Markets dig in for higher interest rates; Japanese retail strong; China PMIs weak; Indian growth beats forecasts; Aussie house prices fall, eyes on impending very hot summer; UST 10yr at 4.76%; gold dips and oil rising; NZ$1 = 59.2 USc; TWI-5 = 62.7

Here's our summary of key economic events overnight that affect New Zealand, with news renewed fighting in the Persian Gulf from Trump's 'forever wars' is pushing oil prices up again and sentiment lower on the impending new shot inflation will get.

So, the yield on the US 10-yr Treasuries rose again now to 4.76%, its highest since January 2025. with market bets rising for a US Fed rate hike later this month.

But all the US news isn't downbeat. A surge in new orders has accelerated the Dallas Fed factory survey up sharply to its most positive level since January 2025 which was its best since the pandemic recovery, even it that was an isolated event. Price pressures were stable but markedly elevated, rising further for prices paid but easing slightly for prices received.

Across the Pacific, and after the unexpected fall in June, Japanese retail sales surged back in July to be +4.4% higher than year-ago levels and restoring the strong gains they have been posting since March.

In China, their factory PMIs for August improved marginally as expected but not by quite enough to avoid another contraction. Meanwhile their service sector PMIs were also expected to improve, but they didn't, staying with the same contraction they recorded officially in July. We need to note that these official surveys have been running more conservative than the private S&P Global alternatives recently. The S&P Global version is due out later today for the factory sector, and on Thursday for the services sector.

India said its Q2-2026 economic activity expanded +7.8% from a year ago, the same as in Q1-2026 and much better than was expected (+7.1%).

Germany said it’s consumer price inflation rate edged up to 2.9% in August, its highest since April, but below market expectations of 3.0%. In August fuel costs rose more than +10% but food was up only +0.1% from a year ago.

In Australia, the Melbourne Institute's survey shows inflation expectations rose by 0.2 percentage points in August to 4.9%. This follows from a three-month period of moderating inflation expectations. Wage expectations also rose in August, after remaining static for a prolonged period.

And staying in Australia, Cotality reported that house prices fell -0.9% in August from July, following a -1.2% decline in July. Overall, house prices are now -3.6% below their peak, although still +2.7% higher than a year earlier. The housing downturn has now spread across more capital cities and regional centers, and further policy tightening by the RBA points to tougher conditions ahead. Sydney and Melbourne again led the declines, falling -4.6% and -4.7%, respectively from this time last year, the only capital cities to now be lower on an annual basis.

And of course, this comes at the same time NSW Bathla has essentially collapsed, waiting to see it it can get some lifeline loans to finish some in-progress developments. But essentially it is kaput. There is a pre-insolvency scramble underway over the dying carcass.

And staying in NSW, they have had their warmest winter in more than 150 year of records. Now the whole east coast is getting ready for a sizzling summer, as strong as Europe is having. Essentially there was no ski season at Threadbo this year, for the first time ever. New Zealand should prepare for an influx of climate refugees.

More generally, international air cargo volumes were up +4.7% in July from a year ago, up +5.2% in the Asia Pacific region. Interestingly, air cargo volumes into the giant US market were up more than +7%, but they shrank around their domestic market.

Meanwhile international passenger travel actually fell in July, not by a lot to be sure, but a fall is unusual. Both Middle East and US travel shrank. International travel in the Asia Pacific region declined too even if not so pronounced. Australian domestic travel shrank in a similar manner.

The UST 10yr yield is now just on 4.76%, up +4 bps from yesterday at this time. The 30 year yield is at 5.25%, also up +4 bps and almost back to its October 2023 levels again. The key 2-10 yield curve is now at +41 bps (up +4 bps). Their 1-5 curve is now at +36 bps (+2 bps) and the 3 mth-10yr curve is at +100 bps (+4 bps). The China 10 year bond rate is down -1 bp at 1.69%. The Japanese 10 year bond yield is now at 2.94%, up +1 bp, and a new 30 year high. The Australian 10 year bond yield starts today at 5.10%, up +1 bp. The NZ Government 10 year bond rate is now at 4.76%, down -1 bp from yesterday.

Wall Street has started its week slightly lower with the S&P500 down -0.4% and the Nasdaq down the same. Overnight, European markets were lower between Paris's -0.8% and Frankfurt's -1.2%. London was on holiday. Tokyo ended its Monday trade down a minor -0.12% and that was matched by Hong Kong. But Shanghai rose +0.9% in s strong afternoon session. Singapore rose +1.0%.The ASX ended its Monday down -0.2%. But the NZX50 was up +1.1% and the best of the markets we follow.

The price of gold is now at US$4432/oz, and down -US$22 from yesterday at this time. Silver has held at just over US$66/oz.

Oil prices are up +US$2 at just over US$85.50/bbl in the US, while the international Brent price is just on US$90.50/bbl. Hormuz transits have held very low with just six ships exiting over the past 24 hours. three of which are tankers (none dark with transponders off) and four entering for new loads (0 dark). The Red Sea activity is lower than Saturday with less than 20 each way at the Yemen chokepoint.

The Kiwi dollar is up +10 bps from yesterday at just on 59.2 USc. Against the Aussie we are holding at 82.6 AUc. Against the euro we are down -10 bps at 51 euro cents. That all means our TWI-5 starts today at just over 62.7, up less than +10 bps from yesterday.

The bitcoin price starts today at US$78,879 and down a very minor -0.2% from yesterday at this time. Volatility over the past 24 hours has been modest at just on +/-1.2%.

The easiest place to stay up with event risk is by following our Economic Calendar here ».