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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47 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.
Yes, demand obviously goes down.
But 'more supply becomes viable'?
That's a comment typical of an economist, not an engineer. The Capex for forward exploitation isn't waiting to flick a switch - there's nothing locked-in, waiting to go. And a growing amount of infrastructure - ports, refineries - is physically offline. Wells have been shut-in, water-cuts halted.
Yes, NZ can outbid the Third World, and not too much inconvenience. They just drop out. And yes, everyone has been drawing-down reserves - but that is nearer the end than the beginning.
Then there's the fact that the major player is in major debt and going further that way. Essentially, western civ cannot afford itself, at and beyond this 'price'. Discretionary spends are being thrown under the bus, and they're just the beginning.
“Western civ can’t afford itself” is just more of your doom rhetoric. We hear it every single time there’s an oil shock, and every single time the system adjusts, stabilises, and moves on. If you want to claim this moment is uniquely apocalyptic, then show actual evidence. Your personal anxiety doesn’t qualify.
Higher prices don’t shorten Capex timelines, but they absolutely do make marginal projects viable. That’s why US tight oil, Canadian heavy, Brazilian pre‑salt and even late‑life North Sea assets have repeatedly surged when prices rise. Higher prices make alternative energy more attractive.
Shut‑ins and water‑cuts happen all the time. They get turned back on when the economics justify it. It's just routine.
"That’s why US tight oil, Canadian heavy, Brazilian pre‑salt and even late‑life North Sea assets"
Didn't have you down as a peak oiler Zac? More a hopium addled investor in BAU?
One of Buffet's pants-down brigade, methinks
I’m seeing evidence pointing towards a structural shift, rather than a standard cycle. This isn't just about oil, the geopolitical framework underpinning western economic dominance is fraying with this middle east conflict.
The push towards multipolar world is evident. The aggressive weaponisation of the US dollar as a foreign policy tool is accelerating the transition to a multipolar financial order. We aren’t seeing a complete replacement of the dollar yet, but we’re seeing an attempt for strategic bypass.
Foreign buyers are steadily reducing their holdings of US debt. This foreign absorption is not keeping pace with issuance. To fill this gap, domestic US capital is forced to absorb this excess supply - this is the hegemonic snake now eating its own tail (Ouroboros).
The fed has lost its ability to fight inflation because raising interest rates increases the cost of servicing the national debt. Historically when an empire spends more on its past debt than on its military forces or productive capacity its operational baseline becomes unviable.
Western hegemony was sustained by controlling critical global supply chains and cheap energy. The paper wealth can no longer command physical resources at a discount. High energy and material costs expose the reality that western service heavy economies can no longer easily print their way into self sufficiency.
!00%, Time Lord.
Great post TL.
Bravo
I've been hearing this story since the seventies.
You're gonna die one day.
And every day that day comes closer.
By your illogic, it won't.
Maybe viable is the wrong word (although I do believe there is some supply that is highly price dependent).
Much of the oil market isn't a free market (OPEC). When price is low they limit supply to prevent it going lower. When price is high they sell as much as they can.
"When price is low they limit supply to prevent it going lower. When price is high they sell as much as they can."
Yes and no.... given that there are 21 countries in the total OPEC circle (OPEC and OPEC+), this implies and awful lot of potential supply from their built-in redundancy which theoretically could add to the supply equation.
Apparently OPEC+ still holds a baseline cut of 2 million barrels per day that dates back to 2022, which internal cartel policies have locked down. They have also explicitly signaled a production pause for Q4 2026. Also, the alliance is gridlocked over 2027 production baselines.
The 21 country "club" implies distributed resilience and redundancy, but true spare capacity is heavily consolidated. Saudi Arabia, Kuwait, and the UAE (which recently left the core OPEC group to pump more freely), hold virtually all of the immediate spare capacity, but they are all subject to the blockades.
Plus, even if the Gulf Nations were able to supply, they might be reluctant to prematurely flood the market.
In summary, because the physical infrastructure is broken, under fire, or blockaded, the OPEC+ quota increases are only really paper barrels. This means that the 21 country alliance cannot rescue the market from the ME and Russian shortfalls even if they wanted too.
We'll see how important the 20% was when the global SPRs start gurgling.
oil prices should follow tanker flow through the SoH and Red Sea, both of which are very minimal.
Said it before Yvil, It's not currently as impacted by supply/demand alone, but more so by who is betting what on oil futures. Where there is risk, there is reward, and I'm certain there will be many risk taking investors out there banking on price hikes when reserves drop low.
When reserves eventually do drop low, and prices increase according to real supply, we will get another inflation shock if the orange man doesn't do something to materially improve the situation, and rely on China from dropping consumption to accommodate the rest of the world.
"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..."
What Hormuz retreat? - the strait remains heavily restricted and highly volatile.
All that has changed is the narrative - any resumption to normal flows could be a very long way off, given that the Trump admin can change its mind multiple times within one day.
The idiot stated that the "Strait could open by tomorrow".
Just more evidence the global economic super organism has reached critical mass beyond the reach of reality?
For all the economics profession insistence economics is hard science, ultimately it's more broadly aligned with voodoo in its current iteration.
Delusion phase in the S&P500 currently with all hopes in AI and energy.
The 'markets' are based on belief now, ever-more than in the past.
Exponential growth - that thing DC lauds here if it ever appears - requires a physical underwrite, and/or inflation. Nothing else staves off belief-loss followed by collapse.
And this bubble is the biggest yet. Because it had to be. As they all did.
Those who placed bets, then to deny. Ultimately that is all of us - given that we have placed a collective bet.
"The idiot stated that the "Strait could open by tomorrow""
The preface "Could" is the ultimate copout of course. Enough hard evidence for the Wall St cult to add a few trillion to indexes.
If Trump were to turn up in Tehran with airforce one stacked to the ceiling with gold bars, converted to Islam, apologised profusely, before martyring himself, maybe?
"Strait could open by tomorrow"
Hard to see it ever opening again isn't it (well not until after the next election). Trump has almost nothing to negotiate with so he would have to admit defeat and let Iran have whatever they want, surely his ego would not allow that.
Maybe if the republicans can convince him that he actually won like a little baby then it could happen.
That said, ironically the two countries affected the least, in terms of trade through Hormuz, are Iran and China, the two that Trump wanted to hurt the most. Another monumental own goal.
Maritime analysts estimate that the total volume of NON-Iranian linked oil tankers navigating Hormuz at the end of July is down 80~90% YOY.
Non-Iranian mainstream container lines, and gas and dry bulk carriers completely abandoned the route by late July.
While overall international shipping through Hormuz has collapsed, Iran-linked vessel numbers have dropped significantly less, and now dominate ~90% of the waterway's remaining traffic.
In a normal pre-war baseline month like June or July, 2025, non-Iranian vessels made up 70-80% of the 100+ daily transits. This number has changed completely in 2026 - reversing to 90-100% Iranian and Chinese linked vessels.
There remains is a huge dark spot in the real transit numbers. A substantial number of Iranian-linked vessels and regional "shadow fleets" are routinely turning off their AIS transponders, or using GPS spoofing to mask their locations.
Iranian crude oil exports are currently tracking at 1.1-1.4 million bpd, in spite of daily ship transits being down, for a number of reasons...
(i) A June/July serge following the easing of restrictions from the Islamabad MoU.
(ii) The vast majority of the transits are destined for Asian markets, with China singlehandedly importing over 1million bpd.
(iii) Using the $2 billion 1000km Goreh-Jask pipeline which pumps directly from the Bushehr Province close to Kuwait all the way to terminals. located on the Gulf of Oman - this 42 inch pipeline maintains a consistent throughput of ~350,000 bpd.
https://tdhj.org/blog/post/iran-goreh-jask-oil-pipeline-geopolitics/
Note that tis project involved international investors including Russian, Germany, and Greek companies.
This article was written back in May of 2021 and includes this paragraph...
Despite regional analysts deeming it impossible for Iran to close the Strait of Hormuz, it should be noted that this eventuality might have a catastrophic impact on the energy market, and increase oil prices.
And... Moreover, the United States is leading one of the coalitions (composed of Gulf countries and several European countries) that oversee and control the security of the Strait of Hormuz. This pushes Tehran into the arms of Moscow in pursuit of establishing another coalition that is capable of contrasting the Western/Gulf strategy.
(iii) The dark fleet mentioned earlier, and which don't appear on the official counts.
(iv) Massive cargo consolidation - remaining operations are consolidated onto much bigger ships - these VLCCs can carry up to 2 million barrels of oil at once.
(v) Iran also draws from tens of millions of barrels held in floating storage, outside the main conflict zones, allowing them to quickly fill Chinese tankers without relying on immediate production lines.
The report showed consumer credit demand remained subdued and was down 7.3 percent year on year.
Credit card enquiries fell 15.8 percent, retail energy enquiries were down 20.7 percent and Buy Now, Pay later enquiries were down 24.9 percent.
Latest data from Centrix. These numbers aren't immaterial for an economy that runs on credit.
Maybe, just maybe, there has been a dawning in society distinguishing between spending from money earned and money borrowed and that assets, or pleasures, obtained by the latter are not actually owned until the day the relative debt is repaid. Hope so, especially among the younger generations coming through and that some of the introductions in this regard in their education is being effective.
Either way it won't be good for the next GDP figures.
As often stated, GDP is an incomplete measure of an incomplete measure.
It selectively measures flows. Sort of.
It does not measure stocks, neither quantity remaining or quality remaining.
And it most certainly hasn't a clue about entropy.
So why bother?
Election issues. Where to start? So many issues, so little leadership. How about the land use change to carbon farming on the back of a vacuum of regulatory framework? We have seen the repeated disasters on the East Coast, Port Hills, but of course it is nation wide. I don’t want some bureaucrat telling me what I can plant / do on my property, but I do need the road bridge down the gully. Has the RMA reform from the Coalition conclusively found the right balance? If not, why not? Who is controlling the narrative? Me, I think this is a good demonstration of the failure of our governance. We have a clear problem, but central government continues to be AWOL for decades. Is not the colour of the political party in charge, it’s the complete lack of foresight, of ignoring the evidence. What to do?
We are governed by lobbyists and ideological zealots.
"East coast." Classic example of greed in action. Those forests were planted with land stabilisation as the primary objective. Then along comes Mr self interest and his paid for politician and it suddenly turns into an exploitable asset.
Don’t disagree. But what to do is the issue. We get a go every 3 years to impact Parliament, > the Executive. A few years ago we gave a majority to Labour, who, being dominated by PolStudies grads, did nothing cause they know nothing. The uncivil unskilled unpublic service perhaps have 51% of the responsibility? See for example the Commissioners defence of partisan advertising, a middle finger to the folks who pay him.
My solution, eat the elephant one bite at a time, doesn’t matter what we do first. Oh, and definitely use that vote to change things up because more of the same will produce more of the same.
Opportunity.
"The past century of massive increases in human population and resource use has seen many undesirable environmental effects, ranging from biodiversity loss to climate change. But a research gap exists, as the ultimate causes are often not described with precision or mentioned at all."
https://onlinelibrary.wiley.com/doi/epdf/10.1002/sd.71358
Then we get barely educated fools setting the political agenda!
NZF "policy proposing to create a “Kiwi Kids Grant” for parents, one of whom must be a New Zealand citizen, for their first three children."
https://www.nzherald.co.nz/nz/politics/ron-mark-returns-to-nz-first-win…
I've no time for Winstons dog whistling politics however I'd acknowledge he's striven far from very humble / poverty beginnings & his Law degree.
Why do interest commentators think the best way to limit the population is to limit births and immigration, meanwhile doing everything to make sure current humans live as long as possible, spending many years producing nothing while consuming and polluting.
How about these options instead:
- Bring back smokes, booze, drugs, tax free
- Defund all medical research
- End of NZS and Kiwisaver
- Free health care expires at 65
- Ban sunblock
- Free KFC
- Etc
Away ahead of you.
Although your first sentence is flawed - attribution.
Lol...I thought of Bartlett's comments as well as I was reading that
Al included war in his list from memory?
He did....and then noted the dilemma.
P.S....the only (acceptable) solution is not to reach that point to begin with....too late.
The answer is simple. It's about respecting human rights. Once you are here, you have as much right to whatever resources are sustainably available as anyone else.
As much as the "grow until there's standing space only" types like to portray those wanting to fit within biological limits as "wanting to kill off billions", LTG types are more concerned about the quality of life for those already here.
The right to have children?
Do you not agree that the human race has become obsessed with being here for for a long time not a good time? Why not live our best years then exit?
Back 4 decades, my partner and I asked whether we should have 2,1 or none. Back then, replacement seemed to us, to be as much as one shoud be entitled to. Since then, I've learned more about overshoot, and respect many of our peers who chose none.
The irony is, of course, that those who chose none, are the very gene pool we need. By default, the species breeds stupidity. Which has implications like MAGA.
Being already overshot by some margin, makes it an interesting piece of Boolean algebra from now on, though. How do you ease the current overshoot down to sustainable numbers, as smoothly as possible? Nice idea; won't happen. We'll keep on blindly lauding GDP, fight each other over what's left (castigating the 'others' of course; they'll be communists or something-ists for sure - pure evil, goes without saying).
That's if AI robots don't do it for us.
The fewer doomers the better.
Get back to me when you hit 75. :-)
Sorry Jimbo, the "75" comment was a bit glib. Not sure what age you are, but at any age when in reasonable health life is better than the alternative. Having worked in the rest home industry a while back, I got to observe end of life scenarios for many people. Some are full of life into eighties, some are wrecks and ready to kick off. Probably the most depressing thing about aging is contemporaries dying off. Friends, family..... There's a time to go, and it usually follows a rapid decline in health lasting two years at most. Some could probably live longer, but being reduced to skin and bed ridden bone is no quality of life. At this point medication, apart from pain relief, is removed, along with food and that's it.
Experiencing end of life among others is different from commenting from a distance.
Genetics aside, keeping positive and having things to do is a lot of it.
I've got more projects than I can possibly have years left - and she has a list on top of that...
Amen. :-)
Great link, PT08
'Yet accepting higher population numbers while still demanding sustainability means committing to even lower per capita environmental impacts—a fact that critics of population action rarely acknowledge.'
Rarely = never
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