US data mixed; Canadian PPI leaps; Japan rises; India PMIs go soft; Aussie PMIs improve, house prices fall; key commodity prices rise sharply again; UST 10yr at 4.68%; gold firms; oil eases; NZ$1 = 57.9 USc; TWI-5 = 61.8

Here's our summary of key economic events overnight that affect New Zealand, with news Middle East escalation continues, but traders don't see any way out other than negotiation. That hope has seen the oil price ease somewhat today even as the bombings, killings and blockades all intensified. Weird.

In the US the first of the July PMIs shows that business activity growth rose modestly but to an eight-month high in July although that isn't an especially high benchmark. However selling prices rose sharply and at their fastest rate for nearly four years. Input cost inflation was at a 14 month high. Their factory sector expansion was little-changed however from June with new orders little-changed. It was their services sector that expanded more, albeit modestly

US new home sales were little-changed in June but maintained the modest level they have had all year. That makes then -5.6% lower than year-ago levels.

Canadian producer price growth fell back slightly in June from May but are still +12.4% higher than year-ago levels. Raw material input costs by manufacturers were up more than +20% from a year go.

Across the Pacific, Japan's CPI inflation stayed low in June even if it did rose to a six month high. It came in at 1.7% in June from 1.5% in May, its highest since December. The pickup was largely driven by a slower decline in electricity and fuel prices as government energy subsidies were scaled back.

Japan's private sector expanded to a five-month high in July via a sharp rise in manufacturing production and an improvement in their factory PMI which was driven mainly by the sharpest increase in manufacturing orders for five years.

The July PMIs for India came in notably lower than for June as private sector growth receded and inflation pressure, especially for fuel, intensified. This is putting them in a tough spot with spreading social unrest. Their factory PMI dipped only marginally but their services PMI registered a notable easing.

In the EU, eurozone business activity has risen for first time in four months in July amid renewed expansion of new orders. Their factory PMI inched up, and their services PMI inched up too. But to be fair, these higher levels are not significant and the expansion is minor compared to other global regions. But at least it isn't a contraction. The German versions of these PMIs was generally better than the overall set. German consumer sentiment didn't budge however.

As expected, the Russian central bank trimmed -25 bps from its key policy rate, taking it to 14.0%. A year ago, this rate was 21%. They have CPI inflation officially at 6.0%, although this seems an unlikely level.

Australia also got better new factory order levels in July, the first increase in new business in five months. Improved demand conditions underpinned a stronger expansion in output, led to upgraded recruitment activity and enabled greater protection of profit margins. This data confirms the good labour market data released yesterday. But overall Australian growth is likely to remain sluggish.

Sydney, Melbourne and Canberra house prices actually fell in the June quarter, an unusual but necessary shift to make their housing more affordable. It takes serious political bravery to turn a frothy market where gains just fell from the sky.

Bitumen prices are surging again on the closed Hormuz and Red Sea shipping lanes. They are back to levels that we had in mid-March and which lasted to mid-June. Interestingly, urea prices are staying low as are potash prices (minor rises) but sulphur prices never fell after the March spike. Naphtha (used for plastics manufacturing) is rising sharply again.

The UST 10yr yield is now just on 4.68%, down -2 bps from this time yesterday but up +13 bps for the week. The key 2-10 yield curve is now at +35 bps (up +1 bp). Their 1-5 curve is now at +31 bps (-1 bp) and the 3 mth-10yr curve is at +90 bps (-5 bps). The China 10 year bond rate is down -1 bp at 1.72%. The Japanese 10 year bond yield is now at 2.80%, up another +3 bps and a new 30 year high. That is up +10 bps for the week. The Australian 10 year bond yield starts today at 5.03%, down -3 bps from Friday and up +11 bps for the week. The NZ Government 10 year bond rate is at 4.82%, up +7 bps from Friday, up +14 bps for the week and it highest since May 2024.

Wall Street is ending the week virtually unchanged on the S&P500 on Friday but down -1.1% for the week. The Nasdaq is down -0.6% today, down -2.9% for the week. Overnight, European markets were firmer between Paris and London's +0.9% and Frankfurt's +1.4%. Yesterday Tokyo ended down -2.7% in Friday trade, down -2.6% for its week. Hong Kong was down -1.0% for a weekly net rise of +0.5%. Shanghai was down -1.6% on Friday for a weekly +0.6% rise too. Singapore ended up +0.1% however. The ASX200 was down -0.8% on Friday to end its week down -0.6%. And the NZX50 fell back -0.2% to end with a weekly +0.6% gain.

The price of gold has firmed to US$4053/oz, up +US$12 from yesterday up +US$48 for the week. Silver is now just on US$58.50/oz, up +US$1 from yesterday, up +US$2.50 for the week.

Oil prices have pulled back -US$4 higher from yesterday at now just over US$89/bbl in the US, while the international Brent price is now just on US$96.50/bbl and down -US$5. A week ago these prices were US$82 and US$88/bbl respectively. Hormuz transits are still just a trickle There has been one crude tankers and 6 cargo ships exiting over the past 24 hours (1 dark with transponders off) and 5 entering for new loads (0 dark). 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). Now almost 800 vessels are waiting for things to calm down.

It is very hard to see how the next few months can be sustained on the current basis. Strategic reserves of oil are being run down everywhere - the US, Japan, China, the EU - and unless that fast drawdown ends soon, fuel availabilities are going to get very tight. The idea that Trump has "no choice but negotiate' with Iran is behind financial market thinking, even though that requires Trump to be rational. Hard to see. He is all about vindictiveness.

The Kiwi dollar is +20 bps firmer from yesterday at just on 57.9 USc but down -50 bps for the week. Against the Aussie we are up +10 bps at 82.9 AUc. Against the euro we are up +20 bps at just over 50.9 euro cents. That all means our TWI-5 starts today at 61.8 which is up +20 bps from this time yesterday but down -50 bps from a week ago.

The bitcoin price starts today at US$64,218 and down -0.6% from this time yesterday but up +0.3% from a week ago. Volatility over the past 24 hours has been modest at just on +/-1.5%.

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