Kia ora,

Welcome to Tuesday'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 of widening variation between countries as the pressure to reopen intensifies.

In the US, their National Bureau of Economic Research said that the economy hit its peak in February and had since fallen into a downturn, as pandemic-related shutdowns tanked activity and brought an end to a record-long expansion - one that had lasted 128 months. The US is now officially in recession.

But despite that, we may be seeing some signs of a turnaround. American consumers felt slightly more optimistic about their finances and job security in May as businesses began to reopen and rehire workers. But the change is only marginal.

There has been a surprising piece of data out in Canada - their housing starts jumped unexpectedly, and driven by single family homes. In fact, these starts were higher in May 2020 than in the same month in 2019.

In China, new data shows steel production near all time record levels, and passenger car sales are growing again. (Tesla is starring.) There are other signs of a China rebound as well.

All of this is adding legs to the unusual run for the iron ore price. That is helping propel Aussie exports past the AU$100 bln annual rate.

But things aren't so happy on the residential sales front in Australia. Industry watchers think they are witnessing a worrying downturn in sales and especially auction sales.

The latest compilation of Covid-19 data is here. The global tally is now 7,065,600 which is up +210,000 in a day, and a faster rising pace. Brazil has decided not to release official data regularly. Global deaths are now over 404,000. India seems to have thrown in the towel in trying to contain the virus spread. It is allowing reopenings of shopping centres and restaurants in a major rollback. That is almost certainly going to explode the infection rate there.

Just under 28% of all cases globally are in the US, which is up +24,000 since this time yesterday to 1,951,100. This is also a faster rate of increase. US deaths are now exceed 111,000.

In Australia, there have been 7265 cases (+5 since yesterday), 102 deaths (unchanged) and a recovery rate of just over 92% (unchanged). 19 people are in hospital there (+1) with 3 in ICU (unchanged). There are now 457 active cases in Australia (+2).

There were zero cases again yesterday in New Zealand, and no-one left who is COVID-19 positive. We are now at Level 1 with virtually no restrictions, except our border remains closed.

Wall Street is moving higher with the S&P500 up +0.7% in Monday trading there. Overnight, European markets fell about -0.5%. Yesterday Asian markets were mixed with flat results in Hong Kong and Shanghai, but a very strong gain in Tokyo.

The UST 10yr yield is down -1 bp at 0.88%.

The gold price has turned back up today, rising by +US$17 to US$1,698/oz.

Oil prices are lower today, ending a recent run of gains. They are down by more than -US$1 to just over US$38/bbl in the US. The Brent price is up to just under US$41/bbl. BP has announced plans to cut 10,000 jobs or 15% of its workforce following the global slump in demand. Very long life car batteries entering the market won't help either.

And the Kiwi dollar has risen even further. We are now just on 65.5 USc. On the cross rates we are to 93.5 AUc and still a one month high. Against the euro we have are up to 58 euro cents. That means our TWI-5 has been pushed up to 70.1.

Bitcoin has turned higher as well, up +2.2% to US$9,717.

Finally, if you are one of the new listeners how have joined us recently, welcome – we appreciate your company.

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

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