Here's our summary of key economic events over the long weekend that affect New Zealand, with news the Americans seem to be making a concerted effort to adopt a stagflation policy. The USD is falling toward a three year low, gold is rising again, as are US benchmark interest rates.
But first, the week ahead will feature central bank rate decisions from Canada (expect a hold at 2.75%), the ECB (-25 bps to 2.15%) and India (-25 bps to 5.75%). And the week will end with the US non-farm payrolls report (+130,000 and extending the ho-hum trend).
But the week will be dominated by factory and service sector PMIs, closely watched for the consequences of trade war activity. More damage came from the US over the weekend with the doubling of steel tariffs, from 25% to 50%. These are certain to make the US steel industry even less competitive globally, embedding higher producer costs for American factories and higher prices for its customers.
We can see that from the latest ISM factory PMI for May, where a small contraction is now taking place, and the cost pressures are still very high. The final S&P/Markit May factory PMI recorded the most cost pressure since 2022, but a tiny expansion in this one.
China released its official PMIs over the weekend, with the factory version contracting much less, and their services little-changed in a tiny expansion. Inflation pressures aren't evident here. The US trade pressure may be preventing China's economy from growing much but it isn't pushing it into a contraction. And so far, Beijing has resisted Trump's request for a phone call with Xi.
And there were May PMIs out for Japan (contracting less), Canada,(holding a sharp contraction) Taiwan (contracting less), Korea (small contraction, but stable) Singapore (stable small contraction) and Australia (stable but expanding a bit less) on Monday. So this set isn't yet showing much change, but the trade war does seem to be embedding stagnation. Inflation doesn't seem to be much of a problem here, it is only the US that is getting them both.
Stagnation without inflation does allow central banks to try a rate cut remedy - a remedy not available to the Americans.
In China they are applying both monetary (lower rates) and fiscal policies (more spending) to stabilise their situation. Beijing is spending big to counter the downward pressure on its economy. As a result, the country’s broad fiscal deficit expanded at its quickest clip since 2023 in the first four months of 2025, reaching a -¥2.7 tln (-NZ$630 bln) deficit in the period, almost 60% more than in the same period in 2024.
They need all of that because it is pretty clear their real estate sector slump isn't anywhere near over yet, despite all the official help for it.
We should also note that it is a holiday in China today, for Dragon Boat Festival.
India reported Q1-2025 GDP outcomes, claiming a heady expansion of +7.4% from a year earlier, far better than the +6.7% expected and the +6.4% expansion in Q4-2024. This expansion was led by both the construction sector, and consumer spending.
And Canada also reported an expanding economy in Q1-2025, gaining +0.5% in the quarter to be +2.2% higher for the year. Both these indicators of economic activity are better than analysts had expected. Of course these are only of historical interest because they pre-date the tariff-war actions of the US that started in April.
Back in the US, the final University of Michigan consumer sentiment survey recovered its early month drop in the second half of the month, ending similar to the April level. The pause in the tariff war and the hope this would ease inflation pressures during the survey period was said to be behind the mood change. Still, this level is very pessimistic, -24% lower than year-ago levels.
In Australia, job ad growth has turned into a decline, with the number of job ads dropping -1.2% in May from April, when they fell a downwardly revised -0.3%. Year on year they are down -5.7% although they remained +14% higher than pre-pandemic levels.
And staying in Australia, regulator ASIC did a major review of their managed funds sector and found widespread compliance deficiencies in plans that control more than AU$1 tln of savings (in the "managed investment industry").
The UST 10yr yield is now at 4.46%, and up +6 bps from Friday. The key 2-10 yield curve is now at +52 bps. Their 1-5 curve is inverted by -12 bps. And their 3 mth-10yr curve positive at +18 bps. The Australian 10 year bond yield starts today at 4.31% and up +2 bps from yesterday at this time. The China 10 year bond rate is unchanged at 1.70%. The NZ Government 10 year bond rate starts today at 4.57% and unchanged.
Wall Street is marginally firmer with the S&P500 up +0.2% in Monday trade. Overnight, European markets were marginally softer. Tokyo ended its Monday trade down -1.3%. Hong Kong fell -0.6% but Shanghai was closed for its holiday. Singapore ended down -0.1%. The ASX200 was down -0.2% at the end of Monday trade and of course the NZX50 was closed for our holiday.
The price of gold will start today at US$3,375/oz, and up +US$86 from yesterday.
Oil prices are up +US$2 in the US at just under US$63/bbl and the international Brent price is just under US$65/bbl.
The Kiwi dollar is now at 60.2 USc, a +50 bps rise from yesterday at this time. Against the Aussie we are up +20 bps at just on 92.9 AUc. Against the euro we are up +10 bps at 52.7 euro cents. That all means our TWI-5 starts today at just on 68.2 and up +30 bps from yesterday.
The bitcoin price starts today at US$104,272 and down -0.9% from yesterday. Volatility over the past 24 hours has been modest at just on +/-1.0%.
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26 Comments
The future of warfare is Drones
Using AI for drone targeting also. The Ukrainian attack on the Russian airfields, while spectacular, is also concerning. What if non state actors utilize these methods? Attacks on airports could be devastating as it doesn't take much of an explosion to take out an aircraft.
They should be able to work out some defensive measures for combat environments. It's going to be hard to protect civilian areas and places that are not at war though.
They are using the same system for both environments.
The other way around Zac. In combat the Ukrainians and Russians are using fibre optic lines to control the drones. these cannot be jammed, and cannot be intercepted. They are often kilometres long. Droneshield focuses on detecting then jamming or disabling some how.
The security question Russia now faces is literally huge. Ukraine has now sent them a message that cannot be ignored. If they persist in Ukraine (I don't see them admitting defeat any time soon), Ukraine will go full guerilla using drones to attack them where they sleep.
As technology develops and improves yes. The Ukraine operation Spiderweb was significantly innovative though and creates a serious ongoing headache for the Russians. Planning and development started 18 months ago and uses low tech drones with fibre optic control wires, but was short range with the trucks parked only a short distance from the final targets.
The Russians now need to ask themselves what else is targeted, how are the drones transported and concealed and how do they detect them?
Potentially this could effectively shut down all civilian transportation systems and/or require a huge force to police their roads. This is more than a nightmare for them. Ukraine has demonstrated that even without high tech weapons, they can reach anywhere in Russia to hit targets. The level of innovation is such that almost any type of protection system or concealment may well be bypassed.
They started the war, I wonder if they still consider the cost worthwhile? I note that the news is reporting the Russian requirement for a truce is essentially for Ukraine to surrender all occupied territory. Ukraine is not going to accept that!
“Ukraine is not going to accept that.” That’s predictable but on the other hand what exactly is going to force Russia to return the territory already seized? Looks more likely, if anything at all, that a demilitarised zone will be established west to east from the Dnieper to the Don. The first question then is positioned how far to the north and the second is how exactly will it be secured and indeed in need, defended.
Wearing coal becoming more fashionable. 380 million tonne coal to chemical. Keep planting those farms chaps.
"The Hami facility, which will be capable of yielding 4 million tons of oil products a year for processing into materials like polyester, is more likely to prosper because CEIC’s scale allows it to mine coal particularly cheaply. It’s liquefaction technology has also been touted as state of the art."
https://www.energyconnects.com/news/oil/2024/october/china-s-top-miner-…
https://www.bloomberg.com/opinion/articles/2025-06-02/commodities-china…
Australia (Labor) have just approved record oil and gas exploration licenses for Santos and Woodside (out to 2070). The Greens got zero seats in the recent Federal elections. The taxes and employment this sector delivers supports Australia's economic prosperity and they are smart enough to realise it. Their economy will keep growing and continue to hoover up our talent.
No it won't.
You consistently fail to grasp the tie-up between exponential growth and energy. What economists call 'the economy' is 100% traceable to energy and resource throughputs (forward debt-bets thereon).
This isn't a growth; this is a desperate attempt to maintain. We burn - and you cannot re-burn, that's contrary to the 2nd Law - 100 million barrels of oil a day, and the equivalent of 200 million barrels of coal and gas. From a series of next-best (so worse) sources. The proposal is a displacemet/replacement, not an addition.
So you comment is ignorant in the primary sense: if you have proxy but no - or reducing - energy/resource throughput, what is the proxy 'worth'?
The stupidity is plain; we're chewing through the planet and turning it into digital proxy. Which will be worth nothing and en route to that nothing; worth less.
Brilliant. So much for sapience.
Australia is going to be just fine, why are tens of thousands of Kiwi's abandoning NZ for Australia if you know so much?
Because they don't.
Until it doesn't.
They will back - as climate refugees as Australia burns.
Australia: Harsher fire seasons, more ocean heatwaves, sea-level rise | PreventionWeb
Won't they just move to WA?
"...And so 1961 effectively became Year Zero for a new fire-management regime in Western Australia, whose development was led by enterprising foresters and land managers. Their methods included the use of controlled burns of woodlands. Using aerial incendiary methods, managers were able to treat more than 300,000 hectares every year—or about one seventh of the total forest area (meaning that treatment of all areas required a seven-year cycle).
...The state of Victoria, on the country’s east coast, follows a very different program from that of West Australia—one largely dictated by urbanites who are (typically) insulated from the results of poor land management. In Victoria, activist opposition to sensible forest-management policies has led to the destruction of the region’s once-thriving native-forest timber industry (which also means that the state no longer has access to the roads maintained by timber sales revenue, nor to the skilled bulldozer operators who might be usefully deployed to help fight fires). Activists have used “lawfare” methods to stall, or even prevent, mitigation activities."
https://quillette.com/2025/01/16/fighting-fire-with-fire/
Misses point (deliberately)?
There was a point to that doomster porn? I guess they didn't check Aussies longest running sea level gauge or they just pretend that sea level level is double or accelerating since 1970? Or check any of the drought history in Aussie.
"Scientists analysing growth rings of 700-year-old native cypress trees in Western Australia's Wheatbelt say the region suffered a series of megadroughts lasting up to 30 years in past centuries.
The study has also suggested the region was comparatively blessed with rain during the 20th century.
Climatologist Alison O'Donnell said rainfall records since 1900 capture "one of the wettest periods in the last 700 years".
"The worst drought periods that have occurred in this region occurred prior to instrumental records," she said."
https://www.abc.net.au/news/2021-05-26/australias-hidden-history-of-meg…
"Combined with an eastern Australian rainfall proxy from Law Dome, the first millennial-length Australian megadrought (>5 year duration) reconstruction is presented. Eight megadroughts are identified including one 39 year drought (A.D. 1174–1212), which occurred during an unprecedented century of aridity (A.D. 1102–1212)."
https://agupubs.onlinelibrary.wiley.com/doi/full/10.1002/2014GL062447
"Around Australia, sea levels have risen 22 centimetres since 1900 - with half of that since 1970." Just not Sydney I guess, the place with the longest running instrumental record.
https://tidesandcurrents.noaa.gov/sltrends/sltrends_station.shtml?id=68…
Australia has always experienced climate variability but past droughts don’t contradict current science—they provide context showing how much worse conditions could become as global warming progresses.
The 22 cm of sea level rise since 1900 has an accelerating rate since 1970—consistent with global trends driven by melting ice and thermal expansion.
Cherry pick
AFR reports that Aussie Bitcoin ETFs took in 60x more funds than gold ETFs in May.
Bitcoin ETF inflows = $87.3m
Gold ETF inflows = $1.5m
https://www.afr.com/markets/currencies/investors-bet-on-bitcoin-over-go…
The corruption by Trump and co around his meme's /crypto and all this digital thin air stuff is mind boggling. The entire things seems to be a great big house of cards/bluff/nothing ness that ultimately will implode.
And in future the world will look back in astonishment.
That's another story. However, if you want to follow the associations with BTC, look no further than Eric Trump and Japanese BTC Treasury MetaPlanet, a company I can't help be suspicious of. Why? Because I've done my research on the people and the underlying business. I am likely to be completely wrong on how any failing company can transform into a BTC Treasury and outperform any other asset class, but it's very hard (for me anyway) to reconcile.
Because I've done my research on the people and the underlying business
Would you say forming sound assessments in this realm is a strength of yours?
Not too long ago you were parroting things said by Trump and Musk of dubious legitimacy.
Would you say forming sound assessments in this realm is a strength of yours?
Better to have done it than not done it P. If you read my comment properly, you will see that I said I am likely wrong.
Anyway, I would not have made the 2,300% gain in past 12 months offered by MetaPlanet mainly because I no longer have direct trading access to the TSE. Congrats to all those that did.
Some of us are looking on in astonishment even now. Trump is breaking the law openly and repeatedly and is openly corrupt, yet so far completely beyond consequences.
He has immunity and it doesn’t matter if his interpretation of that is either incorrect or unlawful. How is he now ever going to be prosecuted for anything at all? No conviction simply translates to not guilty.
So gold pretty much back to ATH and silver showing historic patterns (set up for when it goes parabolic).
But there was other action to look at overnight. Gold miners. The GDX ETF now up a whopping 56% year to date. But to give that some more wild perspective, GDX is only up 47% since its inception in 2006 - 19 years ago.
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