Japanese retail rises; South Korea all in on AI chipmaking; Singapore & Malaysia struggle with producer prices; global rural outlook looks good; air cargo activity expands; UST 10yr at 4.37%; gold dips and oil up; AU$1 = 68.9 USc

Here's our summary of key economic events overnight that affect Australia, with news of new truce agreements in the Middle East, at least as claimed by the US. Iran is conspicuously quiet that there is any agreement however.

But at the year's half-way point, economic prospects are generally far from dire.

In the US, the next regional Fed factory survey for June is out from the Dallas Fed. That shows little-change. Price pressures were mixed, as selling prices and wages rose faster while input cost pressures held steady. Looking ahead, manufacturers remained optimistic, especially as they are able to recover their cost increases. It is a sign inflation is being tolerated and embedding. Despite that, company bosses say inflation is their top concern.

Across the Pacific retail sales in Japan rose +5.3% in May from a year ago, rising from an upwardly revised +2.8% rise in April and higher than the expected +3.2% gain. It was also their strongest growth since November 2023. The strength was broad-based and especially in new car sales. Not driving this increase was fuel costs because they actually fell in the month.

In South Korea, a monumental public-private investment announcement. They have announced an "unprecedented" US$520 bln (NZ$920 bln) plan with Samsung Electronics and SK Hynix to expand chipmaking capacity in the country to stay competitive in the global artificial intelligence race. It will feature the construction of new four production facilities, or "fabs" - two by each of the chipmakers.

The surge that started in March for Singapore's producer prices has only risen from there, coming in +26.8% higher than year-ago levels. This doesn't include fuel, but it does include chemicals (+29%) and machinery (+31%).

Malaysia’s producer prices rose +7.8% in May from a year ago, accelerating from a 5.4% growth in the prior month and marking the third straight month of gain. It was also the fastest increase since June 2022, with producer-level cost pressures mounting amid persistent disruptions linked to the Middle East conflict.

India's industrial production stayed at an expansion rate of +5.1% in May from a year ago, held back by their mining industry, and no doubt by energy conservation issues. But it is still a fast expansion and higher than the 4.8% rate in May 2025.

EU economic sentiment ticked up in June from a low level, mainly because of an improvement in consumer sentiment. But it was not matched by a similar improvement in business sentiment.

Globally, the FAO has been reviewing the outlook for the rural economy. Among many observations, they see China's demand for beef rising sharply so that beef and sheep meat prices will be underpinned. For dairy products, they note that most of the global growth will come from India, but for internal consumption. Only 7% of global production is expected to be exported, and 70% of that will be by just three countries - the EU, the US and New Zealand. Prices are expected to stay high for exported product. Overall, they see rising rural productivity, especially in advanced countries.

And staying global, the latest data for air cargo demand has been released, for May, and that shows a +6% expansion, driven by an +8.0% rise in Asia Pacific international trade, and a +12.9% recovery in trade with North America.

The UST 10yr yield is now just on 4.37%, unchanged from this time yesterday. The key 2-10 yield curve is now at +26 bps (down -2 bps). Their 1-5 curve is now at +18 bps (-2 bps) and the 3 mth-10yr curve is at +69 bps (-1 bp). The China 10 year bond rate is back down -7 bps at 1.72%. The Japanese 10 year bond yield is up +4 bps at 2.64%. The Australian 10 year bond yield starts today at 4.74%, up +1 bp from yesterday. And the NZ Government 10 year bond rate is at 4.40%, also up 1 bp.

Wall Street has started it week up +1.1% on the S&P500, up +1.9% on the Nasdaq. Overnight, European markets were marginally lower, all by -0.2%. Yesterday Tokyo closed up +0.2%. Hong Kong closed up +1.6% however, and Shanghai was up +1.2%. Singapore was up +0.3%. The ASX200 ended up +0.7%. And the NZX50 ended up +0.4%.

The price of gold has retreated to US$4022/oz, down a net -US$66/oz from yesterday. Silver is now under US$58/oz, down -US$1 from a day ago.

Oil prices are up +US$2 from yesterday at just on US$71/bbl in the US, while the international Brent price is now just over US$73/bbl. (Interestingly, while these prices rose, Russian oil prices fell, now down to US$57/bbl ). Hormuz transits have stayed at their lower level after the recent flare up in fighting with just 14 crude or product tankers exiting over the past 24 hours (2 dark with transponders off) but 28 entering for new loads (3 dark). Over the past two days, almost 70% of the exiting vessels were headed to China.

The Australian dollar is down -10 bps from this time yesterday at just on 68.9 USc. Against the Japanese yen we are unchanged at ¥111.5. Against the euro we are down -30 bps at just on 60.3 euro cents.

The bitcoin price starts today at US$60,319 and up +1.4% from this time yesterday. Volatility over the past 24 hours has been modest at just over +/- 1.4%.