The agreement boosted international equity markets, with the S&P 500 reaching a fresh record high. While the optimism was most pronounced in the US and Europe, ripple effects were felt across financial markets.
The US-Vietnam agreement is a strategic move ahead of a looming July deadline for reciprocal trade tariffs. Under the deal, Vietnam will lower tariffs on American exports, while the US introduces new tariffs on transhipped goods. This announcement follows similar framework agreements with China and the UK. However, tensions persist with countries like Japan, where the prospects of a resolution remain unclear.
In Europe, investor confidence was also evident as the Euro Stoxx index posted gains. However, the UK gilt market tumbled, leading to a sharp rise in long-dated bond yields. This instability weighed on the British pound, which fell noticeably against both the US dollar and the euro. The weakness in the pound helped the New Zealand dollar hold its ground on the NZD/GBP cross.
Crude oil prices climbed close to 2 per cent in anticipation of the upcoming OPEC+ meeting. This upward movement in energy prices contributed to a broader sense of market optimism, although it also signalled potential pressure on inflation figures in the months ahead.
Despite the bullish tone in equities and commodities, some caution lingered due to underwhelming US labour market data. A recent report from ADP showed a surprise drop in private sector payrolls, with job creation significantly below expectations. While the ADP figures have not consistently aligned with official government data, the soft reading prompted a brief dip in short-term US treasury yields. The steepening of the yield curve reflected ongoing concerns over fiscal policy and bond supply pressures, particularly in the wake of the UK market’s volatility.
In New Zealand, the domestic bond and swap markets largely echoed offshore movements. Swap rates nudged 1–2 basis points higher, while government bond yields also drifted upward. NZ Debt Management tapped the May 2031 government bond, attracting strong interest and achieving tighter pricing margins. The sizeable NZ$28.6 billion order book reflects continued demand for long-dated, high-quality assets.
The New Zealand dollar weakened slightly across most major currency pairs, although it showed some resilience against the pound. Overnight fluctuations took NZD/USD toward the 0.6050 level before rebounding modestly. With no major local economic data due immediately, attention will shift to the release of the Crown Financial Statements for May.
Markets are now watching for key US economic releases, including nonfarm payrolls and the services ISM index. These updates could set the tone for financial markets in the days ahead and influence investor sentiment in New Zealand.
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