Daily Market Commentary 31st May 2023

A slow start to a shortened trading week, in some parts of Europe and the USA, following the long Memorial Day weekend in the States. The Debt Ceiling Negotiations were the dominant conversation on markets, although it is purely political gamesmanship and was extremely unlikely not to be extended. It was political theatre and markets were pre-occupied, with a lack of meaningful economic data releases. The S&P Case Shiller House Price Index turned positive for March, but remains negative for the year. The Dallas Fed Manufacturing Index collapsed into deeply negative territory, reflecting the parlous state of manufacturing in Texas, which appears to be representative of the US and Europe. EU Consumer Confidence remains in the doldrums and the EUR remains weak, trading around 1.0700, while the GBP fell below 1.2400.

The reserve was steady, but pressure remains on the commodity currencies as demand faulters. The AUD testing 0.6500, to the downside, while NZD slipped to 0.6030. Building Permits in April in both NZ and Australia crashed, due to cost and supply issues. NZ Building Permits contracted 2.6% for April, while Australian permits contracted 8.1% and over 24% for the year! This is despite a massive housing shortage in both countries and a huge wave of immigration, set to flood both countries with new citizens in the next two years. It will support house prices, but a housing crises is looming, with supply challenges, a demand explosion and all in an atmosphere of rising interest rates. Local Markets will look at NZ Business Confidence data due for release today, while market attention will turn to inflation data in Europe.