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%.
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43 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.
If national want Bishop in, they'd put him in a safe seat like they have for Luxon and Brown.
Well spotted. But you need to include the unaccountable bureaucrats as a problem.
Name one thing that our current governance system is addressing that will make our society a better place for our mokopuna? But then, perhaps we only make the substantial changes needed when there is no other solution?
Maybe a dose of citizens assemblies can bring some stability?
imo, we have a system that is revealed to serve the few, the 1%. Same old solutions to problems that have been kicked down the road. Just saying, Opportunity.
Perhaps the good people of Chris's electorate would beg to differ on your summation of his attributes. Maybe it's not MMP to blame at all.
"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.
While I tend to agree with the sentiment, I feel that in the real world we absolutely must pick our friends. For all it's ills I would suggest in the long term the US would be a better or safer friend than China. Europe is too far away so there are not too many options available for a small south Pacific country who would wish to be neutral. Aussie's choices will impact us but we may not be able to influence them.
In the near term China will be useful as a counter point to US flailing, but ultimately the Chinese government will try to control us and we have to be able to disengage from them.
All grounds for the point I have repeatedly tried to make about self resilience.
Yeah nah
Niceness is a product of surplus.
Aggression tends to be a product of scarcity.
So Murray is ultimately right; we need to talk about self-reliance, including defense. In times of permanent scarcity - which is where we are headed - authoritarianism will be the only game in town.
Great post except that NZ is too small and too poor to ever be self-reliant in defense.
It seems you might be equating the need for militaries of equivalent size and or capability. That is the wrong perspective. Consider Viet Nam. Who won? who had the largest, most capable military?
Our military needs to be layered, with multiple, varied capabilities, and yes able to reach out over distance, technologically savvy, adaptable and flexible. But it doesn't need to match any possible invader in size or capability. It just needs to convince them the cost of invasion is more than they are prepared to pay. From small unit minimum support, maximum autonomy to fight highly mobile warfare, to high capability, long ranged technology based grunt. Layered defence backs up layered offence. That doesn't make it unaffordable or unachievable. The cost of not having it may well be a lot higher.
Ukraine is proving that every day.
Correct, however we could have a deal for support from Australia as an alternative, and increase trade with them via proximity. This way we needn't hold and maintain excessive defense capability, and can focus resources on other more productive ventures.
No.
Not while Australia is so far up the US.
Why would thet need nuclear all of a sudden now that Trump has saved the world from an Iran nuclear threat?
It's just Trump barking, it's meaningless
NYTimes: 'To get the deal done with Crown Prince Mohammed bin Salman, the country’s 40-year-old de facto leader, Mr. Trump had to agree to terms that may limit international inspectors from going to any sites in the country that they think could be a pathway to diverting fuel to weapons projects.
And he agreed that, after a joint study with Saudi Arabia on the economics of producing nuclear fuel, the Saudis may be allowed to enrich uranium or reprocess plutonium on their soil.'
And this is the guy who abrogated Obama's inspection deal with Iran, then chose to wage war on Iran, at Israel's behest, with uranium enrichment the excuse?
Funny old world.
Big picture, this is about the hegemony trying to retain the ME satellites. Minus Iran. And Afghanistan. And Turkey.
They must be turning, given what is happening to them. Their Elite may well be placatable, but the people, not so much. Ultimately the Infidel is further away than sectarian differences separate. Trump is placating with the delicacy of a bulldozer.
Trumps new tariffs on Canada "The new tariffs will exclude energy products, fish, critical minerals and potash"
Sounds to me America just revealed it's weakness and Canada should put an export tax or outright ban on those products going to the US,
Spot on.
We've seen this movie before
"OpenAI has admitted one of their AI systems went rogue during testing, hacking its way first onto the internet and then into another business.
This is not the first time AIs have escaped confinement during testing, but it is believed to be the first time an AI has autonomously performed a cyberattack."
What the hell just happened at OpenAI? | Stuff
Early days but this has been foretold by the entertainment industry. AI developing autonomously and choosing to not comply with rules imposed by man. The potential is significant. Arnold Schwarzeneggar's Terminator series had the underlying premise of the script of AI taking over and recognising the human species for what it was - a virus.
What to do about corruption?
Apparently the Houtis have struck two Saoudi oil tankers in the Bab-Al Mandb straight. Both tankers are reported to be on fire. The war in the Middle-East is expanding. Oil price likely to keep rising much more, unless Trump gives in.
Trump has started a war that cannot end satisfactorily without some form of invasion - in several places. The chaos that is inevitable from the current situation only opens the door for the bad players to run amok. It is only a matter of time.
The current regime in the US are if not evil in themselves, akin to children playing with dangerous toys with little to no understanding of consequences. That there are apparently no adults present to rein them in is a significant concern.
Fully agree. Remember that Trump fired any advisors with brains and replaced them with loyalists with no experience.
Smart leaders surround themselves with advisors smarter than themselves in their own field. Dumb, insecure leaders surround themselves with dumb loyalists who don't have the courage or knowledge to correct their leader.
Anyone suggesting that this war with Iran.... "cannot end satisfactorily without some form of invasion - in several places."... is, IMO, an extremely slow learner.
So too, a failure to recognise the fact that the current US regime is evil to the core, in their blatant and overt support of mass genocide, also in igniting a tragic war that is in serious danger of escalating into a nuclear apocalypse and turning half the ME and Europe into molten glass.
BTW, this is precisely what the evangelical rapturist element, ensconced within their war council and cabinet of POTUS #47, salivate over. Just as was the case during Trump #45.
Of course this perpetual war-chant was the case during Hillary Clinton's time too - she simply couldn't wait to wage war with Iran as soon as she could get her foot through the door of the Oval Office - she promptly lost that election to Trump.
However, in those pre-Trump times I don't believe that the rapturist (end of times belief) zeal was anywhere near as obvious.
Hillary Clinton's time too - she simply couldn't wait to wage war with Iran as soon as she could get her foot through the door of the Oval Office
Is this the same Hillary Clinton that was secretary of state when the US negotiated the nuclear accords with Iran under Obama? The same Hillary Clinton that forcefully endorsed the nuclear deal during her election campaign?
Yes this is the same HRC - but she paired the endorsements you mention with aggressive warnings, explicitly declaring that she would not hesitate to use military action if Iran attempted to break Obomber's JCPOA, or build a bomb.
Just like the last half dozen or so POTUSs, they all speak out of both sides of their mouths, and the US forever-war/$-hegemony policy remains a bipartisan obsession.
This war criminal is capable of anything, and as SOS she was one of the chief architects of the multigenerational wrecking of Libya - simply because Gaddafi was running a hugely successful developing nationalist economy.
He planned to introduce a pan-African gold currency which could by-pass the US and Western based banking systems for oil transactions.
Does any of this sound familar?
If they take saudis pipeline offline, either stopping ships getting to the port, or targetting the pipeline itself, that's a huge hit to oil supply
And to the economic viability of Saudi Arabia given their revenue is primarily from oil and it's derived products
Play ecoloon games and win ecoloon prizes.
"With yet another power price hike in the works this year, an energy technology expert warns South Australians may need to consider tolerating the occasional blackout for the sake of cheaper power.
The ABC reported over the weekend that a SA government energy scheme, designed to shore up supply during moments of critical demand, will add new costs to household bills as it collects about $44 million this financial year.
But Australian power prices this century have already skyrocketed well beyond affordable levels for many. After generally tracking close to consumer price trends from the 1980s to the mid-2000s, they leapt 117 per cent between 2008 and 2018 alone and have continued to rise despite a recent fall in the default market offer."
https://www.abc.net.au/news/2026-07-21/sa-power-prices-hike-reliability…
While you may blame ecoloon, there is also a debate about robustness vs cost.
Example Auckland had 1/100 year drought and thay sacked the watercare ceo and probably spent millions on increased supply since. Maybe we are just better off with the occasional drought.
145 million for the waikato 50 water treatment plant they fast tracked during the drought.
https://www.stuff.co.nz/national/politics/local-democracy-reporting/300….
two years later they shut it down to save operating costs. $20K a day.
There is nothing robust about low energy density, high transmission cost solar panels and windmills. Feel good intermittent energy projects foisted on Joe Sixpack are making the grid less robust not more. The is why the system cost is going up and the reliability down.
Increased geothermal and wind capacity, alongside the introduction of battery storage, are helping diversify the supply mix and support system reliability during periods of high demand. Solar generation is also contributing to the system, although its role remains relatively modest given many demand peaks occur outside daylight hours. As these resources have become more prominent, the role of thermal generation during peak demand periods has declined, although thermal generation continues to play an important role during extended dry periods. Together, these developments highlight the increasingly diverse mix of resources available to meet Aotearoa's electricity needs while maintaining system reliability
https://static.transpower.co.nz/public/bulk-upload/documents/Market%20O…
Base load geothermal has nothing in common with intermittent wind and solar. Batteries are an eye waterly expensive non-event. Solar and wind to not help in NZ high demand - frosty nights they are zero.
From the Electricity Authority:
"New Zealand operates a small power system with low inertia and system strength. This implies that the system is more susceptible to active and reactive power imbalances that will cause bigger changes in frequency and voltage, respectively. In addition, the grid is extensive and reaches most parts of New Zealand, with many system components being exposed to external hazards, e.g. local environment and weather conditions.
...With the increase in proportion of variable and intermittent generation in the power system, i.e. wind and solar PV, actively balancing the power system will become more challenging and likely result in more frequency fluctuations.
Wind generation is highly intermittent, which can lead to generation output varying quickly due to wind gusts and potentially shut-down due to low or high wind speed.
Solar PV is affected by weather in a similar way to wind, [10] but may have a weaker correlation which will reduce the overall variable and intermittent effect. Cloud movement can cause solar PV generation to vary, and in some instances a fast fluctuation in active power output can occur.
Variability caused by clouds and wind can make it more difficult for the System Operator to predict the amount of additional generation that will be required from one hour to the next. This in turn makes it difficult to calculate exactly what the output of each generator should be to match demand each trading period.
The short-term balance (second-to-second) between demand and generation is also affected by fast changes in wind speed or cloud movement, presenting a real challenge for the System Operator to maintain frequency within the normal band of 49.8 Hz to 50.2 Hz."
Opportunities and challenges to the future security and resilience of the New Zealand power system
https://www.ea.govt.nz/documents/1979/Appendix-A-Phase-1-final-report.p…
2022 vs 2026. There is significantly more battery storage installed now, and more planned. In 2022 there was none.
So what? Batteries provide no inertia etc so don't help the system cost of the grid. They are useless at grid scale. Just look across the ditch.
"Australia’s main grid chalked up its worst one-day wind drought in more than two years over the weekend, causing a series of price spikes in South Australia and highlighting the urgent need for more battery storage in the state with the highest penetration of renewables.
https://reneweconomy.com.au/big-batteries-caught-short-as-worst-wind-dr…
“The volatility didn’t stop there. Elevated prices persisted overnight, and this morning delivered another period of $20,000 [per megawatt-hour] prices in SA.”
As OptiGrid explains it, many of the state’s batteries discharged heavily through Sunday afternoon and early evening and, as batteries across the state ran low on charge, several dispatch intervals cleared above $3,000/MWh, with prices peaking above $20,000/MWh.
“Around half managed to catch the first extreme price interval,” says OptiGrid, “but far fewer were able to discharge in the later spikes. A couple of batteries were even charging through dispatch intervals above $10,000/MWh.
“By [Monday] morning, many batteries still had limited energy available after the overnight price event. Despite another period of $20k prices, relatively little battery capacity was able to respond.”
Curiously the rise in electricity prices coincides with the privatisation of generation and distribution (and the consequent lack of investment) and the absurd pricing structure.
As Yvil pointed out earlier in this thread, the ME situation has taken a serious turn...
Al Jazeera (for what its worth), is reporting Yemeni attacks on two Saudi oil tankers, the Encela/Encelia and the Layla/Laylia on July 22nd, near the Bab el-Mandeb region.
The weapons mentioned include, ballistic missiles, cruise missiles, and drones.
These attacks occurred just days after the Houthis/Ansarullah Axis announced their blockade of Saudi traffic through the straits.
Matt Hoh reports the fact that Trump only has ~1/3rd of his base supporting him now, and how this is a testament to how ridiculous this war is - and the three stages of the "plan"... from the link...at ~ 12:00...
https://www.youtube.com/watch?v=p8d1jsTuajE
A Achieve a quick decisive regime change in Iran.
B Instigate a civil war and a failed state.
C Carry on a US campaign modelled after their 1991-2003 Iraq assault of containment, sanctions and blockades in trying to further isolate Iran from the RoW.
Of course this "plan" is ridiculous for a multitude of reasons, including...
(i) The Iraq war didn't achieve anything anyway after a cost of ~$3 trillion, and hundreds of thousands of lives. Although they overthrew their former ally, Saddam Hussein, their invasion sparked a long sectarian civil war, crippled infrastructure, weakened Western strategic influence, and created a huge vacuum that allowed extremist terrorist groups like ISIS to emerge.
(ii) Iran is ~4x as large as Iraq, ~3.5x the population, and is in essence a natural fortress in its geography that has withstood foreign invasions for millennia.
(iii) On its northern boundary it has this little thing called the Caspian Sea on which its ally Russia is a littoral state. In fact 3 of the 4 littoral states, including Azerbaijan, and Turkmenistan, maintain strategic partnerships , security alignments or deep diplomatic ties with Iran. The 4th, Kazakstan, has close trade ties with Iran and through multilateral forums like the SCO (Shanghai Cooperative Organisation) - and yet these War$hington based morons think they can Isolate Iran - what a tragic joke.
(iv) Iraq had nowhere near the military capability of Iran.
(v) Neither did Iraq have the allies - Iran has two of the three global superpowers supporting its defense - Iraq had Jack Shite.
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