Risk sentiment sours

<p>Kia ora,</p><p>Welcome to Wednesday's Economy Watch where we follow the economic events and trends that affect New Zealand.</p><p>I'm David Chaston and this is the International edition from Interest.co.nz.</p><p>Today we lead with news interest rate signals are moving a lot today as perceptions of risk change in many directions.</p><p>But first, today's <a href="https://www.globaldairytrade.info/en/product-results/" target="_blank"><strong>dairy auction</strong></a> has brought quite a sharp shift lower in overall prices. They were down -3.6% in US dollars from the prior even two weeks ago, although with the lower exchange rate the decline in New Zealand dollars was 'only' -2.1%. SMP fell a hard -7.0% and Cheddar Cheese by -9.2%. The dominant-volume WMP fell by -3.0%. Since the +15% jump in early march, these prices have depreciated by a net -7.3% since, essentially cutting away half that March gain. The shift lower today will no doubt have analysts reassessing the 2021/2022 farm gate payout forecasts.</p><p>Also slipping more than expected is the closely-watched <a href="https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/services/june/" target="_blank"><strong>ISM services PMI</strong></a> in the US for June, although its fall is from a record high in May. This is a story about supply-chain constraints with severe difficulties getting supplies and sky high prices. Amongst the data, the employment index turned to contraction. It was data that undermined benchmark bond yields when it was released. The companion <a href="https://www.markiteconomics.com/Public/Home/PressRelease/cf907366306e4d8aa6b726a97d885634" target="_blank"><strong>Markit services PMI</strong></a> also fell (and also from a record high) but it didn't show the jobs pullback.</p><p>In Europe there was also a much sharper than expected reversal of <a href="https://ftp.zew.de/pub/zew-docs/frep/072021.pdf?v=1623829048" target="_blank"><strong>business sentiment in Germany</strong></a>, although it should be