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.

And today we lead with news investors are ignoring the geopolitical risks.

The main talking point today is how little financial and commodity markets have reacted to the sudden Gaza-Israel conflict threats. Yes, bond markets are having a 'flight to safety' with yields falling somewhat, but is it limited. Yes, oil prices have risen, but they are are hardly back to week-ago levels yet. Equity markets have hardly reacted. And yet geopolitical risks have clearly risen and the world is a much more dangerous place. Rogue nations are chancing their arm for positioning in a multipolar world. Things are getting messier as authoritarians see their chance.

But markets are yawning. Investors are sidelining those risks, 'happy' they don't involve the major economic blocks in North America, Japan, the EU or even China.

However, there are risks to worry about, especially in China.

It was a national holiday there last week. There is evidence that travel-related activity was quite strong, but that retail activity was not especially strong. Levels this year barely exceeded 2019, it seems.

And the return to work there isn't starting with great signals. China is a very big place so it is possible to find evidence of all trajectories. But there is one that accentuates the drag of a stuttering property market. Steel rebar futures fell to their lowest since August (which itself was a false dawn) and threatening 2017 levels. Confidence construction activity will recover isn't high. That doesn't augur well for New Zealand sales of logs to China.

And in China a copper billionaire has 'gone missing' as his company wobbles, essentially grinding to a halt.

The UST 10yr yield starts today down -13 bps from yesterday at 4.65% with a clear 'flight to safety' underway that raises the price of benchmark bonds and lowers their yield. 

The price of gold will start today at just on US$1850/oz and up +US$17 from this time yesterday. But that only takes it back to where we were a week ago, well before the Gaza explosion.

Oil prices have risen +US$3 to US$85/bbl in the US. The international Brent price is just under US$87/bbl. Yes, there is a lot of talk the oil price 'surges' but in fact both are lower than week-ago levels and both lower than you might have expected given the new Middle-East conflict. Maybe it will come, but it hasn't come yet.

The Kiwi dollar starts today at 60 USc and a very minor firming from yesterday. Against the Aussie we are up +20 bps at 94.1 AUc extending our steady gains. Against the euro we are up almost +½c at just under 57 euro cents. That all means our TWI-5 starts today at just on 70.2 which is up +20 bps from yesterday and a three month high.

The bitcoin price starts today at US$27,379 which is down -2.0%% from this time yesterday. Volatility over the past 24 hours has been modest at +/-1.3%.

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

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

Kia ora. I'm David Chaston. And we will do this again tomorrow.