US inflation reported as unchanged but other US metrics tell a rising story; Japanese PPI stays very high; copper eases; UST 10yr at 4.98%; gold holds, oil eases but Yemen gets more risky; NZ$1 = 58.1 USc; TWI-5 = 61.4

Here's our summary of key economic events overnight that affect New Zealand, with news the combination of high fuel costs, high debt levels, high inflation, and the rising cost of money is driving the world's largest governments into a very difficult corner.

But overnight, the US released its official CPI for August (from the same agency that brought you the wildly optimistic non-farm payrolls data), and it shows no change at 3.4%. Apparently food prices were up +2.%, fuel costs up +16.3%, electricity up +4.0%, drugs down -2.7% and rents up +3.0%. From July to August however, the overall rate rose +0.4% which is an accelerating rise.

However, it is doubtful US consumers believe this sanguine official assessment. The widely-watched University of Michigan consumer sentiment survey for September reported a sharpish and unexpected fall, now to its lowest level since the record low in May. That is a -7.5% retreat since August and a -13.7% drop from a year ago. Year-ahead inflation expectations jumped to 4.6%, the highest since June. Year-ahead expectations for personal finances and business conditions deteriorated, as consumers anticipate greater pressure on household budgets amid rising fuel prices and trade tensions.

US petrol prices have risen +3.6% in just the past week and are now up +44% since the start of Trump's war. Diesel prices are up to US$6.06/gal and an all-time record high.

And it is these relatively high month-on-month rises that have markets seeing a greater chance of a Fed hike on Thursday, September 17 (NZT).

Japanese producer prices rose +7.6% in August from a year ago, following an upwardly revised +7.7% increase in the prior month, which had been the fastest pace since February 2023. Although fuel is a big part of these rises it is the only part, and the outsized rises have been consistent now in each month since April. Despite that, Japanese business sentiment rose to its highest level since 2021.

And staying in Japan, insider reports are that a +25 bps rise by the Bank of Japan for its policy interest to 1.25% is now locked in. That has helped strengthen the yen.

In some earlier reviews we had noted that the copper had hit a new record high of US$15,000/tonne. However since then it has pulled back on the prospects for a sharp increase in supply and an easing of demand as the world's two largest economies hesitate. The current price is now US$14,250/tonne so a -5% drop in the past three days.

The UST 10yr yield is now just on 4.98%, up +2 bps from yesterday at this time, up +20 bps for the week. The 30 year yield is at 5.35%, down -1 bp. The key 2-10 yield curve is now at +33 bps (down -6 bps). Their 1-5 curve is now at +45 bps (down -2 bps) and the 3 mth-10yr curve is at +111 bps (-7 bps). The China 10 year bond rate is holding at 1.68%. The Japanese 10 year bond yield is now at 2.99%, up +7 bps and up +8 bps for the week. The Australian 10 year bond yield starts today at 5.39%, up another +8 bps from yesterday to be up +20 bps for the week. The NZ Government 10 year bond rate is now at 5.06%, up +15 bps for a weekly jump of +24 bps.

All this sudden rise in benchmark interest rates is going to do extensive and expensive damage to government budgets which depend on high debt levels and more borrowed money. A reckoning is closer.

Wall Street has bounced back today with the S&P500 up +0.9% but a weekly fall of -1.1%. The Nasdaq up +1.2% today, down -0.8% for the week. Overnight European markets were all firmer at about +0.8% except London rose only +0.4%. Yesterday Tokyo fell -1.9% for a -2.4% weekly retreat. Hong Kong was down -0.6% on the day for a weekly -3.3% drop. Shanghai fell -1.2% to end its week down -1.4%. Singapore ended up a minor +0.1%. The ASX200 ended its Friday trade down -0.9% capping a -3.1% weekly slide. The NZX50 ended down -1.0% for a weekly -2.8% slide.

The Fear & Greed index is now firmly in the 'fear' zone from being just in the same zone a week ago.

The price of gold is now at US$4346/oz, and up +US$9 from yesterday at this time, down -US$78 for the week. Silver is up +50 USc at just under US$64.50/oz, down -US$1.50 for the week.

Oil prices have eased -US$1.50 to a still very high US$100.50/bbl in the US, while the international Brent price has fallen -US$3 to just over US$104.50/bbl. A week ago these prices were US$91.50 and US$96.50/bbl so a net +9% rise in that time. Hormuz transits are still very low today with just four ships exiting over the past 24 hours, no tankers escorted (0 dark with transponders off) and six entering for new loads (0 dark). The Red Sea activity is little-changed from yesterday with about 20 each way at the Yemen chokepoint.

But the Houthis reached the strategic island of Perim in the Bab el-Mandeb ​Strait on Friday, moving to tighten their grip on a vital global shipping route in the widening Middle East war. And the Houthis keep attacking the Saudi Arabian East-West pipeline that bypasses Hormuz, so they have temporarily shut it. Oil markets haven't yet reacted to this news.

The Kiwi dollar is up +10 bps from yesterday, now just over 58.1 USc but down -70 bps for the week. Against the Aussie we are also up +10 bps at just under 81.1 AUc. Against the euro we are up +20 bps at 50.1 euro cents. That all means our TWI-5 starts today at just over 61.4, up +10 bps from yesterday, also down -70 bps from a week ago.

The bitcoin price starts today at US$77,098 and essentially unchanged from yesterday at this time but down -3.2% from this time last week. Volatility over the past 24 hours has again been modest at just under +/-1.9%.

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