US inflation rises; real earnings rise; S&P500 flat; Asia trade faces liquidity pressure; China FDI rises; lending for houses drops sharply in Australia; UST 10yr yield at 2.12%; oil holds and gold falls; NZ$1 = 66.6 USc; TWI-5 = 71.6

US inflation rises; real earnings rise; S&P500 flat; Asia trade faces liquidity pressure; China FDI rises; lending for houses drops sharply in Australia; UST 10yr yield at 2.12%; oil holds and gold falls; NZ$1 = 66.6 USc; TWI-5 = 71.6

Here's our summary of key events overnight that affect New Zealand, with news of a very sharp fall in lending for housing in Australia.

But first in the US, core June consumer prices increased by the most in nearly 1½ years in June, rising 2.1% pa and slightly above what markets were expecting. The rise was across a range of goods and services. Fast-rising rents helped push the 'services' category up +2.8% pa. Only lower petrol prices kept the overall index unchanged.

Real earnings, wages after inflation, are also edging up, confirming that their labour market is tightening.

Wall Street is unsure what to make of the data, especially in the light of the Fed comments to Congress which continue today. Powell has signaled a rate cut is now likely, but the inflation and jobs data undermines that. The S&P500 is flat today although bond prices are retreating (that is, yields are rising). There is an anomaly to report however; the Dow is up strongly and at a record high. That is because it is stuffed with drug companies and the Trump Administration has announced it will won't be taking action on their pricing strategies.

We should also note that there is now more than US$4 tln invested in ETFs.

Across Asia, payment delays are lengthening as the trade war consequences bite. It is a liquidity test some companies won't survive. A big survey in the region by a trade credit insurer in the region reports that the average payment delay is now out to 88 days, and rising.

Foreign direct investment in China seems to be rising. It was up more than +7% to US$70 bln in the first half of 2019. But in June alone, that rise was +8.5%.

In Europe, it is not just the top-tier countries that have negative interest rates. Government bonds from the Czech Republic, Hungary and Poland now offer sub-zero returns.

France said it will go ahead with a 3% digital services tax on revenues aimed at the US tech giants who they claim pay little or no tax in the country. This is a tariff that the US Administration doesn't like.

In Australia, lending to households in May was an eye-watering -16% lower than the same month a year earlier. That is a decade low. It brought a -AU$3.6 bln drop in the May month from a year ago, and for the year to May it is a -AU$22 bln drop. Lending to households for investment property was down -22% in the same period. That involves a -AU$10 bln drop May-on-May and and for the full year it was a -AU$23 bln drop.

The UST 10yr yield is sharply higher today and now at 2.12% after the rise in US core inflation. Their 2-10 curve is now wider at +28 bps and their negative 1-5 curve now at under -10 bps (narrower). The Aussie Govt 10yr is up +6 bps at 1.42%. The China Govt 10yr is little-changed at 3.18%, while the NZ Govt 10 yr is also little-changed at 1.56%.

Gold is down -US$10 overnight to US$1,405/oz.

US oil prices are holding higher today. They are still just over US$60.50/bbl. The Brent benchmark is still at US$66.50. Storm shutdowns in the Gulf of Mexico lower US inventories are keeping prices up.

The Kiwi dollar is firmer again, now at just on 66.6 USc. On the cross rates we are also marginally firmer, now at 95.6 AUc. Against the euro we are at 59.2 euro cents. That puts the TWI-5 up to just over 71.5.

Bitcoin is down sharply today, down almost -5% from this time yesterday and now at US$11,727. It is not helping that the US Fed chief is pushing back so directly against Facebook's crypto plans. The bitcoin rate is charted in the exchange rate set below.

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

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The US doesn't like the French tax, claiming that it unfairly targets US companies, but there is no acknowledgement that many US companies have fairly predatory practices to eliminate competition, and then operate in a virtual monopoly. This then suggests that the US won't appreciate it when other countries introduce their own versions of this tax, effectively moving against the aggressive tactics of US business's. Interesting times.

but of course they are not US companies.... they are Irish and Luxembourg companies ....unless they are only set up there to avoid tax...surely not(!) Go France!

Foreign direct investment in China seems to be rising. It was up more than +7% to US$70 bln in the first half of 2019. But in June alone, that rise was +8.5%.

BIS sheds some light on China's cross border capital flows - Link

Australian housing market now in big trouble and with it their economy. No wonder central bank panicked

And ANZ in Australia have been the first to cut their sensitivity floor rate on new mortgage lending from the current 7.25% to 5.5%. The sensitivity margin being raised from 2.25% -2.5%.

The kitchen sink has just been ripped out and is now flying out of kitchen window in an attempt to keep the credit bubble alive.

Gold is down -US$10 overnight to US$1,405/oz. versus Today Germany sold 10-year bunds with NO COUPON. Yield was -0.26%.

So much conflicting information it's hard to know exactly were we are. Going backwards I think.