NZ inflation expected to accelerate; oil prices ease from month-high

New Zealand’s inflation data will be closely watched when Statistics NZ releases the June quarter consumers price index figures today, with economists picking the fastest increase in prices in more than two years amid spiking fuel costs.

Meanwhile, oil prices eased from a month-high overnight as Iran said it had received proposals to de-escalate the heightened conflict, even as Houthis said they’d impose a blockade on Saudi ships in the Red Sea and US President Donald Trump vowed that the Islamic Republic would pay for the deaths of US troops in Jordan.

Stocks on Wall Street were mixed with chip companies recovering some of their recent losses and Alphabet rallying on reports that Google was developing a chip to boost artificial intelligence efficiency, while banks and drugmakers weighed on the S&P 500.

And the kiwi dollar was little changed against the British pound as Andy Burnham took over the UK prime ministership, pledging a new economic model and saying he’d use flexibility in fiscal rules.

Fuelling inflation

The kiwi dollar traded at 58.43 US cents at 7am in Auckland from 58.58 cents yesterday ahead of Stats NZ’s June quarter CPI data, which is expected to show the pace of inflation accelerated to 4% from 3.1% in the March period.

Bond traders have fully priced two more rate hikes this year, with a third pencilled in at the February policy review. The Reserve Bank is watching for any signs that the energy shock pushing up petrol prices is seeping into broader inflation.

“BNZ’s pick is slightly above consensus, while the RBNZ’s pick is slightly below consensus,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “With energy costs driving the stronger headline increase in inflation, there will also be keen interest in the core figures, most of which are likely to remain in the top half of the 1%-to-3% target band.”

Brent crude oil futures eased from their highs overnight, and were at US$89.46 a barrel at 7am as Iran said it’s received proposals from mediators to de-escalate the latest conflict, without providing more details.

Meanwhile, Iran-backed Houthis said they’d impose a blockade on the Red Sea, which Saudi ships have used as an alternative route to the Strait of Hormuz, and the US said it was sending more aircraft to the Middle East.

Stocks on Wall Street were mixed as the tech-heavy Nasdaq Composite rose 0.2% in late trading as chip stocks recovered some of their recent losses, with Alphabet gaining on reports that it’s developing a new AI chip, while Meta Platforms increased on news that BlackRock was leading a debt sale of at least US$12 billion to fund a new data centre in El Paso, Texas backed by the social media giant.

Nervous times

The Dow was down 0.5% in late trading, with Merck & Co, Boeing and Sherwin-Williams leading the blue chip index lower, while the S&P 500 was fractionally weaker.

Steel Dynamics, which lobbed in a takeover bid for ASX-listed BlueScope earlier this year, is due to report after the bell, while cinema chain AMC Entertainment surged 26% after reporting record quarterly revenue.

Warner Bros Discovery and Paramount Skydance declined after a judge ordered a 14-day pause on the media companies’ proposed US$110 billion deal to let a coalition of states led by California argue that the merger would harm competition.

The FTSE 100 dipped 0.7% and the yield on 10-year British gilts rose 8 basis points to 5.05% as Andy Burnham was formally appointed prime minister of the UK, pledging a new economic model and signalling a 10-year plan to ease cost-of-living pressures in the coming months.

“Of relevance to markets, he vowed to meet existing fiscal rules but added that he would ‘use obviously any flexibility within them’, perhaps a nod to the use of off-balance-sheet structures to fund targeted infrastructure projects,” BNZ’s Wong said.

The kiwi dollar traded at 43.49 British pence from 43.50 pence yesterday.

Meanwhile, Germany’s DAX nudged up 0.1% and France’s CAC 40 was marginally higher.

Australian futures are pointing to a 0.4% decline for the S&P/ASX 200 index when trading opens across the Tasman.

Greg Boland, market strategy consultant at Moomoo, said the NZX would likely have a mixed opening, with investors cautious ahead of the inflation data.

“Higher energy costs continue to cloud the outlook for interest rates, while stronger export companies are benefiting from resilient international demand,” Boland said in a note.

Reporting by Paul McBeth. Image from Juan Fernandez on Unsplash.