Here's our summary of key economic events overnight that affect New Zealand, with news we are now in the peak vacation season in the northern hemisphere with policy activity relatively low. But US petrol costs are high in this summer driving season.
Trump continues to claim he is negotiating with Iran. Iran continues to deny any talks are taking place. Still, this stalemate is a relatively peaceful one, but one that leaves Iran and Oman holding all the cards in the Hormuz Strait.
In the US, their widely-watched ISM factory PMI came in slightly better than expected with a good expansion, one marginally stronger than the S&P Global PMI result we noted yesterday. This ISM version recorded stronger new order flows and prices increasing at a slower pace.
In China, their top leadership is 'vacationing' as usual at the beach resort of Beidaihe. Oddly, Xi doesn't appear to be there.
Over the weekend we noted that China's official factory PMIs all turned down, and into contraction territory. The private S&P Global version has been less gloomy in the past, but yesterday's release also shows a sector slipping in July from June. But at least this alternate version is not yet contracting. And they feature rising new order levels, which is promising.
India's July factory PMI is still expanding at a solid pace, but that paces has now slipped to its lowest in five years. New order intakes are rising but slower, and input cost pressures are easing there.
And while we are at it, we should note that the factory PMIs for Japan, South Korea, Taiwan and Malaysia all remained quite positive and expansionary. All of these noted that cost pressures are also easing now. The Australian version is rising too, but cost pressures there are still elevated.
In Australia, the Cotality Home Value Index dropped -0.7% in July from June, the sharpest monthly decline since December 2022 and accelerating from a -0.4% fall in the prior month. The drop was after higher mortgage rates, affordability pressures, and soft consumer sentiment that all hurt housing demand. Sydney and Melbourne lead the downturn, with home values falling -1.4% and -1.2%, respectively in a month.
Staying in Australia, the Melbourne Institute Monthly Inflation Gauge increased materially in July, after falling in the previous two months. The increase was broad-based, with annual headline inflation of 4.0%. The monthly cost of living also increased across a range of household types. Later this week we will get the June household spending data from the ABS and also their cost of living indicators. This MI data suggests whatever those ABS results in June, things will get worse in July.
We should note that the copper price is rising again, making another tilt at the record highs it reached in May and June this year. It is now back up at US$14,330/tonne, just -2% below that record peak. At the rate it moves, it could breach that very soon. AI build-out demand, as supply constraints deepen, are driving this latest rush. Some of it is stockpiling in the expectation Trump will queer the pitch with a tariff move. In any event, the world's big mining firms are shifting away from iron ore to copper mining, chasing these riches.
We could probably also note that SpaceX 'listed' at US$135/share but opened at US$160. It is now struggling to hold US$110/share today. Not helping are that 'lockup' investors and staff are now net sellers. Shorting SpaceX seems to be a growth game.
We should probably also keep an eye on accounting firm KPMG. The consequences of its horror story in Australia are about to be played out, with maybe global implications.
The UST 10yr yield is now just on 4.69%, down -6 bps from this time yesterday. The 30 year yield is at 5.23% and down -4 bps. The key 2-10 yield curve is now at +43 bps (-2 bps). Their 1-5 curve is now at +35 bps (-6 bps) and the 3 mth-10yr curve is at +100 bps (-5 bps). The China 10 year bond rate is little-changed at 1.71%. The Japanese 10 year bond yield is now at 2.82%, up +2 bps. The Australian 10 year bond yield starts today at 4.98%, up +5 bps from yesterday. The NZ Government 10 year bond rate is at 4.77%, up +7 bps from yesterday.
Wall Street has opened its week sharply higher on recovering tech views and the Hormuz retreat, up +1.6% in Monday trade with the Nasdaq up +2.2%. Overnight, European markets were mixed between London's -0.1% dip and Frankfurt's +1.5% rise. Yesterday Tokyo fell -0.9%. Hong Kong was up +0.5% but Shanghai fell -0.6%. The KOSPI fell -5.1%. Singapore dipped -0.3%. The ASX200 ended its Monday trade up +0.5%. And the NZX50 ended up +0.6%.
The price of gold has slipped to US$4033/oz, down -US$9 from yesterday. Silver is little-changed at just over US$57.50/oz.
Oil prices are down -US$4.50 from yesterday and now just under US$80/bbl in the US, while the international Brent price is now just on US$83.50/bbl. Hormuz transits are still very constrained. There has been only one crude tanker and 6 cargo ship exiting over the past 24 hours (4 dark with transponders off) and five entering for new loads (2 dark), all Iran-linked. The Red Sea activity is still low at about 20 either way. That is kept low because only Chinese-bound vessels are getting Houthi exemptions.
The Kiwi dollar is down -30 bps from yesterday at just over 58.6 USc. Against the Aussie we are little-changed at 83.8 AUc. Against the euro we have dipped -10 bps to 51 euro cents. That all means our TWI-5 starts today at 62.4 which is down -20 bps from this time yesterday.
The bitcoin price starts today at US$63,851 and up +0.9% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/-1.4%.
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2 Comments
"Oil falls hard" because...? Because the US stopped its planned attack. That's not a good reason, oil prices should follow tanker flow through the SoH and Red Sea, both of which are very minimal. There is no resolution ahead, Iran will keep control of these waterways and there is nothing the US can do about it.
Oil is still more expensive than it was before the war, it's just that people overestimated how important that 20% was to prices and supply. Once the price goes up more supply becomes viable and demand goes down.
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