Here's our summary of key economic events overnight that affect New Zealand with news gold is flashing 'safe haven' signals.
But first, the early 'flash' release of the globally-benchmarked S&P/Markit PMI for the US for January shows that their factory sector is back expanding with a small gain to a 7-month high. But there was a notable pullback in their services sector, still expanding but quite a bit slower than in December. So the composite PMI is at a nine-month low. (In January 2024 is was even, neither expanding nor contracting. In January 2023 is was contracting.)
US existing home sales were up +2.2% in December from November to an annualised rate of 4.38 mln units, the most since February 2024 and despite mortgage interest rates over 7%. But in a long term perspective, this level is still very low, similar to what they had in the mid-1990s
There was an update to the University of Michigan sentiment survey for January out overnight, and it was revised lower. But the inflation tracking in this survey was unchanged at 3.3%, an eight month high.
Across the Pacific, Japanese inflation jumped to 3.6% in December from 2.9% in the November, the highest level since January 2023 and well above the 3.2% level expected. Food prices were a notable driver, up 6.4%. Their core inflation rate climbed to a 16-month high of 3%, in line with market estimates.
This bolstered the case for the Bank of Japan to raise its policy by +25 bps to 0.5% at their review on Friday, and that is exactly what they did.
Meanwhile the Japanese factory PMI contracted a bit more in January than the very minor contraction in December. But their services PMI expanded more in January than in December, and by much more than expected.
Singapore's central bank loosened its monetary policy on Friday, its first such move in more than four years. Rather than interest rates, their monetary policy centers on exchange rates, via the S$NEER, allowing the Singapore dollar to rise or fall against the currencies of major trading partners to stabilise prices.
In China, we should remind readers that their week-long 'Spring Festival' holiday will start on Tuesday, January 28 and run until Monday, February 3, 2025. Only after that will they be back to normal. Chinese New Year is on Wednesday January 29, which ushers in the Year of the Snake.
In India, their January PMIs show 2025 beginning with the private sector slowing and services losing steam. Having noted that, the expansion there is still very strong. But inflation pressure, especially in their services sector, is rising suggesting growth at this level is creating distortions which will take the edge off it for most people.
In Europe, their January PMIs showed they "returned to growth". That came with the combination of their factory sector contracting less and their services sector expanding more.
In Argentina, and given his shouty firebrand stances, President Milei has presided over the largest collapse of his country's currency of all time - and that is saying something. When he came to power, the Argentine currency, the peso, took 356 to buy a US dollar. It now takes 1047. It is hard to claim he knows what he is doing or talking about. His 'dollarisation' election promise never happened. But inflation, which was running at 160% before he was elected jumped to 290% in the first year after. However it has faded, as spending has faded, to 'only' 120% now. Meanwhile their labour force participation rate has collapsed to just 48%. So Milei is turning to culture war rhetoric, now that is libertarian campaign policies have failed. He correctly identified that Argentina needed a shock reset to escape its long-run decline. But his set of policies haven't delivered any benefits; in fact they made things worse, much worse for most Argentinians. Their neighbours are getting a local lesson of what not to do. And they aren't. Chile, Brazil, Uruguay, are all going a different way and generally prospering.
Australia's factory PMI contracted noticeably less in January, and now is barely contracting at all. New orders rose, but prices rose faster too. Their service sector however expanded at a slower pace in the month.
And staying in Australia, Westpac is pointing out that tax cuts there are not boosting consumer spending in the way expected. Three quarters of these cuts are being used by households to either pay down debt or increase savings.
The UST 10yr yield has eased slightly to 4.62% with a -0.3 bps fall from this time yesterday but it is up from 4.60% at this time last week. The key 2-10 yield curve is more positive at +37 bps. Their 1-5 curve is positive at +25 bps and little-changed. And their 3 mth-10yr curve has flattened marginally, now to +29 bps. The Australian 10 year bond yield starts today over 4.52% and down -3 bps. The China 10 year bond rate is now at 1.67% and unchanged. The NZ Government 10 year bond rate is now at 4.63% and down -3 bps. A week ago it was 4.75% so a big -12 bps fall since then.
Wall Street is lower in Friday trade, down -0.4% on the S&P500 and retreating from Thursday's record high. And we should note, as Bloomberg is reporting, that for the first time ever, more trades are now occussing away from the public exchanges; so-called 'dark trades' are now the majority.. Overnight European markets were quite mixed between Paris up +0.4% and London down -0.7%. Yesterday, Tokyo dipped -0.1% to be up +3.3% for the week. Hong Kong rose +1.9% for a weekly gain of +1.3%. Shanghai rose +0.7% on Friday for a weekly dip of -0.1%. Singapore also dipped -0.1% on Friday. The ASX200 rose +0.4% in its Friday trade to be up +1.2% for the week, while the NZX50 fell -0.3% on Friday for a weekly -0.8% loss.
The Fear & Greed Index ends the week in the middle of the 'neutral' zone, and easing back from the 'fear' zone last week.
The price of gold will start today at US$2776/oz and up +US$19 from yesterday, up +US$60 for the week. It is approaching the US$2790 record high level it reached in October 2024. And it is making a push up there in today's trade.
Oil prices are down -US$1 at just under US$74.50/bbl in the US and the international Brent price is now over US$78/bbl. These prices are -US$4 lower than a week ago.
The Kiwi dollar is now at 57.2 USc and up +40 bps from this time yesterday and more than a one month high. It is up +1¼c from this time last week. Against the Aussie we up +20 bps at 90.5 AUc. Against the euro we are down -10 bps at 54.4 euro cents. That all means our TWI-5 starts today just on 67.4, up +20 bps from yesterday and up +60 bps for the week.
The bitcoin price starts today at US$106,413 and up +0.1% from this time yesterday. But it is up +1.4% from this time last week. Volatility over the past 24 hours has been moderate at +/- 2.0%.
Monday is the Auckland Anniversary holiday, and Australia Day, so the newsflow will be light. But we will have continuing regular service on Monday.
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56 Comments
Yes still more USA weapons supply (Rubio will be reschooling the Saudis on who is world boss) and a promise the USA will continue to contain Iran and hit the Hoooties when needed.
The Russian weapons industry are losing ground bigtime to the USA/Euro/Isreali military industrials.
The Clintons are completely pissed right now.....they made out like bandits and got millions personally, from the USA weapons sales. The Clinton "foundation" now drained/closed??
Sad news indeed , for the doomsters here at interest.co.nz ... but , we're not running out of oil anytime soon . .. or anytime later ... there's heaps of it ...
... joy for those of us who love a little Muscle Car Madness ... Goon is the place to be this weekend ... crazy paint jobs , big burbling engines , and monster burnouts .... boooo-yahhhhh ...
Saudi's are saving the oil for you chap. Currently burn through 400,000 bbl/day just for electricity.
DAVOS — Minister of State for Foreign Affairs and Climate Envoy Adel Al-Jubeir said that Saudi Arabia is striving to develop its nuclear program to generate nuclear energy in order to benefit from its uranium reserves, which are estimated at ranging between one percent and four percent of global reserves.
https://www.zawya.com/en/business/energy/saudi-arabia-is-developing-nuc…
"we're not running out of oil anytime soon . .. or anytime later ... there's heaps of it ..."
Hmmm ...
And if we cook the planet and can't produce enough food? What then?
But hey. Lots of oil available, ay? Only there's none left to buy it. A sound economic model? I think not.
Larry Fink and Jamie Dimon both see a scenario where the US 10y yield is over 5%.
And for those saying, "You are the customer," what are BlackRock and JP Morgan selling when both the bond and equities markets are selling off simultaneously?
To act on their "predictions," which isn’t their base case, is to stay in cash, avoiding both the bond and equity markets. I’m not sure how they benefit from you staying in cash. They also say the US is strong with no recession in sight, which suggests being in equities. However, they are just pointing out that there is a scenario, which isn’t their base case, where the long end could sell off further.
Don’t cry for me Argentina. Bit like a beached whale struggling to get back to the water, but just digging itself deeper in the sand. The nation has always been seen to be a mixture of dodgy and turmoil but unfortunately for them covid really exposed that plus all the frailties running alongside. That really flattened the whole damn shooting box. Proud and stylish nation on top but desperately bad below.
Foxy ! ... you're not going Debbie Downer on the USA too , are you ? ... it's bad enough that David Chaston & 75 % of the bloggers here have a severe case of TDS , but not you as well ... say it isn't so ...
... say it once , say it loud : America is already great , and will continue forever to be so ...
... silly moi ... I didn't get to the end of Chaston's weekend briefing ... I try to ... but after awhile I lose the will to live , he's a bit depressive about things ... Argentina : An example of being gifted so much , but screwing it up ... Russia too ... whereas Singapore , Japan or South Korea , examples of being gifted so little , but making outstanding success for themselves regardless ...
... and NZ is ... ??? .... hmmmm ...
I think there is always a % of the population of a country drawn to hard drugs to medicate their issues. They had bene's, then opioid, now fentanyl, and tranq.
It seems to me that the hard drugs are harder now, and that things like weed are just a legal phone call away via medical route , even in NZ.
I think its very hard to stop this at any boarder, hell lots of meth sneaks into NZ.
Its also a huge problem in other countries, not just USA.
IMHO USA economy is more insulated from the globe then most, I would worry about Europe more.
Milei is on the right track. Rome wasn't built in a day. They'll come right.
Argentina is still running strong currency controls as a result of their pervious extravagant monetary abuses, and so the dropping peso is not an uncontrolled market reaction - that is, it's not the natural market alone valuing it less and less against the dollar. In fact, since Milei's policies were put into operation the number of pesos in circulation has fallen.
Their issue is going to be removing these currency controls without suffering major adverse market moves - and as their central bank lacks proper reserves to smooth out such fluctuations (a lesser form of defending the currency) this may be interesting to watch. But it is unlikely to need a full-on currency defence - as they've got spending and deficits under control, the case for inferring risks of serious medium term instability has fallen away.
Are you sure about that ..reminds me a bit if NZ currently...
Argentinas poverty level had consistently hovered above 25 percent. But since the far-right Milei took office on December 10, 2023, that figure has skyrocketed.
Over the last year, the poverty rate reached nearly 53 percent. That is the highest level in 20 years, according to a research team at the Argentine Catholic University (UCA) that has kept track of key economic indicators.
Let me guess his supporters the top 5% will be creaming it?
That's because they laid off like 40% of government. The private sector can't replace those jobs in any long term way that quickly.
BUT
Their inflation has dropped dramatically (so those in poverty aren't getting poorer quicker)
AND
Their government is running a surplus in like, a long time.
Argentina tried to kid themselves for a long time they could spend their way to prosperity.
Problems that are decades in the making are usually fairly existential. We like to convince ourselves a transition somewhere better is painless and quick, but it almost required a commensurate amount of time and sacrifice to be of any lasting merit.
Yes agree with you Painter - positive change in anything dysfunctional is almost always painful for the individual, company or even nation.
Sorting out Argentinas inflation is going to be painful - just as sorting out our problems here is NZ (eg housing market is also going to be painful if we actually ever want it back to 4x incomes).
Speaking of Singapore...some here worry more about the impact on the 'economy' or perhaps their own businesses than the lives our current immigration policy ruins. I'm proudly not one of them and ashamed of what NZ policy allows to happen:
Mansion-building firm charged worker thousands for job and sacked him a week later | RNZ News
He was recruited from Singapore, along with at least four others, and paid the equivalent of about NZD$11,700 over 2022 and 2023 to get a job and visa.
"The amount of money Mr Zhou was required to pay was significant from his perspective,"
"He spent all his savings, as well as borrowing money, to pay the fee, hoping to create a better future for his family."
My suggestion is to stop immigration for this and the harm it does to local workers. Let INZ charge $50k per 12mth work visa so the most skilled can still come help out businesses here if needed but apply a 'thanks, but no thanks' to the rest (as was TOPs original immigration policy under Gareth Morgan).
Don't panic Painter, tourists will soon be flocking here, spending up big on attractions like tailings dams, paddocks of cute CRISPR'd animals chowing down on transgenic plant like substances and magical green lakes with the scent of hydrogen sulphide wafting on the gentle breeze.
How about some more funding for whale music played to kauri trees to fight dieback?
Only in NZ
https://www.chrislynchmedia.com/news-items/4-million-spent-on-kauri-tre…
How many people would this have had to go through to get signed off? It's incredible and only the tip of the iceberg in terms of the grift that is currently happening. I can't wait for it to be exposed for what it really is.......but, that would involve a PM with the resolve to do it. Luxon is a career private sector bureaucrat. He's only worked for established multinationals and hasn't got an entrepreneurial bone in his body. We need a firebrand with the ability to disrupt the status quo and take this country on a journey. Let's get Nick Mowbray to pause making billions and get him to run the country for 2 years. He'd cut all of the stupid spending and chuck it into growth industries.
I haven’t seen any MSM websites pick up this story. I’ve only done a quick google search to be fair. The Platform bought this story to light.
I found Luxon’s SOTN speech very dry. Lacked vision or imagination. Growth, growth, growth but didn’t outline in detail how to achieve this growth. David Seymour’s speech was far better. He has a clear vision for NZ and articulates himself well.
Luxon is a career private sector bureaucrat. He's only worked for established multinationals and hasn't got an entrepreneurial bone in his body.
To be honest, it's very difficult to climb the ladder at Unilever if you don't add any value. Some can move up through non-commercial means but they don't last long at the top if they get there.
Let's get Nick Mowbray to pause making billions and get him to run the country for 2 years.
Why would he bother? Also, Nick Mowbray would know that little could get achieved in 2 years. Aotearoans need to understand things like long-term strategic planning. Like S'pore, Japan, China, Korea, Germany, Poland.
We need a long term strategy to future fund Super and Health. Education would also be on my list but I doubt we will ever come to agreement on a better approach.
Any long term plan will need to be non partisan or it will fail.
I have learnt in life that to get a decision agreed to by a large group, you have to make compromises on both , but the left and right in NZ are so far apart that them seems to be little compromise possible. Not only does everyone disagree on new tax strategies but the spending of said new tax, they situation is somewhat hopeless and made worse by the fact that National voters probably have more to loose from the required reforms.
I am struggling to think of a single issue that achieved broad support from both sides?
"To be honest, it's very difficult to climb the ladder at Unilever if you don't add any value."
What a pile of toss.
I've seen many a middle management 'leader' climb the ladder delivering short term 'benefit' while gutting a company of longer term value.
You quote Buffet, J.C. But you clearly don't understand what he's saying.
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