Kia ora,

Welcome to Friday’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 that markets are assuming a US debt deal will be done soon to avoid a shutdown and default.

Well, equity markets seem to be assuming that. Bond markets aren't so sure although yield inversions are either easing back or not getting worse. But long-term rates are rising slightly.

Last week's new American jobless claims fell back unexpectedly to +216,000 and there are now 1.6 mln people on these benefits. Analysts had expected higher levels, not lower levels. The strength of the US labour market is not done yet it seems. Markets noticed, thinking this will give room for another Fed rate hike at their June 15 (NZT) meeting.

The next regional Fed factory survey, this one from the manufacturing heartland by the Philadelphia Fed was far less negative than the New York one. It improved in May sharply from its April low although to be fair it is still not 'positive'. The indicators for current activity, new orders, and shipments rose, but all three remained in negative territory. The firms surveyed continue to indicate overall increases in prices paid and decreases for prices received. The survey’s future indexes still suggest "tempered expectations" for growth over the next six months.

Meanwhile, existing-home sales faded -3.4% in April to an annual rate of 4.28 mln. That is their largest drop in more than a decade. Sales fell more than -23% from one year ago. Unsold inventories rose.

Leading indicators for the US economy remain mildly weak, but little-changed.

In the period leading up to round one of the Turkish election, investors voted with their feet, betting Erdogan would not concede and would remain. The country's foreign currency and gold reserves fell another -US$17 bln. The run-off round of voting there is on May 28, 2023

In Australia, their jobless rate rose to 3.7% in April from 3.5% in March. It was a rise that wasn't expected. At the same time, employment -4,300 when a +25,000 rise was expected. Full-time jobs fell -27,100 while part-time jobs rose +22,800.

And staying in Australia, Westpac has banned customers from transacting with Binance. And Binance was stripped of its ability to accept PayID funds transfers from Australian clients. The global crypto firm is fighting to retain banking services in Australia. It is a firm accused of knowingly facilitating money laundering in other jurisdictions, especially the US, and no-one wants to get caught up in that.

The latest global container freight cost eased yet again last week and is now -83% below the peak reached in September 2021. It is also -36% lower than the 10-year average which of course includes that peak. However it remains more than +20% higher than average 2019 pre-pandemic rates. The current weakness is spreading to more than just the outbound rates from China. Bulk cargo freight rates eased but are still in their recent general range.

But air passenger travel is ramping up, anticipating a surge in demand. That translates to thousands more aircraft and new pilots. Boeing estimates that the world will need more than 600,000 new pilots between 2022 and 2041, and the biggest requirement is in Asia. Pilot training is a huge new growth industry, it seems. Aircraft manufacturers are salivating.

The UST 10yr yield starts today at 3.66%, and up another +8 bps from this time yesterday and a two month high. 

The price of gold will start today at US$1957/oz and down -US$24 in a day.

And oil prices are down -US$1.50 from yesterday to be just under US$71.50/bbl in the US. The international Brent price is now under US$75.50/bbl.

The Kiwi dollar is a -½c lower against the USD from yesterday and now just on 62.1 USc. Against the Aussie we are little-changed at just under 94 AUc. Against the euro we are also little-changed at 57.7 euro cents. That means the TWI-5 is now under 70.8 and down -20 bps from this time yesterday.

The bitcoin price is lower today, now at US$26,477 and down -2.2% from this time yesterday. Volatility over the past 24 hours has remained modest at just on +/- 1.9%.

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 on Monday.