Kia ora,

Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the International edition from Interest.co.nz.

Today we lead with news the reasons your mortgage payments are rising sharply are all in today's global news roundup here.

The US equity markets are lower today, but by less than yesterday. That leaves them well in bear-market territory. And American bond markets are still haemorrhaging losses. Both are waiting for tomorrow's US Fed rate decisions. Markets have priced in a +75 bps rise to 1.75%.

The Fed seems sharply focused on fighting inflation, prepared to take the risks of triggering a recession.

Meanwhile, American producer prices rose sharply again in May, but the rate of annual increase was unchanged from April at just over +10%. But as high as that is, it is actually its least acceleration of 2022. And the underlying rate rose its least since October 2021. So perhaps some sting is going out of the inflationary impulse in business activity. But that doesn't hide the fact that a +10% increase rate is damagingly fast.

Still holding up however are American retail sales gains. Last week's survey shows them little-changed from the year-on-year rise of about 11%. Much of this will be inflation however.

In Japan, an unexpected remark by the Bank of Japan Governor has made waves, as some consider it a subtle message that the central bank may be starting to explore an eventual end to its large-scale monetary easing.

Japanese industrial production fell -4.9% in April, data that had pretty much been signaled in an earlier 'flash' release.

Hong Kong industrial production also fell, but they are now reporting Q1-2022 changes.

Chinese foreign direct investment inflows are slowing, and slowing fast. They revealed that for the five months to May, +US$87.8 bln flowed in. But if that is correct, that means they had only +$13.3 bln arrive in May, the lowest month flow since October 2021, and almost -20% less than in May 2021. This is probably neither a reduction they want given their slowing economy. Not is it a signal they want widely known which is why they only focus on the year-to-date numbers.

Indian producer prices rose faster in May, up +15.9% from a year ago.

German investor sentiment as measured in their ZEW survey remains very low in June, although it wasn't as low as in any of the prior three months. The Russian invasion of Ukraine is a sever depressant for them.

In Australia, the widely-watched NAB Business Confidence report was "strong", but not quite as positive as for April. Cost rises eased back in what they hope is an early signal. That overall sentiment is this good despite high inflation, rising interest rates and cost pressures is somewhat remarkable, especially in the face of global expectations of recession.

The UST 10yr yield will start today up another +9 bps from this time yesterday at 3.50%. 

The price of gold is down another -US$18 in New York, now at US$1811/oz, still knocked around by the strong US dollar.

And oil prices are falling too, from this time yesterday, now down -US$1.50 at just under US$117/bbl in the US, while the international Brent price is now just on US$119.50/bbl. 

The Kiwi dollar will open today sharply lower again at just on 62.1 USc and another -¾c fall from this time yesterday. Since the start of June that is now a -4.9% devaluation. Since the start of the year it is now an -9.1% devaluation. Against the Australian dollar we are unchanged at 90.4 AUc. Against the euro we are down -½c at 59.6 euro cents. That all means our TWI-5 starts today at just under 70.3, and down another -50 bps since this time yesterday. 

The bitcoin price has fallen again from this time yesterday and is now at US$22,393 and down another -3.3%. Volatility over the past 24 hours has been extreme again at +/- 7%. Below US$30,000 there is no technical support. If it goes below US$20,000 the speed of the fall could be sudden.

You can find links to the articles mentioned today in our show notes.

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again tomorrow.