Here's our summary of key economic events overnight that affect New Zealand, with news the US and the world are facing a new jolt of inflation as the hot war activity spread. The US central bank response? ignore the risks and pretend things will return to normal soon.
But first, US mortgage applications fell sharply last week, their largest dip since mid-May, and driven by a -10% fall in refinance activity. And that came as their benchmark mortgage interest rate rose yet again, now its highest in a year.
Also falling sharply last week were US crude oil stocks, down much more than expected. They have fallen in 12 of the past 14 weeks, and this latest one is one of the larger retreats. Worse perhaps, their strategic oil reserves are now at at levels they last had in 1983 just after they started building these reserves in 1982, and their economy is now nine times as large. These strategic reserves have gone from double the private system holdings, to only 75% of them. It is public mismanagement on an epic scale.
The US Fed held its policy rate unchanged, even while noting they have high inflation that isn't easing and they have "supply shocks that have driven price increases" well above their 2% goal. But it was a split decision with three members voting to hike +25 bps. One of those was not Jerome Powell; he was in the nine who voted for the hold. Chairman Warsh's style is all over this statement because it was very short with little transparency. And Warsh's inflation fighting vow seems to be just talk.
Across the Pacific, Singapore reported that their producer prices rose more than +30% in June from a year ago, maintaining the pace of increase for non-oil goods they have had since March.
In South Korea, there has been real drama on their stock exchange with declines so sharp they had to temporarily suspend trading. It is all related to perceptions about tech valuations. Even though these companies are reporting sharp profit increases, investors worry that Chinese chipmakers are about to eat their lunch. At one point yesterday the share market there was down -13%, suddenly wiping out all the prior AI gain euphoria. But it ended down 'only' +6% to cap a five-day retreat of -17%.
In Australia, June CPI inflation came in at 3.8%, and less than the 4.0% expected. It was kept up by the expiry of household energy support measures, but the falls in fuel costs more than offset that. More here. Will this deter the RBA from moving their policy rate on August 11? It may do, but inflation expectations remain very high. Some analysts now expect a hawkish hold. The lower CPI hit the AUD hard yesterday, presumably because FX markets no longer see higher interest rates imminently.
The global credit risk environment has evolved heading into the second half of 2026 but continues to be driven by two main sources of short-term risk, according to Fitch Ratings; rising vulnerability to an AI-related market correction and persistent geopolitical uncertainty in the Middle East. This is on top of a broader context of slowing US consumer momentum, high inflation risks stemming from the 2Q energy shock and structural public finance pressures limiting the ability to respond to risk events. Credit risk premiums will rise, says Fitch.
Iran was annoyed Trump claimed talks were taking place when they weren't, so they reinforced their point. Then the US and Saudi Arabia attacked Iran-linked forces in Iraq. And the Houthis attacked two Saudi tankers off Yemen. This mess isn't going away.
June air cargo demand rose, at a time of a relative lull in Middle East tensions. It was up +8.5% overall, up +9.6% for international trade. Asia/Pacific activity was up +9.5% from a year ago. There were larger increases in air cargo trade with North America.
Meanwhile the China-to-Europe cargo train trade is surging, added to by very fast 15 day transit times for peak demand of air conditioning units, for example. Shipping via the Suez canal chokepoint will probably never recover for consumer goods.
The UST 10yr yield is now just on 4.65%, up +5 bps from this time yesterday and with a small push higher after the Fed decision. The key 2-10 yield curve is now at +31 bps (+1 bp). Their 1-5 curve is now at +28 bps (unchanged) and the 3 mth-10yr curve is at +94 bps (+4 bps). The China 10 year bond rate is down -1 bp at 1.72%. The Japanese 10 year bond yield is now at 2.76%, also down -1 bp. The Australian 10 year bond yield starts today at 4.96%, up +1 bp from yesterday. The NZ Government 10 year bond rate is at 4.68%, and down -6 bps from yesterday.
Wall Street is lower on both the S&P500 (-0.5%) and the Nasdaq (-0.4%) in Wednesday trade. The Fed abdication of action on inflation didn't help. Overnight, European markets were mixed, down -0.6% in Paris and up +0.3% in London. Yesterday Tokyo ended its Wednesday trade down -1.5%. Hong Kong ended up +2.0% while Shanghai rose +0.4%. Singapore spirted +1.7% higher The ASX200 ended up +1.0%. The NZX50 was up +0.8%.
The price of gold has risen to US$4075/oz, back up +US$45 from yesterday. Silver is now just over US$58.50/oz, back up +US$1.50 from yesterday.
Oil prices have risen sharply by +US$5.50 from yesterday at now just over US$84.50/bbl in the US, while the international Brent price is now just under US$90.50/bbl and up +US$5. Hormuz transits are still basically halted. There have been no crude tankers and only 8 cargo ship exiting over the past 24 hours (6 dark with transponders off) and sixteen entering for new loads (11 dark). The Red Sea is even less active than the prior day.
The Kiwi dollar is down -10 bps from yesterday at just under 57.8 USc. Against the Aussie we are up +30 bps at 83.3 AUc. Against the euro we have dipped -10 bps to 50.7 euro cents. That all means our TWI-5 starts today at 61.7 which is down -10 bps from this time yesterday.
The bitcoin price starts today at US$63,890 and up +0.5% from this time yesterday. Volatility over the past 24 hours has been low at just on +/-0.9%.
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41 Comments
“Iran was annoyed.” How they then reacted is telling to the point that they now appear to be taunting their Gulf neighbours and the USA “come and get us then.” Saudi Arabia has been forced to get involved. From the look of it not one of the anti Iranian brigade has the stomach to land any ground forces in Iran. Said it before and say it again no nation has ever been forced into submission by non nuclear aerial assault. As such Iran will remain as is. Like it or lump it.
Wars are won through tactics. Trump doesn't know the meaning of the word, he flip flops on a daily basis. I don't think he knows what he wants to achieve, let alone how to achieve it.
For a while i was confused whether he is a master tactician that acts a fool to hide his real agenda, or an absolute idiot that Americans were stupid enough to vote for. That question has been well and truly answered.
The way I see it he has three options - pull out altogether, play the long game through economic sanctions, or full on war. He needs to pick an option and stick with it.
He can't Jim. He's an immature and insecure child. This is the consequence when the adults in the room refuse to hold him in check.
Tactics are important, so too strategy but if you consider the North versus South in the American Civil War or the USA versus Japan in WW2 it was overwhelming industrial resources that won out in the end. In each case neither of the defeated are thought to have been devoid of tactical or strategic abilities, quite the opposite early on. But in this situation certainly the tactics and strategy being employed by Iran are proving to be a successful foil against the power of the opposing forces.
FG. Iran's militarily is heavily degraded and the country effectively blockaded except for a tenuous supply line from a stumbling Russia and limited support from a cautious China. Not sure I'd describe that as 'successfully foiling' the US, unless you mean by that the dashing of hopes for a quick and easy team America style knockout. All sieges are by their nature a long game. You feeling a teeny bit smug in switching from Emirates?
MM, you said...
" Iran's militarily is heavily degraded and the country effectively blockaded except for a tenuous supply line from a stumbling Russia and limited support from a cautious China."
Are you ignoring the other Caspian Sea Littoral trading states - Kazakstan, Turkmenistan, and Azerbaijan? The Caspian serves as a direct corridor for energy and military logistics between Moscow and Tehran, away from the attempted Western enforcement of a siege-mentality blockade.
Pakistan has opened up multiple land routes from its ports, Gwadar and Karachi which connect to the Iranian border to supply food and other essentials.
Turkey, Armenia, and Azerbaijan also connect with road and rail corridors for trade of all kinds. With these networks remaining operational any notion of the US causing an economic collapse of the Iranian state, is little more than an idiotic pipe dream.
So when a siege is not a siege....
How about, when it is merely a failed blockade, as opposed to an effective military encirclement, attempting to try to starve or bludgeon a fortified position or country into surrender.
I neglected to mention the major trade route that connects China to the Caspian sea and hence Iran as well.
This multi-modal network known as the Trans-Caspian. International Transport Route or Middle Corridor.
Trains depart from Chinese hubs like Xi'an, Tianjin, and Beijing, and exit China from the Xinjiang region, traverse across Kazakstan via rail, then trains or containers are loaded onto marine ferries at ports like Aktau, or Kuryk to cross the Caspian Sea.
https://www.youtube.com/watch?v=NHfordskew4
At 56:00...Col. Wilkerson...
"We couldn't replenish ourselves probably to the point where we could wage a major war for three freaking years!"
And at ~58:00
"I think we are in deep trouble, I really do. Deep trouble as an empire - deep trouble as a democracy, and a republic, which it is very questionable whether we are anymore.
And deep trouble in terms of the three bodies of the legislative if you will - the "constitutional" government all seem to be owned by the same group of people, who all seem to be acting in ways that are inimical to our interests, security and domestic situation.
I don't know how we get out of it - I really don't - I hate to say that, but I don't know what the solution is."
Russia is currently in no position to provide meaningful support despite its land links with Iran. Pakistan is limited in what it can do militarily for a range of reasons. China so far treading a cautious line. Even before the US blockade the Iranian economy was in dire straits. With most oil exports now blocked Iran's economic position is even deeper trouble. Like all dictatorships it'll have significant capacity to absorb more pain but its a mugs game trying to predict one way or the other whether the economy will collapse.
For crying out loud, MM where on Earth do you dredge up this tripe?
Russia is providing significant military, tactical and intelligence support for Iran, and helping them target Western assets as well as replenish its military arsenal.
This includes advanced satellite surveillance data, drone tech upgrades, and long-term defense cooperation. Moscow helps Tehran locate and monitor US troops, warships, and aircraft in the Gulf region. They also share precise data regarding critical military and intelligence infrastructure.
Russia also provides anti-jamming navigation equipment and tactical advice learned from the Ukraine war to improve the accuracy of the Iranian Shahed-type drones. Cooperation also extends to pilot training and future fighter jet deliveries including a planned 48 Su-35 fighter jets.
I would recommend you listen to Pepe Escobar and JudgeNap at ~14:40 where he backs up Colenel Douglas Macgregor's statement that neither China nor Russia would ever allow Iran to fall, and that Trump and Netanyahu simply don't understand this.
https://www.youtube.com/watch?v=4POE39381uM
...quoted...
"These three civilisational states, Russia, China, and Iran, are building this long and winding road towards multipolarity. On top of that they are three very old states with vast diplomatic geopolitical experience and interlocking strategic partnerships."
Early on we as a group were able to determine for ourselves just using limited military experience in one or two, an understanding of history by most and just general common sense by all that the US was on a hiding to nothing and without an all out invasion of Iran, they would lose this war. Trump and Hesgeth ignored then sacked those who would have advised against this action and ultimately have created a worse mess than Viet Nam ever was for them.
I did postulate the other day that a ME coalition who are opposed to Iran might be convinced to lead an invasion, supplied and backed by the US. I see a long term resolution in that, but doubt it would ever happen until and unless Iran gets much more wildly out of control and is openly attacking it's neighbours directly.
But without an invasion this is not going away anytime soon. The war in the ME is going to be the new 'normal'. People will continue to die for little or no purpose other than Trump's ego. That should be a crime for which he is held to account.
Ever since 1979 the Iranian regime has been thinking deeply, and organising itself accordingly, towards making the nation and therefore itself unbreachable. There might be a small opportunity of a corridor to attack Tehran, with the help of their new found friends, from Syria and some Kurdish regional expertise but Iran is beyond that, still a very large country of challenging climate and terrain. The Iranians have witnessed the two invasions of Iraq and will not be drawn into the same sort of military confrontation. They will run a mobile and modular defence, the cities will become fortresses and the resultant urban warfare will be of horrifying consequences to the civilians. Even Trump’s cronies should be able to work all that out even if he can’t.
FG. All along its been clear a wide scale ground invasion of Iran has not been contemplated by the US. Over 800K personnel were needed for desert storm, this would be far bigger due to the geography and other factors you cite. There's been no indication of the lengthy force build up that'd required. But I wouldn't rule out limited objective operations such as seizing key coastal Hormus strait land strips or specific key infrastructure sites such as Kharg Island.
Trouble is anything seized then needs to be defended and of course that is a static target, not like the navy vessels which even so are hardly being risked. By the way we canceled the river cruise. River levels too low, became a bus tour. How are you looking.
Sure. But as we see with the Russian invasion of Ukraine, movement of forces across open land has become extremely difficult due to new technology. If the US was able to seize the coastal areas bordering the strait, Tehran would be powerless to reinforce the area due to the overwhelming dominance of American Airpower. The crass individual in the White House might be tempted to give it a go. Our cruise is lower Danube so supposedly still proceeding but yes we'll now be bussing part of the way, especially through Romania. The ship we will be on ran aground a couple of days ago.
You know how long that coast is? 800 miles!! Good luck seizing that and being able to defend it from missiles and drones that can be launched from miles away. The USA forces would be sitting ducks hence why none of the military ships dare even venture into the strait.
Albert. Outside of mines, coastal launched sea borne drones with small radar signatures are a key threat. The Hormus stretch of coast is comparatively short and lightly populated. The missile threat to shipping would remain unchanged from what it is now even if the yanks had land bases on the Iranian side. I personally doubt they will try a physical landing, my point was that its just one possibility.
If the "overwhelming dominance of American Airpower" that you mention, is real, then please tell us all why the US is comprehensively losing this war on every front, with their overall position, defensive capability, and munitions inventory becoming weaker by the day?
You are sounding more and more like Fox News by the day.
You're trying to draw two disconnected points together Colin. MM is correct in referring to the overwhelming dominance of US airpower in conventional terms. What he chooses to ignore is that while the US applied conventional forces to its war, the Iranian response, once its conventional forces were eliminated, was highly unconventional, and a response the US military has demonstrated in the past it is unable to pivot to and adapt to countering. That unconventional response has proven to be highly effective not to mention disruptive.
By any conventional measure this war should have been over almost before it started, perhaps like the Gulf war in '91. It's not and the wallies at the top of the pentagon and US Government cannot adequately explain why.
It's fascinating though. Many companies are putting a lot of effort into the means to detect and counter even the smallest drones, mostly with limited success. I suspect for the first time in history a force has fielded what is effectively a low tech weapon against a high tech enemy, and the technology doesn't currently exist to fully counter it. Somebody got a spare force field in their back pocket? Anybody? Oh damn....
"Disconnected points"
For crying out loud, Murray - they could hardly be more connected.
This is par for the course for you - you begin with a muddled claim, present it as a statement of fact, and then immediately proceed to tear your own claim apart at the seams.
By what measure do you base "present it as a statement of fact"? I presented it as opinion. If you are unable to discern the difference perhaps you should take your extremism elsewhere.
I didn't tear my own position apart. I explained what has actually happened the MM did not go into. MM remains correct 'conventional' US airpower is over whelmingly dominant in the ME in conventional terms. What you have also ignored is that no war has ever been won from a solely aerial base. They always require a ground component. That has been pointed out by numerous commentators in the past in these discussions. The ground component has been studiously avoided, and that is why Iran can still field and launch drones and missiles. That doesn't make MM's comment wrong.
Murray. Not choosing to ignore. I agree the US pivots slowly in the face of asymmetry. It was for example slow to pick that the Ukrainians had rendered its core integrated land sea air attack doctrines obsolete. But on Iran, I suspect US planners were always aware this would likely evolve into a long term siege.
Colin. I skip past anything that contains gratuitous ad hominem insults.
Me too, MM, because that has long been the specialty of the cosy-club bigots.
When I first engaged here and began asking some very awkward questions of the resident Russophobes and Sinophobes, you should have seen the torrent of personal insults that were hurled my way.
I very rarely engage with the stalwarts now, other than when a statement is so dangerously and overtly idiotic, that it demands being called out.
Anyone who still hasn't figured out who humanity's real enemy is, is basically a lost cause anyway. As you say, scrolling is dead easy too.
OK. Tks for laying out your position. I have thick skin and enjoy a robust joust but being likened to ghastly Fox News is a step too far. 'Dangerously and overtly idiotic' - gosh, this site must attract some serious extremists at times.
Sensible, diplomatic, truthful comment always appreciated. Or in another way - the subtlety that lies between a tongue in cheek and a tongue in check.
Foxglove, you said...
"The Iranians have witnessed the two invasions of Iraq and will not be drawn into the same confrontation."
Well, that prediction had a short shelf-life.
https://www.youtube.com/watch?v=NHfordskew4
Quoted from Col. Lawrence Wilkerson (defense analyst, Retired US Army Colonel, and Chief of Staff to the US Secretary of State)... at ~7:50...
"... wars especially when they are waged by idiots and fools, can spread in ways that no one ever dreamt of in the beginning. And we are seeing these kind of connections that these sorts of wars like the two central theaters, SW Asia, and Ukraine, that metastasize and spread.....
..... this could go regional and then global very quickly, and all of it has the potential for the use of nuclear weapons - every stretch of it, and Trump bears a lot of responsibility for putting the latter aspect into motion, and not doing anything about it."
Larry Johnston ( Former CIA analyst)... at ~14:20...
"There are a large number of leaders, political, military, economic leaders that have basically published an open letter yesterday to Prince/King Abdullah's (refering to multiple figures most commonly King Abdullah of Saudi Arabia, King Abdullah of Jordan, or Prince Abdullah of Saudi Arabia) saying, get the US the hell out of our countries.
And so this is about making the US no longer welcome in the entire area of West Asia - and the last place they are retreating to is Israel."
Apologies. I was contemplating the prospects of a ground invasion but I should have clarified all the same as the “same sort of confrontation” and by that I meant not engage, for example their armour and troops, in widespread combat in open territory. I will edit accordingly.
A ground invasion would be a massive, massive escalation and one that would have extremely serious consequences…..for all of us.
Bubbles. Yep, not going to happen. There was significant political fallout when the US lost 2,350 dead in Afghanistan. This Iranian war is already unpopular in the US, an invasion would be a bloodbath and make Afghanistan look like a picnic.
The USA lost this war a long time ago. All the current fuss is so they can pretend, mainly to themselves, they have not lost.
The real mission in Afghanistan was over in a few months. Took them twenty years to leave, and then it was an obvious sad loss anyway.
Pride always comes with a cost, and at times far greater than it is worth.
Even in the example of submission by nuclear assault, there was a very credible threat of land invasion by the US and USSR.
Say no more
I see that friend of the average person Farage is batting away any suggestions of undue influence from the political donations he has received from fraudsters and tax expatriates. “I may have failed to fill in a form “ is a defence too familiar to the political class. “I have seven homes and I am sorted “ definitely won’t work with Oppotunity as they want much better disclosure of the purchase of influence. We see the impact of purchase of influence in the USA today. NZ, small, distant, let’s try to lift our game, become a bit more inspirational, is it too much to ask our pollies to work for the average person?
Best prospect of Opportunity getting in is their bottom line of cracking down on lobby influence
I just keep being amused by the hilarity of count binface vs farage. Great comedy
Looking like the 30's are going to be a lost decade. Much like the 1930's and for similar reasons. How did that end!
Reshoring, sanctions and US tarrifs upend global trade
USA counting the cost of backing peace/NATO
Money going into military rather than productivity projects
Anti-immigration policies in UK, USA spread into NZ and AU
High unemployment due to AI expectations and/or sharemarket crash as AI bubble bursts
Droughts and floods lead to food shortages (dust bowl)
High inflation
Fed boss Waaaarsh sits on his monetary hands.
Trimp wants lower rates.......but inflation is now out for a marathon run....so rates are only either a hold or higher.
Sooo US bonds do the talking and borrowing rates rocket!
Bigger mortgage rates comming down the Debt pipe. Specuvester gets flushed out, alongside other bad debt sewerage sludge.
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