The French gamble

Economy Watch

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 the EU parliamentary election jolt has everyone's attention.

But first in the US, in the four months December to March, consumer inflation expectations held steady at 3%. Then in April they rose 3.3%, and this latest NY Fed survey shows them easing somewhat to 3.2%. They were unchanged at the three-year horizon at 2.8%, and increased at the five-year horizon to 3.0% from 2.8%. So its a mixed picture where these expectations are holding higher than where they need to be.

In a well supported 3 year US Treasury bond auction (US$140 bln was bid for the US$58 bln available), the median yield achieved was 4.59%, and that was marginally higher than the 4.55% at the prior equivalent event a month ago.

Wall Street is in a bit of a lull at present as they await the combination of the May CPI result and the US Fed monetary policy meeting outcomes.

In Canada, consumer sentiment is beginning to improve, especially after their central bank made a cut to its official interest rate last week

In Europe, like many others, markets are recoiling at the EU parliamentary election results. And even more so, 'surprised' by the French reaction of calling a snap national election. But to understand both, you need to know that the EU parliamentary election featured low turnouts, some very low. That allowed motivated extreme parties to make some spectacular headline gains. But it wasn't all one-way traffic. Macron is gambling that a normal turnout in national elections will overwhelm the right-wing votes with more normal voting patterns as voters who sat out the EU version are 'shocked' into returning. We'll see.

In Australia, major supermarket Coles has imposed limits of how many eggs customers can buy after hundreds of thousands of chickens have been destroyed after bird flu was found at five large poultry farms. Prices are likely reflect these shortages, although the normal 'don't panic' notices have been issued.

The UST 10yr yield is now at 4.47% and and up +4 bps from yesterday.

The price of gold will start today back up +US$20 from yesterday at US$2313/oz.

Oil prices have risen +US$2.50 from yesterday and are now at just on US$77.50/bbl in the US while the international Brent price is just over US$81.50/bbl. So they are back to week-ago levels.

The Kiwi dollar starts today at just on 61.2 USc and up less than +¼c since this time yesterday. Against the Aussie we are little-changed at 92.7 AUc. Against the euro we are +¼c firmer at 56.9 euro cents. That all means our TWI-5 starts today still at 70.8, and up +20 bps from yesterday.

The bitcoin price starts today at US$70,043 and up +0.6% from this time yesterday. Volatility over the past 24 hours has still been low at just on +/- 0.7%.

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 tomorrow.