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 bond yields are rising sharply today as fears for a hot response in Taiwan seem to recede.

Overshadowed this morning by that Pelosi trip to Taiwan, the dairy auction delivered another weak result, down another -5% from the prior event. That means overall prices are now down -27% from the peak in March. The WMP price fell -6.1% and more than the fall expected. The SMP price fell -5.3% and also more than expected. Butter also fell -6.1%. Despite global reductions in milk supply, this auction didn't bring a respite from falling demand. Farm gate pay-out forecasts will now need to be pared back as this run of price declines is now well embedded and prospects for a turn higher seem to have faded. Expect analysts to start this trimming adjustment later this week. Today's decline was the fourth in a row, and the ninth of the past ten.

Meanwhile, American retail sales climbed last week to record one of their best gains of the year.

But the number of job openings in the US fell in June by -605,000 from a month earlier to 10.7 mln, the lowest in nine months and below market expectations of 11 mln. To put that in perspective, the US is expected to have 5.9 mln people unemployed in July, of which 1.4 mln are on jobless benefits. So roughly, there are two job openings for every unemployed worker. The June fall in job openings was the third consecutive drop after a record level in March. Ironically, retail was where some of the larger pullbacks happened in June.

In China, after a three month stand-down period to supposedly allow their in-shore fish stocks to recover, thousands of fishing vessels have been launched into these oceans for a renewed plunder. China doesn't show the same [minimal] restraint for the wider oceans.

And staying on the seas, global shipping giant Maersk has raised its earnings guidance again, a third rise. They say shipping freight costs will stay high for longer. The supply-chain congestion has been a river of gold for them, and they are essentially saying they want it to continue.

In Australia, their central bank raised their cash rate target by +50 bps to 1.85% as expected. Most analysts see another +50 bps coming in September, but then the increases will slow to +25 bps. They have raised their inflation forecasts and lowered their growth forecasts. There wasn't any indication in this announcement that they are about to drain their huge monetary reserves by starting quantitative tightening.

All eyes now turn to the New Zealand jobless rate and it is expected to be near historic-best levels, dropping from the March 3.4% to 3.1% (consensus), or possibly even below 3% (ANZ).

The UST 10yr yield starts today at 2.73% and surging +12 bps from this time yesterday. 

The price of gold opens today at US$1769/oz in New York which is unchanged from this time yesterday.

And oil prices start up +US$1.50 at just over US$94/bbl in the US, while the international Brent price is now just over US$100.50/bbl.

The Kiwi dollar opened today falling more than -½c from this time yesterday to 62.7 USc. Against the Australian dollar we are marginally firmer at 90.4 AUc. Against the euro we are little-changed at 61.6 euro cents. That all means our TWI-5 starts today at 71.1.

The bitcoin price has moved up from this time yesterday, up +1% to US$23,188. Volatility over the past 24 hours has been modest at just over +/-1.7%.

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.