Trump pushed out the start date for Mexico and Canada tariffs to 2 April, says tariffs on products from the EU like autos and "other things" will be 25%. US equities recover after recent fall. US 10-year Treasury rate pushes down to a fresh 2025 low

Newsflow has been light but in breaking news Trump said Canada and Mexico tariffs – proposed at 25% – would go into effect 2 April.  This is yet another pushback, from the original 1 February start date that was subsequently pushed out to 4 March. The timing of 2 April would coincide with the proposed start date for a whole host of other tariffs, subject to the various trade reports that will land on Trump’s desk due 1 April. Trump also said tariffs on products from the EU like autos and “other things” will be 25%.  Other details will be forthcoming.

These tariff imposts are worse than assumed in the lead-up to the election, but the market still seems to be holding out hope that they will not proceed. This a dangerous assumption. Trump’s update on tariffs caused a little ripple in the market, but it’s fair to say that the tariffs are nowhere near fully priced.

For the day, there have only been small changes in rates and currency markets. US equities have broken their run of four consecutive down days, with the S&P500 recovering 0.4% in early afternoon trading, albeit with some paring of earlier gains after Trump’s update.  Focus is on Nvidia’s earnings result which is released after the close this morning. Ahead of that release, its stock price is up over 4%, amidst broader gains in the IT sector.  In a flip from recent days, IT and cyclical stocks are outperforming today.

After five consecutive days of falling yields for the 10-year rate, US Treasuries are consolidating, although the yield is down slightly for the day.  A small lift during NZ trading hours has reversed overnight, leaving the yield at just over 4.27%, down 4bps from the NZ close and a fresh 2025 low.

There has been little economic data, but US new home sales plunged 10.5% in January from an upwardly revised December. The coldest January since 1988 contributed to the weak figure.

Republicans narrowly voted in favour of a Budget blueprint, that paves the way for extending the 2017 tax cuts and reduced spending. The Budget won’t accommodate all of Trump’s desired tax cuts and the vote is only a small step in the process. The Senate is likely to alter the plans and there is likely to be numerous reiterations before any deal is settled.

Currency markets show small net movements. The NZD dipped below 0.57 overnight but is currently just over that figure, down slightly from this time yesterday. The AUD fell to 0.63 before recovering a little. NZD/AUD is flat around 0.9030. GBP has been the strongest of the majors, making a run for 1.27, seeing NZD/GBP fall to just under 0.45. The CAD is flat for the day, reversing an earlier modest fall after Trump’s tariff update. EUR fell from just over 1.05 to just under 1.05, following Trump’s tariff update.

In other news, Bloomberg reported that China plans to start re-capitalising three of its biggest banks in coming months, following through on a broad stimulus package unveiled last year to shore up the struggling economy.  Authorities are looking to inject at least 400 billion yuan ($USD55b) of fresh capital into the first batch, completed as soon as the end of June.

Yesterday, monthly Australian CPI data – showing inflation flat at 2.5% y/y and the trimmed mean ticking up to 2.8% y/y – didn’t move the needle. Of note, the detail showed reduced inflation for the housing components, paving the way for weaker quarterly inflation and another RBA rate cut likely in May.

The NZDM’s announcement yesterday morning that it is expected to syndicate a tap of the existing May 2032 bond by the end of April was a surprise in terms of timing, coming hot on the heels of the recent $5.5b tap of 2035 bonds.  NZDM said the volume will not be limited by the $40b FY2025 bond programme forecast and may prefund some of the FY2026 programme. This saw NZGBs underperform on a cross-market basis and relative to swaps. Against a backdrop of lower global rates, NZGB yields showed little change across most of the curve (plus or minus 1bp), apart from a 3-4bps lift in the ultra-long bonds. Meanwhile, swap rates fell 2-4bps across the curve.

On the calendar today, the ANZ NZ business outlook survey is released.  Tonight, for the US, the second estimate of Q2 GDP, is released expected to remain unchanged at an annualised 2.3%, alongside durable goods orders, jobless claims and pending home sales.