Kia ora,

Welcome to Tuesday’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 there are growing suggestions that the inflation surge may be topping out

Remember, it is the July 4, Independence Day holiday in the US and financial markets are closed there.

Yesterday we noted than most of the top ten global commodities were falling in price now. Other key hard commodities like nickel, cobalt and tin are too, most essential for green energy projects. But not lithium yet even if its rise is now over. The overall slide in commodity prices are an indication that inflation's bite may be easing, and quite quickly.

Further, there are suggestions that the US may roll back some of its tariffs on Chinese imports, a Trump-era tax on Americans. (Only those drunk on MAGA propaganda thought they were a tax on the Chinese. US import volumes showed otherwise.) This could be significant too to arrest inflation.

China is feasting on cut-price Russian oil, gas and coal. It is helpful for China because their economy is struggling to regain momentum. Other suppliers like Iran are having to match the Russian discounts. That in turn is driving down West African oil prices. And Australian coal producers are having to make the same match. All these price declines in these key commodities are helping quell inflation globally.

In China, property developer Shimao Group has missed the interest and principal payment of a US$1 bln offshore bond due on Sunday, in the latest blow to China’s embattled property market.

To get their economy moving again, China has halved taxes on new car purchases.

And China has found more undeclared additives in what is being sold as "pure milk" products. And these are from the Xinjiang Uyghur autonomous region. Propylene glycol is the additive; no mention of forced labour at these dairy farms of course.

In Europe, there is no relief for producer prices, up +36% from a year ago, with energy prices almost doubling and non-energy prices up about +17%. But this is May data so there is no evidence yet that it is topping out, even if other June data has subsequently suggested that.

High Russian gas prices has pushed German importers to the brink of collapse. But now the German government wants to add a rescue measure for energy companies such as Uniper in its energy security law and may end up acquiring a stake in the company.

German exports slipped slightly in May when a small rise was expected. But that was despite a virtual collapse of exports to Russia (down -30% in 2022) . Being able to post a 'hold' in such circumstances has to be a good win for Germany in the circumstances, although since 2014 they have weaned themselves off Russia as a customer to a very substantial extent.

Turkey's inflation rate rose for a 13th consecutive month to almost +80% higher than a year ago, its highest since 1998. This is what happens when a central bank chooses not to raise interest rates early enough. Meanwhile their currency dived further making the problem worse. Everything Erdogan does reveals he is incompetent.

In Australia, SkyCity’s Adelaide casino will be scrutinised via an independent review as part of a widening Australian crackdown on the gambling industry.

One of Australia's largest insurers, Suncorp, says costs are rising from 'the material hardening of the global reinsurance market following elevated natural hazard activity in recent years’. Their focus might be Australia, but Kiwi premium payers probably won't be forgotten in insurance repricing for rising natural hazard claims.

And staying in Australia, there was a big and unexpected jump in the number of residential building consents issued in May, up almost +10% from April when a -2% fall was expected. It is unclear how analysts could get that so wrong. Also rising is bank mortgage lending, up more than +2% in May from April, when a -2% fall was expected.

The UST 10yr yield starts today still down at 2.89%. 

The price of gold is now down -US$5 at US$1808/oz.

And oil prices are up +US$2 at just over US$109/bbl in the US, while the international Brent price is just over US$113/bbl.

The Kiwi dollar will open today unchanged at 62.1 USc. Against the Australian dollar we are firmer at 91.5 AUc. Against the euro we are also unchanged at 59.6 euro cents. That means our TWI-5 starts today at just on 70.3 and marginally softer.

The bitcoin price has risen since this time yesterday and is now at US$19,904 and up +3.9%. Volatility over the past 24 hours has been moderate at +/-2.7%. The crypto lender Vauld, backed by Coinbase and Peter Thiel, is exploring a possible restructuring after becoming the latest cryptocurrency platform to freeze services.

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.