Volatility rises for high asset prices

<p>Kia ora,</p><p>Welcome to Tuesday'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 you may have "<a href="https://www.investopedia.com/terms/s/sell-in-may-and-go-away.asp" target="_blank"><strong>sold in May and gone away</strong></a>" after the past week's swoon.</p><p>Then you would have missed the overnight equity recovery where some investors were determined to "<a href="https://www.investopedia.com/terms/b/buy-the-dips.asp" target="_blank"><strong>buy the dips</strong></a>". Wall Street is making the Friday -1.3% dump back, and more - and ignoring the huge -3.3% retreat in Tokyo earlier. The Tokyo drop was said to be triggered by rising short term interest rates in the US, so the question is, why is Wall Street rising now? Mainly it in those sectors that benefit from the reflation trade.</p><p>In the US the Chicago Fed's <a href="http://www.interest.co.nz/sites/default/files/embedded_images/cfnai-june2021-pdf.pdf" target="_blank"><strong>national activity index</strong></a> reported a broad gain in May with all components rising - except personal spending which took a breather. Sales, production and employment categories all rose and reversing the April declines.</p><p>In Taiwan, their <a href="https://www.moea.gov.tw/Mns/dos_e/bulletin/Bulletin_En.aspx?kind=14&html=1&menu_id=6744&bull_id=9004" target="_blank"><strong>export order growth</strong></a> in May tailed off a bit from its +43% raging increase in April. The May rise is 'only' +35% year-on-year (or up +38% from May 2019).</p><p><a href="https://www.abs.gov.au/statistics/industry/retail-and-wholesale-trade/retail-trade-australia-preliminary/may-2021" target="_blank"><strong>Australian retail sales</strong></a> rose less than expected in May. The snap lockdown in Melbourne in that month kept things restrained. A national rise of +0.5% from April was expected but it came in at +0.1%. However, the -1.