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 we are being reminded of the central role the giant Wall Street markets play in global finance.

It is a US holiday weekend, Memorial Day, and without those US markets operating, data releases and other market activity is very restrained.

But in the US, Fed boss Powell delivered a graduation speech that contained a spirited defense of those who run public services and the core role they play in a crisis. He clearly showed there are no libertarians in a recession or threat of one. They all want "the government" to cover their backs.

And the Trump Administration also shows the power of 'active' government policy setting. The using of tax policy to help your friends (and family) and punish your perceived enemies is on full display. And the use of tariffs to screw the scrum is a lever that also shows that clearly.

From his bully-pulpit, Trump has delayed a punitive tariff threat on EU goods to July 9. It was enough to depress the USD on the capricious uncertainty and the EUR as hit a one-month high.

We should note that American hot-rolled steel prices are now at US$900/tonne which is +29% higher than when Trumps tariff actions started to take shape at the start of 2025. These are policies that are embedding sharp producer price inflation there. And of course, they will rise from here, as tariff pressure builds on other efficient manufacturers outside the US.

You can contrast that with Chinese steel prices. We don't have hot-rolled coil steel prices for China to hand, but we do have rebar steel prices there and they are now US$425/tonne, down from US$460/tonne at the start of 2025, so a -7.5% decrease. A crude matching of the US and China steel price shifts suggests the Chinese-sourced products have gained a +35% advantage in the period, largely offsetting the tariff actions. It is American consumers paying for all this infantile policy-making.

Meanwhile, the world is getting on with business, but just with fewer data signals to start the week.

In Canada, factory sales there were weakish in April, the weakest month of the year so far. Key to the fall were declining output in both their oil industry, and their car manufacturing.

A recent review of the Canadian economy by the OECD suggests it will avoid recession, but that expansion will be hard to find in the present trade-war climate.

Meanwhile, the province of Alberta is feeling very uneasy. There is a fringe movement there to cede from Canada and become a US state, built on the feeling that federal Canada doesn't appreciate the economic role they play in the Federation. But that overlooks the central role the US is playing in depressing the oil demand and prices they claim is 'theirs'. Joining the US would only accentuate the feelings of 'victimisation'.

Across the Pacific, Singapore also released April factory production data and that rose faster from March, to be +5.9% higher than year-ago levels.

The UST 10yr yield is now at 4.51%, and unchanged from yesterday while the New York bond market was closed. 

The price of gold will start today at US$3,340/oz, and down -US$17 from yesterday.

Oil prices are holding at just on US$61.50/bbl in the US and the international Brent price is still just under US$65/bbl.

The Kiwi dollar is still at 60 USc, and up +10 bps at this time. Against the Aussie we are up +30 bps at just on 92.5 AUc. Against the euro we are down -20 bps at 52.5 euro cents. That all means our TWI-5 starts today still just under 67.9 and up +10 bps from yesterday.

The bitcoin price starts today at US$109,020 and up +1.6% from yesterday. Volatility over the past 24 hours has been modest at just on +/-1.4%.

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.