Kia ora,

Welcome to Wednesday'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 the gold price has made a run at its highest ever level, one reached in August 2011.

But first up today there was another dairy auction overnight and prices were basically stable, even if slightly on the soft side. They were down -0.7% overall in US dollar terms and down -1.9% in New Zealand dollar terms. The key WMP price actually rise +0.6% as did the cheese price, but most other lines dipped, and especially butter that was down almost -5%. The key here however is that overall it cements in the prior auctions +8% rise and so this one poses no threat to farm gate milk prices.

In the US, retail sales rose at a +1.9% rate from the prior week, but are still down -7.5% from the same week a year ago and that is a steeper year-on-year decline that we saw last week.

The Chicago Fed's National Activity Index was up in June from May with a minor +4.1% gain given that May was a relatively minor rebound from the deep April contraction.

In China, we are keeping an eye on their flooding situation which seems to be worsening. The alert level at the massive Three Gorges Dam is at its highest level now. There is potential for a major disaster here.

The Australian government has expended its payroll support program for another six months through to March 2021, but cut the level of payments sharply, especially for part-time workers. It is estimated that 2.5 mln people will move off the program in its revised form leaving only 1 mln on it. And it is expected that ½ mln will move on to their unemployment benefit.

After nearly five days of intense haggling, the EU has done its €750 bln stimulus deal. It is a deal notable for its firsts: European countries will raise large sums by selling bonds collectively, rather than individually; and much of that money will be handed out to member nations hit hardest by the pandemic as grants that do not have to be repaid, and not as loans that would swell their national debts. This is also a deal where Germany and France sided with the poorer Southern members, and although acrimonious probably points to a new more federal union that will stand up to the new autocrats in the east.

The European equity markets were positive about the outcome, rising modestly overnight after pricing in a good gain in anticipation of the deal. In current trading, Wall Street's S&P500 is up +0.6% partly on the same news. Yesterday, and quite separately, Shanghai was flat (+0.2%) while Hong Kong (+2.3%) and Tokyo (+0.7%) both posted good gains. Locally, the ASX200 ended the day up a strong +2.6% on the Aussie wage support announcement, and the NZX50 Capital Index was up +1.6% on strength with two icon stocks, FPH and A2M, both of which have pandemic advantages.

The latest compilation of COVID-19 data is here. The global tally is 14,775,000 and that is up +208,000 since this time yesterday. Global deaths reported now exceed 612,000 (+5,000).

A quarter of all reported cases globally are in the US, which is up +60,800 from this time yesterday to 3,989,400. US deaths now exceed 144,400 and a death rate of 436/mln (+2/mln). The number of active infections in the US is now up +12,000 in a day to 1,982,600.

In Australia, there have now been 12,428 cases reported, another +359 since this time yesterday, and still concentrated in Victoria but growing in NSW in Sydney's suburbs. Their death count is up to 126 (+3) and 38 people are now in ICU (+5). Their recovery rate has slipped back further to under 69%. There are now 3761 active cases in Australia (up +207 in a day).

The UST 10yr yield has dipped by -1 bp to 0.61% and that is its lowest level in three months.

The gold price will start today sharply higher at US$1,843/oz which is a large +1.5% daily rise or a +US$27 gain overnight. Much of the gain however relates to US dollar weakness. (The highest price ever was US$1918/oz on August 22, 2011. The highest daily close was US$1895/oz on September 5, 2011.)

Oil prices are up about +US$1 today. They are now just under US$42/bbl in the US and the international price is just over US$44/bbl.

And the Kiwi dollar will start today sharply firmer against the greenback (which has sunk in overnight trade), and is now at 66.4 USc and almost its highest level of the year. But other currencies have also gained sharply against the US dollar so we are down more than -½c at 93.1 AUc. Against the euro we also stable at 57.6 euro cents. That means our TWI-5 is now at 70.3 and still broadly the level of the past three weeks.

The bitcoin price is +1.8% firmer at US$9,369.

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. We will do this again, tomorrow.