Lake Lucerne talks make edgy progress

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. Today we lead with news the Swiss talks between the US and Iran seem to have made progress overnight, from Iran's point of view at least. The fighting in Lebanon has abated. Oil prices have fallen following the 60 days peace deal roadmap is still in place. To keep the momentum, the US Treasury Department has agreed it will not enforce their sanctions on the production, delivery and the sale of Iranian oil - for at least these 60 days. But of course, Iran has been selling oil before and after these sanctions, although it just got easier for them. Having noted that news, ship traffic in the Strait of Hormuz has in fact changed little so far. Over 400 ships are waiting for confirmed safety before their owners will move them. And in turn, they are waiting for insurers to price their cover at more normal terms. In the US, the Fed is actively assessing (https://www.federalreserve.gov/newsevents/speech/waller20260622a.htm) how its global dominance in financial markets can be enhanced by linking US Treasuries to USD stablecoins. And staying in the US, we should probably note that Alan Greenspan (https://en.wikipedia.org/wiki/Alan_Greenspan) , who led the US Fed from 1987 to 2006, has died, aged 100. His legacy is controversial, being the originator of "whatever it takes" (The Greenspan put), and which many say led to the ensuing real estate bubbles worldwide. Canada's May CPI (https://www150.statcan.gc.ca/n1/daily-quotidien/260622/dq260622a-eng.htm) came in at 3.2%, higher than expected and the most since December 2023. Driving the rise was fuel costs of course. On a core basis this inflation is running at 2.2%, about what was expected and only marginally different o April's level. The Chinese central bank has kept its key lending rates (Loan Prime Rates (https://www.pbc.gov.cn/rmyh/108976/index.html#r_con4) ) at record lows for a 13th straight month in its June review. Chinese economic momentum has recently sputtered, delivering mixed economic data, so this cautious no-change was widely expected. Meanwhile China's foreign direct investment (https://www.mofcom.gov.cn/xwfb/rcxwfb/art/2026/art_dce7b1bd2f07450bb32c48ec330533b8.html) indicates significant struggles in attracting and keeping investors from outside the country. On a year-to-date basis, FDI fell -8.3% in yuan terms, down -3.1% in USD terms. But the May activity is much weaker coming it at just a third of year-ago levels and the net was a very minor +US$6.3 bln this year. So far in 2026, these levels are the weakest in at least ten years, probably longer, continuing a trend that is off its 2022 peak. They often talk about 'opening up' but for the past three years they have been shunned and those initiatives are failing. In Europe, consumer sentiment (https://economy-finance.ec.europa.eu/document/download/048e52b1-167a-4903-9e97-612239018383_en?filename=Flash_consumer_2026_06_en.pdf) has recovered some in June after their deeply negative fall in May. But it is only a minor recovery and remains deeply negative. In Australia, their housing market is slowing noticeability. This past week and weekend their auction clearance rate (https://www.cotality.com/au/press-releases/combined-capitals-preliminary-clearance-rate-falls-to-47-4-lowest-since-april-2020) fell below 50% and to its lowest in six years. In Brisbane it got as low as 33%. In Sydney it was 47.4%. In Melbourne it was 50.6%. Prices are in a falling trend too (https://www.smh.com.au/politics/federal/house-price-fall-could-slice-100-000-from-your-home-s-value-20260622-p608yl.html) . And in spite from the full-court press vested business interests have made against recent Canberra budget moves that affect housing, it looks like voters approve (https://www.smh.com.au/politics/federal/down-down-australian-home-owners-back-fall-in-house-prices-20260621-p608pl.html) . The UST 10yr yield (https://www.interest.co.nz/charts/interest-rates/us-treasures) is now just on 4.51%, up +2 bps from this time yesterday. The price of gold (http://www.interest.co.nz/charts/commodities/precious-metals) has held at US$4180/oz, up a net +US$25/oz from yesterday. Silver is at US$65.50/oz, up +50 USc from yesterday. Oil prices are down -US$4 from yesterday at just under US$73.50/bbl in the US, while the international Brent price is now just on US$77.50/bbl. Hormuz transits (https://insights.windward.ai/) are staying modest up with 10 crude or product tankers exiting over the past 24 hours (3 dark with transponders off) and 10 entering for new loads (2 dark). Most are ships heading for China and India. (Normal is 60 in each direction.) The Kiwi dollar is down -30 bps from this time yesterday at just on 57.1 USc. Against the Aussie we are also down -30 bps at 81.6 AUc. Against th...