3%. Meanwhile the NZX50 ended essentially unchanged.
The price of gold has slipped to US$4146/oz, down -US$13/oz from yesterday. Silver is now under US$61/oz, down -US$1.50 from yesterday.
Oil prices are up +US$2 from yesterday at just under US$70.50/bbl in the US, while the international Brent price is now just on US$74/bbl. Hormuz transits have picked up sharply despite renewed uncertainties with 27 crude or product tankers exiting over the past 24 hours (4 dark with transponders off) but only 18 entering for new loads (4 dark). Interestingly. All this comes as attacks on ships in transit become daily events, so the rise in oil prices isn't surprising. Red Sea activity near Yemen has fallen again to even lower levels on added risks there too.
The Kiwi dollar is down -10 bps from this time yesterday at just on 56.9 USc. Against the Aussie we are little-changed at 82 AUc. Against the euro we are also little-changed at just on 49.8 euro cents. That all means our TWI-5 starts today at just on 60.7 which is down -10 bps from this time yesterday.
The bitcoin price starts today at US$64,063 and up +0.8% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.3%.
Please note there will be no video version today. That feature will resume in August.
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2 Comments
And in the meantime there's a whole bunch of irony going on. Trump has arrived in Turkey to the NATO summit, and is reported to be bleating about NATOs lack of support for his war against Iran. He has apparently singled out the UK.
On the other hand, Breaking Defense is reporting that in February this year, Trump signed and executive order wrapped around his America First Arms Transfer Strategy (AFATS), where he tasks the Department of Commerce "to increase foreign procurement of defense articles produced in America".
So we have on one hand Trump, proving to the world, they should not ever again trust America at any level, but especially around military support, but he's tasking is commercial infrastructure to sell their staff to the world...
That article is loaded with ironic statements; United States must remain the Arsenal of Freedom, something Vance especially but Trump too, has railed against. And then there's this paragraph: "As a businessman himself, President Trump understands something every defense executive knows instinctively: you cannot make long-term investment decisions without sustained, predictable revenue. AFATS is built on exactly that logic, and it is already delivering results." As a business man you'd probably expect that he understands he shouldn't piss his potential customers off?
And the effects are already visible. NATO is facing the same problem the US has with its E3 AWACS in that they are too old, unreliable and expensive to operate. So they've found a replacement. The options are update the Boeing 707 the E3 is based on (very unlikely), Boeing E7 Wedgetail (pretty good, the Aussies are using them and making their mark) E2D Hawkeye (US Navy, very capable) or the one they've chosen the SAAB Globaleye. This aircraft is based on the Canadian Bombardier Global 6500 with SAAB built radars and systems. It is proven and not built in America! I'd say Trump's running a pretty successful marketing campaign for SAAB products! I especially like the SAAB Gripen E. We should have a sqn or two.
Agree we need to think about defense - it's coming, whether we are ready or not.
The US is on a downward trajectory - not least because they've lost sight of the objective, which is dominance, not the making of money. The latter now reigns within their procurement system, which allows the out-pirates (Buckminster Fuller's term) to go asymmetrical. As they have.
Which is where we diverge; I think you're pining for the past (manned fighters) but I think the future is unmanned (drones etc). If we stand back and look at the trend, it is to smaller/expendable. Like torpedoes; you don't ram a ship with a submarine, you do it with a small, unmanned expendable.
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