Here's our summary of key events overnight that affect New Zealand, with news that around the world, the major economies seem to be marking time.
The July PMI readings for the US remain modestly good in July but are overall just a tad softer. The main takeaway from this survey is the pickup in price increases. In the EU, they are also softer and at a broadly similar level to the US. Price pressure eased in the EU but is still elevated. Japan is softer too but only be a small amount, even if their level is marginally lower. Price pressure is rising in Japan.
In addition to rising prices, the US is now moving to increase subsidies for its farmers, adding another $12 bln in support for an already cushioned sector. Tariff-related distortions are starting to spill out now. The Federal deficit track just got even larger.
In China, the Shanghai stock exchange rose sharply yesterday, up a very impressive +1.6%. Hong Kong rose +1.4%. These moves weren't mirrored elsewhere and are driven by an expectation that major stimulus is underway in China as part of their defense against the Trump tariffs. That seems to involve a new US$200 bln in infrastructure spending. Markets are applauding the strategy. China bond yields are climbing, their currency is being reset pointedly lower. China is girding itself for a coming economic 'war' and markets are suggesting they are on its side. Interestingly, with rising consumer debt, China can't now count on its household savings level to get it through this challenge.
And in another sharp turn, Chinese investors have become net sellers of American commercial real estate for the first time in a decade. In the June quarter they sold US$1.3 bln of American commercial property and bought only US$125 mln's worth.
Japan is moving to address its age-related shortage of healthcare workers by loosening its immigration rules. The numbers are surprisingly large; +10,000 from Vietnam alone. Cambodia, Indonesia and Laos are additional.
The EU is moving to tax profits as the result of economic activity, ignoring the vagaries of transfer pricing and other tax-dodging techniques. The issue is being highlighted by the way the big internet companies earn their income (and report their taxable income). This is putting them on a collision course with the US. Australia looks like it will be siding with the EU on this one.
In Australia, there is growing angst over the dominance of the big four audit firms and the power they wield. Getting unconflicted advice from them is now increasingly difficult. Regulators are turning their attention to this oligopoly.
The UST 10yr yield has settled in the New York from this time yesterday and is at 2.95% and down -2 bps near the market close. The 2-10 curve has pulled back a bit, now at +30 bps. The Chinese 10yr is at 3.56% (up +3 bps) while the New Zealand equivalent is now at 2.85%, also up +1 bp.
Gold is unchanged today US$1,226/oz in New York.
US oil prices are a little firmer today and now just under US$68.50/bbl. The Brent benchmark is now just under US$73.50/bbl.
The Kiwi dollar is unchanged at 68 USc. On the cross rates we are also little changed at 91.7 AUc, and at 58.2 euro cents. That leaves the TWI-5 at 71.4.
Bitcoin is on the charge higher and is now at US$8,244 which is up +6.5% from yesterday. Driving the rise is speculation that the US SEC will license the first cryptocurrency exchange-traded fund, maybe as soon as August. In the last twelve days, the bitcoin price has risen by a third.
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