Here's our summary of key economic events overnight that affect New Zealand, with news Middle East escalation continues, but traders don't see any way out other than negotiation. That hope has seen the oil price ease somewhat today even as the bombings, killings and blockades all intensified. Weird.
In the US the first of the July PMIs shows that business activity growth rose modestly but to an eight-month high in July although that isn't an especially high benchmark. However selling prices rose sharply and at their fastest rate for nearly four years. Input cost inflation was at a 14 month high. Their factory sector expansion was little-changed however from June with new orders little-changed. It was their services sector that expanded more, albeit modestly
US new home sales were little-changed in June but maintained the modest level they have had all year. That makes then -5.6% lower than year-ago levels.
Canadian producer price growth fell back slightly in June from May but are still +12.4% higher than year-ago levels. Raw material input costs by manufacturers were up more than +20% from a year go.
Across the Pacific, Japan's CPI inflation stayed low in June even if it did rose to a six month high. It came in at 1.7% in June from 1.5% in May, its highest since December. The pickup was largely driven by a slower decline in electricity and fuel prices as government energy subsidies were scaled back.
Japan's private sector expanded to a five-month high in July via a sharp rise in manufacturing production and an improvement in their factory PMI which was driven mainly by the sharpest increase in manufacturing orders for five years.
The July PMIs for India came in notably lower than for June as private sector growth receded and inflation pressure, especially for fuel, intensified. This is putting them in a tough spot with spreading social unrest. Their factory PMI dipped only marginally but their services PMI registered a notable easing.
In the EU, eurozone business activity has risen for first time in four months in July amid renewed expansion of new orders. Their factory PMI inched up, and their services PMI inched up too. But to be fair, these higher levels are not significant and the expansion is minor compared to other global regions. But at least it isn't a contraction. The German versions of these PMIs was generally better than the overall set. German consumer sentiment didn't budge however.
As expected, the Russian central bank trimmed -25 bps from its key policy rate, taking it to 14.0%. A year ago, this rate was 21%. They have CPI inflation officially at 6.0%, although this seems an unlikely level.
Australia also got better new factory order levels in July, the first increase in new business in five months. Improved demand conditions underpinned a stronger expansion in output, led to upgraded recruitment activity and enabled greater protection of profit margins. This data confirms the good labour market data released yesterday. But overall Australian growth is likely to remain sluggish.
Sydney, Melbourne and Canberra house prices actually fell in the June quarter, an unusual but necessary shift to make their housing more affordable. It takes serious political bravery to turn a frothy market where gains just fell from the sky.
Bitumen prices are surging again on the closed Hormuz and Red Sea shipping lanes. They are back to levels that we had in mid-March and which lasted to mid-June. Interestingly, urea prices are staying low as are potash prices (minor rises) but sulphur prices never fell after the March spike. Naphtha (used for plastics manufacturing) is rising sharply again.
The UST 10yr yield is now just on 4.68%, down -2 bps from this time yesterday but up +13 bps for the week. The key 2-10 yield curve is now at +35 bps (up +1 bp). Their 1-5 curve is now at +31 bps (-1 bp) and the 3 mth-10yr curve is at +90 bps (-5 bps). The China 10 year bond rate is down -1 bp at 1.72%. The Japanese 10 year bond yield is now at 2.80%, up another +3 bps and a new 30 year high. That is up +10 bps for the week. The Australian 10 year bond yield starts today at 5.03%, down -3 bps from Friday and up +11 bps for the week. The NZ Government 10 year bond rate is at 4.82%, up +7 bps from Friday, up +14 bps for the week and it highest since May 2024.
Wall Street is ending the week virtually unchanged on the S&P500 on Friday but down -1.1% for the week. The Nasdaq is down -0.6% today, down -2.9% for the week. Overnight, European markets were firmer between Paris and London's +0.9% and Frankfurt's +1.4%. Yesterday Tokyo ended down -2.7% in Friday trade, down -2.6% for its week. Hong Kong was down -1.0% for a weekly net rise of +0.5%. Shanghai was down -1.6% on Friday for a weekly +0.6% rise too. Singapore ended up +0.1% however. The ASX200 was down -0.8% on Friday to end its week down -0.6%. And the NZX50 fell back -0.2% to end with a weekly +0.6% gain.
The price of gold has firmed to US$4053/oz, up +US$12 from yesterday up +US$48 for the week. Silver is now just on US$58.50/oz, up +US$1 from yesterday, up +US$2.50 for the week.
Oil prices have pulled back -US$4 higher from yesterday at now just over US$89/bbl in the US, while the international Brent price is now just on US$96.50/bbl and down -US$5. A week ago these prices were US$82 and US$88/bbl respectively. Hormuz transits are still just a trickle There has been one crude tankers and 6 cargo ships exiting over the past 24 hours (1 dark with transponders off) and 5 entering for new loads (0 dark). The Red Sea is also now effectively blocked at Yemen although a small handful of ships are still getting through (less than 20 each way). Now almost 800 vessels are waiting for things to calm down.
It is very hard to see how the next few months can be sustained on the current basis. Strategic reserves of oil are being run down everywhere - the US, Japan, China, the EU - and unless that fast drawdown ends soon, fuel availabilities are going to get very tight. The idea that Trump has "no choice but negotiate' with Iran is behind financial market thinking, even though that requires Trump to be rational. Hard to see. He is all about vindictiveness.
The Kiwi dollar is +20 bps firmer from yesterday at just on 57.9 USc but down -50 bps for the week. Against the Aussie we are up +10 bps at 82.9 AUc. Against the euro we are up +20 bps at just over 50.9 euro cents. That all means our TWI-5 starts today at 61.8 which is up +20 bps from this time yesterday but down -50 bps from a week ago.
The bitcoin price starts today at US$64,218 and down -0.6% from this time yesterday but up +0.3% from a week ago. Volatility over the past 24 hours has been modest at just on +/-1.5%.
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14 Comments
"...he is all about vindictiveness" ...why should other countries laws apply to US (/s)
"Donald Trump says the US will launch an investigation into the European Union and threatened a fresh tariff over fines handed to some of the biggest American tech companies."
https://www.bbc.com/news/articles/cvgjenp4680o
The EU should impose reciprocal tariffs on US services equivalent to the tariffs the US imposes on EU goods.
Then the EU should kick the US out of NATO, and close the US military bases in Europe and tell their military to go home.
What Trump is doing will have the opposite effect to what he thinks. The rest of the world will trade with each other, and in particular with China. The US will still be a powerhouse, but less so than now. Maybe they will have more manufacturing if they import less, but they will have less exports when they get snubbed.
America won't be great again. To achieve that they need to take on China and Korea in technology, rather than manufacturing outdated ICE vehicles for themselves.
I've been doing a lot of watching and reading concerning buying new cars and have recently made a purchase. I actually wanted to buy an outdated ICE vehicle but "her indoors" had different plans. Reading comments on YouTube reviews of vehicles you often see people bemoaning the fact that new cars have too many gimmicky things. EVs and even hybrids are often scorned. Large tablet like displays and fewer knobs causes outrage. You would think there would be a big market for outdated ICE vehicles. The reality is new car buyers really do like new features. These commenters are likely old people who are not even in the market for a new car or only have the budget for second hand car buyers.
Now I have a new vehicle with a lot of tech I do like it. I have a budget to replace it in four years or less time to trade it in on another new vehicle. I want my new tech to be new and under warranty. Car companies would be unwise to try and cater for cantankerous folk who claim they don't want tech. Let's hope it all lasts for 15 - 20 years before the cars are inevitably sent to the wreckers. I think it probably will be fine. Most cars, even the old "simple" ones weren't meant to last more than twenty years. The bodies rusted out quickly in the old days. Running old cars for many years is likely just a legacy of NZ history, the fifties and sixties, when the government's economic rules made it essential. Like Cuba today.
"government's economic rules made it essential. Like Cuba today."
Cuba? Um, don't you mean the US blockade?
Cuban car imports are heavily restricted by the Cuban government. Of course the US does make shipping to Cuba difficult as ships cannot go to US ports for 180 days if they have been to Cuba. They have only recently allowed Chinese car imports and then they have to be EVs. They likely restrict buying imported goods much like NZ did in the sixties. My parents back then could buy a new car every year as they had some money in the UK. They then sold the car a year or so later for more than they paid.
"These commenters are likely old people who are not even in the market for a new car"
Oh contraire, our car has all sorts of nonsense features that I've never used and don't care about. I'd be annoyed having to pay for them if I hadn't got the car cheap on runout. My light truck has 35 years under it's belt and I'd rather spend the money keeping it's simplicity running than being gouged by car companies marking up their product with useless gadgets for suckers. They're an absolute liability on the 2ndary market!
Either way there is still a massive market for tech laden Chinese EVs, they don't have to appeal to everyone. And there will be a significantly smaller market for ICE than now, many of those companies will go under.
Personally I wouldn't buy either right now, I'd buy second hand and wait a few years to see how reliable the Chinese cars are.
You are one of those commenters I was talking about. Car manufacturers cannot afford to pin their future on the buying habits of people like you. They'd go bust even sooner.
This from RNZ this morning:
Battle lines drawn over proposed LNG facility https://www.rnz.co.nz/news/regions_taranaki/788995/battle-lines-drawn-o…
This from RNZ today.
To me it's a classic example of risk likelihood trumping consequence.
The ammunition barge explosion in 1917 in Halifax harbour, Canada, killed 2000 and completely devastated the Bedford Basin.
The ammonium nitrate explosion in Beirut in 2020 killed 200+ and left 250,000+ homeless.
In each of these events, arguably the risk of disaster wad pretty low. But as time has demonstrated, the consequences are catastrophic.
LNG is a highly volatile and explosive compound. Surely it should be made absolutely clear to all residents of New Plymouth that the proposed site of the LNG storage gives the highest priority rating to consequence of the worst case happening rather than the risk of it happening.
Telling residents that initial risk assessments are commercially sensitive is abhorrent, considering that the people asking, carry the potential consequence of a catastrophic failure.
Trust us, we know what we are doing, just doesn't cut the mustard.
This LNG explosion in Qatar a month ago killed 13 and was heard 70kM away
"oil price ease.......weird?"
There's a golden opportunity to partake in the grift. The Maralago Mafia man is offering early access to his market moving announcements by subscription to his "Truth Social".
3:50
https://www.youtube.com/watch?v=_eZ9VfgjSIs&t=383s
"Donald Trump’s latest scheme to monetize his presidency — selling Wall Street traders the right to an early peek at his posts on his Truth Social platform"
https://www.latimes.com/business/story/2026-07-23/trump-selling-wall-st…)
Price discovery is a quaint notion from a bygone era.
Take note anyone investing in the corrupt cess pit previously known as gods country.
The Irish economic 'miracle' in 20 mins.
https://www.youtube.com/watch?v=ZZisvA4btXs
The mechanism slightly different here but the results are the same.
New Zealand’s ‘rocket man’ takes on Elon Musk and Jeff Bezos
https://www.ft.com/content/d9d7ff54-a04c-4d5a-ad70-a249fcd761a4?syn-25a…
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