Fed claims the US recovery on track

Kia ora,

Welcome to Thursday's Economy Watch where we follow the economic events and trends that affect New Zealand.

I'm David Chaston and this is the International edition from Interest.co.nz.

Today we lead with news, company earnings are mixed, but generally support the idea that the giant US economy is mending quickly.

The US Fed has been meeting and as expected made no change to their policy positions. But their mood was upbeat about the trajectory of the US economy and suggesting a tapering is in their plans. And they repeated that they see the current inflation impulse as temporary.

And it seems that the Biden Administration will pull off a bipartisan infrastructure deal very soon.

Separately, the US announced a massive -US$94.3 merchandise trade deficit, driven by surging imports which were up almost +5% from May, up +35% from the pandemic-affected June 2020, and up +17% from June 2019. Exports are up too, but not like this.

One of the early pandemic victims was aircraft manufacturer Boeing. But it is now in recovery mode and back in profit, shelving plans to shed another 10,000 workers by the end of the year. It is also now boosting production of the 737 MAX jetliner amid the airline industry’s recovery.

And in other corporate earnings news, Pfizer says it now expects to make US$34 bln in revenues from its COVID-19 vaccine by delivering 3 bln doses, up from its previous estimate of US$26 bln.

US mortgage applications jumped last week, and mortgage interest rates fell, and quite noticeably and taking them back to early 2021 levels.

Canada reported its June CPI inflation which came in at +3.1% which was lower than expected (3.2%) and lower than for May (3.6%).

In Australia, they released their June CPI result yesterday. It rose +0.8% this quarter and over the twelve months to the June 2021 quarter, the CPI rose +3.8% exactly as expected. The increases there were led by petrol (+6.5%). The last time weekly earnings data was released it showed wages up +3.2% in a year. The next time this gets updated is August 19. They are expecting the base CPI effects to unwind quickly.

On Wall Street, the S&P500 has turned negative on mixed earnings reports after starting off ahead, and is down -0.2% so far. Overnight, European markets were mixed with London up the least (+0.3%) and Paris up the most (+1.2%). Yesterday, Tokyo fell a sharp -1.4% on the day. However Hong Kong clawed back +1.5% on the day, but Shanghai shed another -0.6% in a continuing sell-off. Beijing gathered 'the home team' for a pep talk at the end of yesterday's session. 

In the US, a blue-ribbon group has concluded the US Treasury market needs urgent reform. They are proposing sweeping changes to prevent repeated market meltdowns like those seen in 2020.

The UST 10yr yield starts today at just on 1.26% and a +2 bps change. 

The price of gold is now just over US$1797/oz which is down -US$5 from this time yesterday. This continues the recent yo-yo pattern around the US$1800/oz mark.

Oil prices have risen by +50c and in the US they are now just under US$72/bbl, while the international Brent price is still just under US$74/bbl.

The Kiwi dollar opens today just on 69.3 USc and another -30 bps lower than this time yesterday. Against the Australian dollar we are another -10 bps lower at 94.4 AUc. Against the euro we are also another -10 bps lower at 58.7 euro cents. That means our TWI-5 starts today at 72.3 and a further backslide.

The bitcoin price is now at US$39,313 and back up +3.5% since this time on yesterday. Volatility in the past 24 hours has been very high again at +/- 4.7%.

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

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

Kia ora. I'm David Chaston and we’ll do this again tomorrow.