Here's our summary of key economic events overnight that affect Australia, with news of more big-country tariff negotiation updates.
But first, US mortgage applications were little-changed last week as their benchmark 30 year mortgage rate rose.
Meanwhile, American home resales fell in June from May to an annualised rate of under 4 mln and down -4.4% from June 2024. This was largely driven by declining sales of single family homes. But median prices inched up, now at US$435,300 (NZ$720,000). High mortgage rates are getting the blame.
There was another US Treasury bond auction overnight, this one for their 20 year maturity. It was well supported with a median yield of 4.89%. That was little different to the 4.88% at the prior equivalent event a month ago.
The US has said it has agreed a 15% tariff deal with Japan (a notable level lower than the arbitrary 25% previously imposed). The main thing Japan had to do was agree to buy things (like aircraft) that would probably have bought from the US anyway. But it also supposedly requires Japan to water down its standards for rice imports and open their markets to US cars. Both of those requirements show a distinctly naive understanding of Japan. Very likely they will drive an anti-US sentiment by consumers there, mirroring what is happening in Canada. Japanese investors loved the deal - for Japan. boosting the Nikkei225 +2.2% at its market opening yesterday and ending the day up +3.5%.
The Japanese bond market - an enormous beast - reacted with Japan’s 10-year government bond yield surging nearly +10 bp to around 1.60% approaching its highest level since 2008.
In South Korea, the glow after resolving its presidential issues has seen its Consumer Sentiment Index rise in July from June, the fourth consecutive monthly gain and the highest reading since January 2018. The improvement reflects growing optimism fueled by the newly elected government and expectations for economic stimulus.
Taiwanese industrial production continues to expand aggressively, up another +18% in June from a year ago, no surprise given the strong order inflows we reported earlier this week. But Taiwanese retail sales are nowhere near as positive, actually.
In Europe, there is growing optimism some sort of tariff deal with the US is imminent. The US-Japan deal is being seen as a benchmark, and the optimism is fuel by the early judgement that Japan will come out on top in that one.
In Australia, economic growth momentum is leaking away. At least, that is what the Westpac-Melbourne Institute leading indicator data shows. For them, the main drag coming from commodity prices, consumer and business sentiment, and total hours worked.
The UST 10yr yield is now at 4.39%, up +5 bps from yesterday at this time. The key 2-10 yield curve is unchanged at +51 bps. Their 1-5 curve is less inverted at -15 bps. And their 3 mth-10yr curve a steeper +10 bps positive. The Australian 10 year bond yield starts today at 4.33% and up +5 bps from yesterday. The China 10 year bond rate is firmish again at 1.70%, up +1 bp.
Wall Street is up +50 USc in Wednesday trade on the S&P500 and a new record high. Overnight European markets were mixed with London up +0.4% but Paris up 1.4%. Yesterday Tokyo ended up a very strong +3.5% on the US tariff deal. Hong Kong was up +1.6% but Shanghai was little-changed. Singapore was up +0.5%. The ASX200 ended up +0.7%.
The price of gold will start today at US$3,387/oz, down -US$40 from yesterday.
American oil prices are holding at just over US$65/bbl but the international Brent price is still at just under US$68.50/bbl.
The Australian dollar is now at 65.9 USc and up +25 bps from yesterday. Against the Japanese yen we are unchanged at ¥95.6. Against the euro we are down -50 bps at 56 euro cents.
The bitcoin price starts today at US$117,867 and down -1.1% from this time yesterday. Volatility over the past 24 hours has remained modest, at just under +/-1.2%.