US inflation expectations rise; India inflation surges; Japan and Canada report soft factory activity; China FDI rises; Australia and UK near trade deal; UST 10yr stays at 1.50%; gold down and oil holds; NZ$1 = 71.4 USc; TWI-5 = 73.2 – Interest.co.nz

Credit: Original article can be found here

Here’s our summary of key economic events overnight that affect New Zealand with news both benchmark interest rates and equity prices are on the move higher this morning.

Although all eyes are firmly on the Thursday (NZT) US Federal Reserve meeting, with some positive but nervous energy in anticipation, there have been some other releases worth noting.

US inflation expectations came in sharply higher at 4% in one year which is actually a series high for this survey which started in 2013. If you are older, poorer, or live in the economically booming South, your expectation of much higher prices ahead are even greater. The same survey shows labour market expectations improved, with unemployment and the probability of losing one’s job both reaching series lows. The actual May CPI came in at 5.0% so consumers don’t see much moderating and certainly not in the way economists expect from the Fed.

In India their May inflation surged +6.3% and above the upper band of their central bank’s policy comfort zone. The rises in India were broad-based and driven by their recent lockdowns. But normal monsoons and an eventual, gradual easing of their lockdowns are expected to stabilise prices somewhat. A key aspect is food price inflation, which was up +5.2% year-on-year.

Japan has reported a good +16% rise in industrial production in April from the same month a year ago, but that is pandemic-distorted. Compared with April 2019, they are still -2.2% behind

Canada factory sales were also reported overnight, also for April, and they weren’t flash with a -2.1% decline rate month-on-month. Year-on-year these are also quite distorted, but compared to April 2019 they were -1.8% lower, so nothing encouraging here.

There other interesting data was from China, where May inbound foreign direct investment continued its strong run, up by more than a third in a year.

Australia is expected to sign an in-principal “free trade deal” with the UK later today. While a lot of detail will have to be worked through, it will likely involve a timetable for more access for Aussie rural exports into the UK – if the UK concedes to Australia its use of hormones in livestock production.

Wall Street has opened the week lower with the S&P500 down -0.3% in afternoon trade. Overnight European markets closed mixed with most up +0.2%, except Frankfurt. Yesterday Shanghai and Hong Kong were closed for a public holiday, but Tokyo was trading and had a good day finishing up +0.7%. The ASX was also closed for a public holiday, but the NZX50 Capital Index traded and ended the day little-changed (+0.1%).

The UST 10yr yield starts today up +5 bps at 1.50%. The US 2-10 rate curve is now steeper at +134 bps. Their 1-5 curve is now steeper at +74 bps, while their 3m-10 year curve is steeper as well at +149 bps. The Australian Govt ten year benchmark rate starts today at 1.49% and up +3 bps. The China Govt ten year bond is still at 3.15%. And the New Zealand Govt ten year is still at 1.66%.

The price of gold starts today at US$1863/oz which is down -US$15 from this time yesterday.

Oil prices are unchanged overnight at US$70.50/bbl in the US, while the international Brent price is still just on US$72.50/bbl.

The Kiwi dollar opens today at 71.4 USc and inching back up overnight. Against the Australian dollar we are also firmish at 92.6 AUc. Against the euro we are still at 58.9 euro cents. That means our TWI-5 starts today at 73.2 and still near its two month low.

The bitcoin price is now at US$40,223 and up +7.6% from this time yesterday, and mainly on Elon Musk’s references. Volatility in the past 24 hours is back as extreme at +/- 5.0%.

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

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End of day UTC