US advance goods orders jump, home ownership rate turns up, trade deficit eases; Russia ready to retaliate; Germans feel trapped; China targets supply side; UST 10yr yield at 2.31%; oil and gold up; NZ$1 = 74.9 US¢, TWI-5 = 77.6

Here’s my summary of the key events overnight that affect New Zealand, with news of an America doing well in spite of itself – lawmakers paralysed in internecine squabbling, but their economy is improving nicely.

On the economy front, there was a slew of US data released today, and most of it was positive for them. Firstly their June advance durable goods report shows new orders up a very strong +6.5%, although that comes after two months of slight weakness. Strong transportation equipment activity boosted the result, mainly for airplanes.

And after hitting a 50 year low in the March quarter, their home ownership rate jumped strongly in June, up to 63.7%. That ends a long downward track. (The New Zealand home ownership rate is 63.0% as at March and is still falling.)

The American trade balance in goods eased to a deficit of -US$63.9 bln in June, an improvement because exports were up and imports lower. Interestingly, trade with Mexico is booming – US imports from there rose +11.5% from the same period a year ago and US exports to its southern neighbour rose +9.5%. The goods trade is virtually in balance with a +US$63 mln advantage to Mexico, tiny when you realise the two-way trade in just one month amounts to more than $71 bln. The US trade disadvantage is barely a rounding error. And in related news overnight, the US Congress has given up on the Trump plan to institute a “border adjustment tax” which was proposed at the rate of 20%. The idea is dead, for now.

Tomorrow, the first estimate of their June quarter GDP will be announced. Markets are expecting an improvement from the March quarter, up to +2.6% growth.

It does appear that a do-nothing President and Congress is not hurting their economy.

In Russia, they are reported to be disillusioned by the new round of tough sanctions being adopted by the Americans, one policy area that is getting progressed in Washington with bipartisan support. A fresh start in relations between the two superpowers seems unlikely, and there are growing calls for retaliation by Moscow. And the Europeans, especially the Germans, are alarmed by this. The alarm is most keenly felt by German energy companies. The Germans are starting to talk about counter-sanctions against the Americans.

In China, the talk is all about ramping up their supply-side reforms. (Remember those here in the 1990s ? They had a huge, lasting impact on structure of the New Zealand economy, dragging us in to the modern world. But it wasn’t without collateral stress.)

In New York, the UST 10yr yield is up a little today at 2.31%.

The price of oil rose again overnight and is now at just over US$49 a barrel, while the Brent benchmark is now just under US$51.50.

The price of gold is slightly higher as well, up US$2 to US$1,249/oz.

The Kiwi dollar is just marginally weaker, now at 74.9 USc after yesterday’s run-up on the weakening greenback. On the cross rates we marginally higher at 94 AU¢, and at 64.1 euro cents. As a result the TWI-5 index will start today at 77.6.

If you want to catch up with all the changes yesterday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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