Powell turns bond markets sceptics into believers

<p>Kia ora,</p><p>Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the international edition from Interest.co.nz.</p><p>And today we lead with news bond markets are coming around to believing the US Fed signals, reversing their view that their call for high rates was 'just talk'.</p><p>But first, US <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20231389.pdf" target="_blank"><strong>jobless claims</strong></a> stayed up at 250,000 last week at about the level expected. There are 1.67 mln people still on these benefits unchanged as well and also staying up. Although both are now higher than year-ago levels, they remain historically low and don't alter the underlying tightness of their labour market. But you do get a sense the next movement will be an unwinding of their benign labour market conditions.</p><p>The Chicago Fed's <a href="https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20231389.pdf"><strong>National Activity Index</strong></a> turned marginally negative in May after a positive showing in April.</p><p>The Kansas City Fed's regional <a href="https://www.kansascityfed.org/Manufacturing/documents/9600/2023June22.pdf" target="_blank"><strong>factory survey</strong></a> turned more negative in June as well, as did the Conference Board's index of <a href="https://www.conference-board.org/topics/us-leading-indicators" target="_blank"><strong>leading indicators</strong></a>. Both were as expected.</p><p>Meanwhile American <a href="https://www.nar.realtor/newsroom/existing-home-sales-edged-higher-by-0-2-in-may" target="_blank"><strong>existing home sales</strong></a> edged marginally higher and by more than expected in May, an improvement on the April retreat.</p><p>China is on vacation for its Dragon Boat Festival, a three day break. They are expecting more than 100 mln tourist trips this year which is actually higher than pre-pandemic levels.</p><p>Although still d