Here's our summary of key economic events overnight that affect New Zealand, with news the Yemeni Houthis have announced a naval blockade against Saudi Arabia but effectively closing the Red Sea. Elsewhere new mediation efforts are underway again.
In the US, the Conference Board's leading indicator tracking turned negative in June. The shift down isn't a lot because it wasn't very positive in earlier months. But it is consistent with the Atlanta Fed's GDPNow tracking showing an exhaustion of the pace of the US expansion.
Off balance sheet debt at the big US tech giants is exploding, making investment assessments harder to make. It is now an estimated US$1.65 tln as artificial intelligence investments ballooned, a Nikkei study shows, and now exceeds actual reported debt. The problem is particularly acute at Meta. These companies are about to report Q2-2026 results and these debt levels are sure to become an issue. The main way these debt obligations stay off balance sheets is via "innovative" lease transactions centered around timing issues.
And US Big Tech valuations are also under threat from Chinese alternatives, especially the relatively new Moonshot K3 version. It is hard not to to get a sense that financial markets are facing a revaluation crisis in the tech sector.
In Canada, their CPI inflation rate came in at 2.8% in June, with a core rate of 2.1%. Both these measures were lower than in May and slightly lower than expected.
The Malaysian export boom is carrying on (+45% from June a year ago), especially for electronics (+57%) and petroleum (+56%), and especially to the US (+109%). But they needed all of that because imports surged sharply too, up 44% from a year ago.
The People’s Bank of China kept its key lending rates at record lows for a 14th straight month in July, as widely expected. The one-year loan prime rate (LPR), the benchmark for most corporate and household borrowing, was held at 3.0%, while the five-year LPR, a reference rate for mortgages, remained at 3.5%. However, rate cut expectations are rising there as their domestic economy slows.
German producer prices were up a modest +1.8% in June from a year ago, similar to the prior two months. But this new level is in contrast to the PPI deflation they had reported for the earlier twelve consecutive months.
A number of major countries are struggling to contain the devaluation of their currencies against the US dollar. Japan is seeing its currency at its weakest level since 1996. India is seeing levels back to near the record lows they had in mid-May. And Indonesia is battling record low levels as well. All these are major economies and all are trying to work what level of higher interest rate differential is needed to stabilise their situation. This is just part of a rising interest rate background, not helped by the prospect of higher US interest rates from their inability to tackle inflation effectively.
The UST 10yr yield is now just on 4.60%, up +4 bps from this time yesterday. The key 2-10 yield curve is now at +38 bps (up +1 bp). Their 1-5 curve is now at +29 bps (+2 bps) and the 3 mth-10yr curve is at +90 bps (+6 bps). The China 10 year bond rate is up +1 bps at 1.74%. The Japanese 10 year bond yield is now at 2.72%, up +1 bp.. The Australian 10 year bond yield starts today at 4.98%, up +8 bps from yesterday. The NZ Government 10 year bond rate is at 4.73%, up +5 bps from yesterday.
Wall Street has opened its week unchanged on the S&P500 with the Nasdaq up +0.2%. Overnight, European markets were mixed between Frankfurt's minor +0.1% rise and London's -0.7% retreat. Yesterday Tokyo ended down a sharp -4.0%. Hong Kong was up +2.4% and Shanghai was up +0.9%. Singapore ended down -0.2%. The ASX200 dipped a minor -0.1%. And the NZX50 ended essentially unchanged.
The price of gold has slipped to US$4003/oz, down -US$14 from yesterday. Silver is now just under US$56.50/oz, up +50 USc from yesterday.
Oil prices are +50 USc firmer from yesterday at just under US$83/bbl in the US, while the international Brent price is now just under US$89/bbl. Hormuz transits are still just a trickle There have been just 1 crude tanker and 5 cargo ships exiting over the past 24 hours (4 dark with transponders off) and 8 entering for new loads (8 dark) and all this traffic is Iran-linked.
The Kiwi dollar is marginally firmer from yesterday at just under 58.5 USc. Against the Aussie we are down -20 bps at 83.5 AUc. Against the euro we are up +10 bps at just on 51.2 euro cents. That all means our TWI-5 starts today at 62.3 which is unchanged from this time yesterday.
The bitcoin price starts today at US$65,541 and up +1.6% from this time yesterday. Volatility over the past 24 hours has been modest at just over +/-1.4%.
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22 Comments
$1.6 trillion is considered a lot of debt for the big tech companies, yet Elon could pay 2/3 of that himself!
Are you sure you're not an economist?
Ask what form his 'money' is in.
How to become a Billionaire ? Start as a Trillionaire and invest in AI.
It seems strange that the riches and might of Saudi Arabia and Egypt & even Jordan cannot protect the Red Sea, their vital trade route, from the Houthis in Yemen. This is their terrain and what their military is adapted to. In the 70s a light British SAS force in Oman was able to prevent then defeat similar activity out of Yemen. It is no wonder that Iran has concluded there is nothing to fear from its neighbours.
The Saudis pay protection money to the USA to take care of these problems by propping up the petrodollar, it's time for the USA to earn it's keep. The USA needs to stop messing around and send all its fleets into the Persian Gulf and the Red Sea to assert its dominance.
What dominance, HeavyG?
According to Asia Times... "Following retaliatory strikes by Iranian and allied forces against U.S. and Israeli operations, up to 80% of Iran's integrated air defense systems have been destroyed.
This effectively renders them incapable of preventing U.S. and allied stealth assets from mounting continued strikes on Iranian territory."
This same loss of regional airbase capabilities, forces the U.S. Navy to transition from an offensive power-projection posture
to a defensive survival posture
, severely limiting its ability to safely deploy fleets into the Persian Gulf and Red Sea."
Your suggestion...
"...to stop messing around and send all its fleets into the Persian Gulf and the Red Sea to assert its dominance."
...end quote...
... would be suicidal for the already flailing hegemony, replete with its rapidly depleting munitions stocks and supply lines.
Separate riches from might.
And question the former.
The ME oil 'countries' - recent constructs themselves - are, like Norway, busy turning a one-off stock of energy, into digits. Some have tried to 'diversify'- but ex fossil energy, tourism looks unlikely as does much of modernity. Too many forward bets, not enough remaining planet.
Might - the US (taking over from the prior oil-requiring hegemony; Britain) did deals to get at the energy; established bases to both threaten and to stake possession. The local Elites were happy to go along - the local masses not so much. That's the same worldwide - read about how the locals on Okinawa resent the GI's treatment of their daughters. Local militaries seem to be at the say-so of the US - certainly they are reliant on it for munitions.
I think what we are seeing is the failing of the US hegemony and the repositioning of everyone else. The ME leaders have to placate their masses, sooner or later. That means rejecting Trump/the US. More Airbus, less Boeing. More China. As to 'riches' - in what form? USD? The proxy of a dying hegemony?
Fair enough. Actually, with requisite afterthought, ironic would have been my better adjective, rather than strange.
It's a lot easier to down a slow moving 300m long ship with a cheap drone which can be launched from any location, than to protect said ship.
Spot on PDK.
Its not just the..."failing of the US hegemony and the repositioning of everyone else" - what we are witnessing are all the signs of the imminent collapse of the entire Western-facing fiat debt-based financial system.
Alasdair Macleod and Andy Maguire covered this in depth in a recent interview, along with the endless tripe, that Western media talking heads churn out, on how China and Russia are both close to collapse.
Right now, the PBOC and the National Financial Regulatory Administration are instructing banks with high exposure to pare down their positions in USTs and limit further purchases to curb risks associated with market volatility and geopolitical tensions.
Other institutions around the globe, that possess half a brain, would be doing likewise.
Of course the Western sovereigns, that are already technically insolvent, have been buying one another's debt in a last ditch attempt to keep this Western-facing Ponzi-charade alive.
Alasdair Macleod at ~18:00...
"I think what we are seeing is the failing of the US hegemony and the repositioning of everyone else."
Couldn't agree more.
The hegemonic spell America holds over the world is thinning. Expect them to keep throwing their toys out of the cot.
Per dollar smile theory, an energy driven liquidity squeeze forces capital back into greenbacks. In the short term this boosts USD demand and reinforces the illusion of ongoing USD supremacy. The scramble ensues to acquire USD to service debt, cover collateral calls and pay for higher energy costs.
The irony is this short term strengthening only cements a long term fracture in greenback support.
The trick is creating synthetic dollar demand today while acting as an accelerant to de-dollarisation tomorrow. The very backfire they are trying to prevent.
A senior Iranian official told Reuters on Monday that Tehran had received a proposal from mediators for a 10-day ceasefire
If Iran has RECEIVED a proposal for a ceasefire, it means that the US initiated the proposal. This tells you who is more desperate for a ceasefire. Trump did say yesterday that the US are prepared to keep fighting for a year, which is a clear sign that he's getting desperate to end the war asap.
Pretty sad to see him being hustled off at the W/C presentation. The difference is stark; the Dems had what it took to retire Biden, humanely. The Republicans, current format, don't.
In hindsight, strategizing requires an intellectual facet that Trump doesn't possess - and age isn't helping. But even dumping him, the US is in trouble.
Indeed. It's interesting too that Trump thinks he can end the war between Russia and Ukraine in one day, yet he's unable to end the war in the Middle-East that he started himself !
Based on his actions, his plan to end the Russian invasion of Ukraine was to pull all support and let Ukraine fall. What a shame this meant that the US red lines no longer had any relevance to Ukraine unleashing a new wave of attacks on infrastructure across Russia.
The Yanks don't know to finish. Give up and leave. Should have been in Afganistan for three months. 20 years later........
Cuba kicked them out 50 years ago but they will get over it when?
Iran kicked them out 40+ years ago and they have not got over that yet. A primary cause of this current war in my view.
When you're exceptional, and capitalist Jesus blesses your every move, it's your duty to spread your natural superiority for the benefit of those poor unfortunates yet to experience the light shining from the land of freedom. Depleted uranium munitions and napalm are the tools of gods will.
If Iran has RECEIVED a proposal for a ceasefire, it means that the US initiated the proposal.
Could be the new mediators that proposed this to both parties.
Wider wars, higher oil prices, rising inflation, immense national debts, rising interest rates, overstretched tech valuation, commercial Real Estate collapse, shadow banking problems...
WHEN, is it all going to collapse ?
That isn't the question.
The question is: If it's bound to collapse, how should we position ourselves?
Edit - that goes both jointly and severally :)
The short answer... GET OUT OF CREDIT.
Yes, Yvil - the $100 trillion dollar question.
Andrei Jikh, with a very interesting discussion on the size of the AI tech bubble and the huge danger of leverage in this environment - and this is just one facet...
https://www.youtube.com/watch?v=hy90LdpEUvQ
...paraphrased...
"Case in point, where just 2 stocks, Samsung and SK Hynix represent over 56% of the entire Korean stock Market - mostly due to ~14 million retail investors that have put their savings plus a huge pile of borrowed money to get into those two stocks.
SK is doing the exact same thing as the US - they are both running the same version of the same technique, with Korea just running a faster smaller version of the same leveraged mechanism."
And on the wider financial WW-front, Russia and China could pull the pin on the entire fiat casino any day now, simply by gold-backing their currencies. They already have all of the architecture in place required to do this.
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