Here's our summary of key economic events overnight that affect New Zealand, with news the US is raising interest rates and the Middle East war is spreading.
First, as expected and in a very brief Warsh-style statement, the US Fed raised its key policy rate by +25 bps to 4.0% in a unanimous vote. It was its first rise since 2023. It did note that "inflation remains elevated" and they "will deliver price stability". However their forward looking interest rate 'projections' were raised although only to the new 4% levels. A strong majority of members thing another rate rise is possible this year.
Immediately after their decision was released, Wall Street held its small pre-decision gains. The UST 10 year yield dipped slightly but has since risen back over 5%. The US dollar rose. That USD rise has been maintained but Wall Street has changed direction sharply lower and the UST 10yr has jumped back over 5%.
Trump's reaction to the rate rise, and the prospect of another, has so far been conspicuous silence. He had demanded that rates be cut.
US mortgage applications fell last week, essentially driven by refinance applications. They say their 30 year benchmark home loan interest rate has risen to just under 7% and its highest since January 2025.
US retail sales rose in August and by more than expected, up the most month-on-month in five months following a fall in July. But the monthly +1.2% rise was essentially driven by higher fuel purchases, up +3.1% in the same period. From a year ago, these retail sales are up +5.3% of which fuel was up +20.5% at petrol stations.
US crude oil stocks took another fall last week and by more than the prior week although not as much as was expected. And their strategic reserves fall again, but only marginally this time.
The New York Fed's survey of the service sector activity in the New York region shows the July and August improvements have not continued into September, with a notable backslide in the latest survey.
Meanwhile the NAHB/Wells Fargo Housing Market Index of house builder sentiment has retreated to its lowest level since December 2022 with higher costs and higher interest rates getting the blame.
Canadian housing starts stayed low in August, almost the same as in July and well down on the unusually high year-ago August level.
EU industrial production fell in July from June, but it is still up marginally from a year ago.
The UST 10yr yield is now just on 5.01%, unchanged from yesterday and its highest since 2007. The 30 year yield is at 5.35%, down -3 bps. The key 2-10 yield curve is now at +34 bps (down -1 bp). Their 1-5 curve is now at +44 bps (-2 bps) and the 3 mth-10yr curve is at +111 bps (-5 bps). The China 10 year bond rate is little-changed at 1.69%. The Japanese 10 year bond yield is now at 3.00%, down -4 bps. The Australian 10 year bond yield starts today at 5.31%, down -9 bps from yesterday. The NZ Government 10 year bond rate is now at 5.04%, down -3 bps.
Wall Street was firmish ahead of the Fed decision today, up +0.3% in Wednesday trade on the S&P500, and up +0.8% on the Nasdaq. But then it retreated, now down -0.8% with the Nasdaq down -0.4%. Overnight, European markets were firmer between Lindon's +0.3% rise and Paris's +0.6%. Yesterday Tokyo ended up +0.7%. Hong Kong was up +0.2% and Shanghai rose +0.7%. Singapore was down a minor -0.1%. The ASX ended its Wednesday trade up +0.3%. But the NZX50 rose a full +1.0%.
The price of gold was at US$4328/oz, and up +US$34 from yesterday just after the Fed decision. But now it is at US$4249 and a -US$79 reaction. Silver was at just over US$64/oz and up +50 USc but has subsequently dropped to US$62.50/oz.
Oil prices have eased -US$4 to US$102.50/bbl in the US, while the international Brent price is down -US$4.50 to just on US$104.50/bbl. Hormuz transits are still low today with just seven ships exiting over the past 24 hours, three tankers escorted (3 dark with transponders off) and two entering for new loads (2 dark). The Red Sea activity is now only about 10 each way at the Yemen chokepoint in a sudden shift
Saudi Arabia is scrambling to fix or bypass their war-damaged key oil pipeline, one that delivers as much as 4% of global oil supplies. And for Saudi Arabia this is a major economic threat, choking their revenues in a significant way.
The Kiwi dollar is little-changed from yesterday, now at 57.6 USc. Against the Aussie we are also holding at 80.8 AUc. Against the euro we are unchanged as well at just on 49.9 euro cents. That all means our TWI-5 starts today at just under 61, little-changed and still at a six-week low.
The bitcoin price starts today at US$75,518 and down -1.6% from yesterday. Volatility over the past 24 hours has been modest at just over +/-1.2%.
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