Here's our summary of key economic events overnight that affect New Zealand, with news we may be facing a renewed oil supply shortage and this time reserves are at unusually low levels. The combined impacts of extended closures in the Persian Gulf, the Red Sea, and the Black Sea are mounting, and just as we thought the May-June stresses had faded.
US mortgage applications rose slightly last week and that was despite an unexpected fall in refinance activity. But since mid-June this US housing market indicator has essentially been flat. And US mortgage rates are now at an 11 month high.
US crude oil stocks rose unexpectedly last week when another fall was anticipated. Yes, it was minor, but still. Maybe it indicates that local production is rising faster than some assume. Or surging imports from Canada or Venezuela? Or maybe that demand is lackluster. Or all three. US Strategic Reserve levels fell again and to their lowest level since 1983.
Today's US Treasury 20yr bond auction saw its yield surge through 5%, ending with a median yield of 5.12% and a high of 5.16%. That is up sharply from the prior equivalent event a month ago of 4.88%. And demand was lower too (-4%). It is quite the rate move.
Not to be outdone, the overnight German 20 year bund auction rose to 3.60%, up from 3.38% a month ago.
Across the Pacific, Japanese exports rose faster than expected in June, up more than +19% from a year earlier. The weak yen helped as did strong demand for electronics and other data center equipment. The June export level was their second highest on record, just a whisker off the March record. At the same time their imports surged as well, up +25% and also more than expected to a new record high, just eclipsing the October 2022 level. Oil prices were high but oil import volumes retreated. The net result was a modest but stable trade deficit in June (from May), but slightly worse than the small trade surplus in June a year ago. None of this helped the yen however because it fell to a 40 year low against the USD. Against the NZD it has only been this low in 2024 and 2007.
In case anyone is still confused, or unaware, the Chinese regulator, China Securities Regulatory Commission, has been organising the SOE home team to bolster the Chinese stock markets recently, after they showed some negative indications. This has driven some good rises, but also a creeping state ownership in many listed Chinese companies. The Shanghai Composite closed up +1.8% yesterday, the Shenzhen Component was up +4.8%, while the ChiNext was up +7.1% and the STAR Market index jumped 8.8%. This is not to claim other governments don't manipulate markets; they do (Trump, Japan, etc.). But the Chinese moves don't seem sustainable unless the reasons for the dour conditions that prompted the artificial buying are resolved. In other economies, regulators would get punished by investors if issues aren't resolved. In China it is the other way around.
The Philippine-China dispute about who controls the sea off the Philippine coast is taking an ugly turn with China posting racist trope video targeting Filipino's. It is unnecessary and grubby diplomacy. But 'going low' isn't something China invented.
Surprising most observers, the Indonesian central bank did not raise its policy rate overnight following its June out-of-cycle shift higher. It judged that that earlier move was all that is needed at this time to defend the rupiah.
In Australia, the latest update of the Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, suggests growth there is stalling. While the latest growth pulse is still not overly weak it is broadly consistent with stalling activity through the middle of the year.
Later today the June labour market report will be released in Australia. It is expected to show tame jobs growth.
The UST 10yr yield is now just on 4.66%, up +3 bps from this time yesterday and matching its recent mid-May highs. The key 2-10 yield curve is now at +35 bps (down -2 bps). Their 1-5 curve is now at +30 bps (unchanged) and the 3 mth-10yr curve is at +95 bps (+3 bps). The China 10 year bond rate is holding at 1.73%. The Japanese 10 year bond yield is now at 2.74%, up +2 bps. The Australian 10 year bond yield starts today at 4.98%, unchanged from yesterday. The NZ Government 10 year bond rate is at 4.73%, up +2 bps from yesterday.
Wall Street is a marginal +0.1% firmer today on the S&P500 with the Nasdaq down -0.3%. Overnight, European markets were higher between Frankfurt's +0.6% and London's +1.2%. Yesterday Tokyo ended slipping a minor -0.2%. Hong Kong was down a full -1.0% but Shanghai was up +0.1% after a home team cushioning. Singapore ended up a strong +1.2% however. The ASX200 was up +0.3%. And the NZX50 ended up +0.8% with a late push higher.
The price of gold has risen to US$4140/oz, up +US$71 from yesterday. Silver is now just on US$60/oz, up +US$1.50 from yesterday.
Oil prices are another +US$2.50 higher from yesterday at just under US$87/bbl in the US, while the international Brent price is now just on US$94/bbl and up +US$2. Hormuz transits are still just a trickle There have been just 2 crude tankers and 3 cargo ships exiting over the past 24 hours (5 dark with transponders off) and 5 entering for new loads (3 dark). Three of these outbound ships were hit by missiles. The Red Sea is also now effectively blocked at Yemen although a small handful of ships are still getting through (less than 20 each way). More than 700 vessels are waiting for things to calm down.
The Kiwi dollar is another -20 bps lower from yesterday at just over 58.1 USc. Against the Aussie we are also down -10 bps at 83.2 AUc. Against the euro we are down -10 bps at just under 51 euro cents. That all means our TWI-5 starts today at 62 which is down -20 bps from this time yesterday.
The bitcoin price starts today at US$66,141 and down -0.4% from this time yesterday. Volatility over the past 24 hours has again been low at just over +/-0.9%.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
6 Comments
Something's broken.
Take a look around your representatives in parliament. Consider their performance.
Then consider that MMP is possibly causing hard working, experienced MPs like Chris Bishop to loose their seat.
Your alternative being?
That's been broken for a long, long time. Started before 1980, probably with Piggy Muldoon in 1975. Every government since then has only contributed to the slide, not arrested it, but some were worse than others.
I don't think MMP per se is the problem despite Bulger openly admitting they deliberately screwed the model to try to put voters of it. I suggest the real problem is the way the total system works. It needs to be recalibrated but too many vested interests will block that.
MMP wasn't the best format on offer, but it was the one that had the best chance of getting across the line (I know a couple of the people who led the charge).
But Chris buy-our-tobacco Bishop unbolting his seat (or was the above writer a product of Stanford's phonetics nonsense and meant lose rather than loose?) will probably draw comment from the Speaker.
"US to announce deal allowing Saudi Arabia a nuclear programme"
https://www.bbc.com/news/articles/cj03r59z73po
The picture of 2 rulers who've authorised extrajudicial killings of people they didn't like seems...ironic
I repeat: Time we distanced ourselves from the dying hegemony and associated tyranny.
But there are bigger problems afoot - the amount of energy NOT entering the system, is becoming an insurmountable problem. In the words of Bush the Lesser, this sucker could go down. Global trade is so intertwined, so dependent on that ship getting to there then there... Add in that most of the First-World ex middle class are tapped-out and that all resource stocks (physical, not proxy) are less concentrated, more dispersed than they were yesterday - and you've got a perfect storm.
Which our High Priests will counter with? Interest-rate adjustments. This has to end well.
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.