Here's our summary of key economic events overnight that affect New Zealand with news markets are all quiet ahead of the US Fed monetary policy review and results will be announced at 8am NZT. Markets do not expect any rate change, but given the aggressive start to the Trump Administration, markets will be watching for any Fed reaction. It seems unlikely to come today however.
US mortgage applications were a little softer last week through the Washington swamp burp, down -2%. And the benchmark 30 year interest rate stayed just above 7% and little changed as lenders assessed the risk implications.
Both wholesale and retail American inventory levels fell in the latest accounting out overnight.
But as expected, the American trade deficit rose sharply in December as traders rushed to beat the aggressively-signaled tariffs threatened by the incoming Administration. That is entirely consistent with what we had reported for trans-Pacific freight rates. In fact exports fell rather sharply too with buyers fulling back on the risk of capricious American actions. And imports jumped - in fact they were +15% higher than the same month a year ago. The biggest increases were for food, industrial supplies and capital goods; imports of vehicles actually fell. Substituting these for local supply, which seems to be the plan, will probably create distortions that will be inflationary.
Global air cargo demand ended 2024 on a high too, with a surge in international air cargo to and from North America.
The Fed will be watching for the actual inflationary reactions, but they may not show up for a few months yet. But by the time they do show up, the impulse may be embedded already. They have a tough watch-wait-react conundrum ahead of them - well aware that if they get it wrong, Trump will blame them.
In Canada, they have already announced their rate decision earlier today, and as expected they cut by -25 bps to 3.00%. They face the same pressures from their neighbour, but from the other side. They are in the unique position of not having a friendly neighbour any more. They also signaled that they will no longer reduce their balance sheet, so the end of their quantitative qualitative tightening program. From here on, their balance sheet will be set to grow at the same rate as their economy. 'Normalisation' is returning at a much higher level that pre-pandemic. Back then they had a balance sheet of C$117 bln. They are 'normalising' now at C$280 bln.
In Russia, after some successful 2024 central bank moves to keep a lid on inflation, producer prices are taking off again, up +7.9% in December. The Kremlin-pressured back-tracking on those moves is having the anticipated effect, and they are heading into a period of high inflation again.
In Australia, there were some mixed signals in the Q4 CPI data released there yesterday, along with their Monthly Inflation Indicator for December. The Q4 CPI rate fell to 2.4% from 2.5% in Q3, and slightly better than expected. Underlying inflation fell to 3.2%. But the month inflation indicator rose to 2.5% in December, up from 2.3% in November and 2.1% in October, and actually the highest in four months, so tracking the "wrong way". Markets however focused on the "good" quarterly result, anticipating this will open the door for a RBA rate cut on February 18. But you have to wonder if that is actually how Bullock & Team see it.
Markets have reacted very little to the Aussie CPI data, signaling that all the risks are priced in. Politically, some think a February RBA rate cut could mean an April federal election there.
The UST 10yr yield is at 4.55%, down -1 bp from yesterday at this time awaiting the US Fed decision. The key 2-10 yield curve is a little flatter at +33 bps. Their 1-5 curve is also flatter at +20 bps. And their 3 mth-10yr curve is still at +22 bps. The Australian 10 year bond yield starts today over 4.44% and down -4 bps. The China 10 year bond rate is unchanged (while they are on holiday) at 1.64%. The NZ Government 10 year bond rate is still at 4.55%, unchanged.
Wall Street is lower today with the S&P500 down -0.6% in its Wednesday trade ahead of the US Fed decision. Overnight, European markets were mixed with Paris down -0.3%, London up +0.3% and Frankfurt up +0.9%. Yesterday Tokyo rose +1.0%, Hong Kong and Shanghai were closed for CNY. Singapore was closed too for the same holiday. Australia ended up +0.6% yesterday. And the NZX50 traded up +0.4%.
The price of gold will start today at US$2752/oz and down a minor -US$6 from yesterday.
Oil prices are up +50 USc at just over US$73.50/bbl in the US and the international Brent price is now at US$77.50/bbl.
The Kiwi dollar is now at 56.5 USc and down -10 bps from this time yesterday. Against the Aussie we are up +20 bps at 90.8 AUc. Against the euro we are little-changed at just under 54.3 euro cents. That all means our TWI-5 starts today just under 67.1, and also little-changed from yesterday.
The bitcoin price starts today at US$101,997 and down a minor -0.3% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.4%.
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36 Comments
Its ACTs libertarianism coming through (also a form of government that has worked nowhere ever). They believe all government intervention is wrong, so are after a much smaller government, which austerity provides. And it seems Willis has rationalised ACTs desires into austerity, but because she has no economic nous and refuses to read history, she believes she is doing the right thing.
If you want to read about the first place that tried libertarianism, I recommend looking up galts gulch Chile, a hilarious example of libertarianism quickly falling apart (as anyone who thinks about it for more than about 5 minutes should realise would always happen).
what M0ralHazard said plus ...
- drive down labor costs
- created a nice big pool of destressed assets for their vultures and wolves to prey on
It worked until FDR realized the increasing government debt was going to sink them. As he reduced the stimulus the economy sank back in 1938 to as bad as it was. It was only the onset of WW2 and manufacturing and selling war machines to Britain that finally pulled the USA out of the depression.
https://youtu.be/nl6lESiR3Os?feature=shared
It's worthwhile watching the whole series of this excellent documentary on the great depression, but the first part of this episode covers the economy sinking again in 1938.
Yes, also probably postponed the US slipping into Fascism for around 100 years according to the work of Peter Turchin
The withdrawal time for gold stored in the Bank of England’s vaults has increased from a few days to four to eight weeks. According to FT, it's because of Trump and his tariffs. Obviously with BTC you wouldn't have these issues.
A surge in gold shipments to the US has led to a shortage of bullion in London, as traders amass an $82bn stockpile in New York over fears of Trump administration tariffs.
The wait to withdraw bullion stored in the Bank of England’s vaults has risen from a few days to between four and eight weeks, according to people familiar with the process, as the central bank struggles to keep up with demand.
“People can’t get their hands on gold because so much has been shipped to New York, and the rest is stuck in the queue,” said one industry executive. “Liquidity in the London market has been diminished.”
The BoE declined to comment.
Since November’s US election, gold traders and financial institutions have moved 393 metric tonnes into the vaults of the Comex commodity exchange in New York, driving its inventory levels up nearly 75 per cent to 926 tonnes — the highest level since August 2022.
Total gold flows into the US could be far higher than the Comex numbers reflect, according to market participants, because there are likely to have been additional shipments to private vaults in New York owned by HSBC and JPMorgan. The two banks declined to comment.
https://www.ft.com/content/86a5fafd-603e-4ee1-9620-39b5f4465f53
Gold, BTC, etc. are tradable. I.e. their value, as measured in $$$ goes up and down.
The $$$ meanwhile - while they depreciate over the longer term - don't in the short term.
I'll stick with cash and near-cash for now (near cash being rock solid government bonds).
It's a pretty easy decision when so much looks overvalued, there are bubbles aplenty, and, I really can't see anything I feel comfortable investing in. I must be getting old.
First, the FT article states Trump has yet to spell out his trade policy and has not specifically mentioned a duty on bullion. The BOE is one of the world's largest repositories of gold. A run on gold could occur in the US if people become nervous about where the bullion actually is and start buying as much gold as possible in the US. Remember, it's not always clear exactly where or who has their hands on the gold. It's not conspiracy theory.
We can do what we like with OCR, but our banks funding is more complex, international investors see us as more risky then native USD investments, hence will require a margin for that risk. Same applies to Gov Bonds.... hard to cut rates if less risky investments are paying more.
Not really an issue. They will robo call all numbers they can. Just because you pick up doesn't mean they get a hit - I invariably hang up as soon as I realize it is a scammer - unless I'm feeling bored and want to have some fun. Perhaps the real scam is selling the phone list.
Uncles had a few extra whiskeys at lunch... very zesty yesterday, haha
https://www.nzherald.co.nz/nz/shane-jones-labelled-racist-by-greens-for…
Whats wrong with this sentence?
"But Lane said the 3D printer would eventually cut down a standard build time to as little as three
months."
https://www.rnz.co.nz/news/national/540332/building-a-3d-printed-house-…
I built out of SIPS panels - walls up in one day, roof on in another. A mate used the same panels a few years ago; 135 squares, two people building, 6 weeks start-to-turnkey. And he was 1k/sqm.
Most people don't think (I was going to add to the sentence, but...).
Edit - it's not unlike the Chinese AI undercutting the US version; everyone gets into value-adding to add to their profit, the result is a lot of padding and a method of construction which suits those who charge for it. Well, they're not going to tell you you don't need something, eh?
Trump offers buyouts (=8m redundancy) to approx 2/3 of US Govt workers
https://www.stuff.co.nz/world-news/360564008/trump-offering-federal-wor…
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