Update: President Trump has announced that the US will impose 25% tariffs on Canada and Mexico, and a 10% tariff on China. The news undercuts earlier news from his officials that tariffs would not start until March 1. In the hour after the announcement, the S&P500 fell sharply, the UST10yr yield rose, and the US dollar moved up slightly. Gold didn't seem to react. Bitcoin slumped.
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Here's our summary of key economic events overnight that affect New Zealand with news of distortions everywhere, especially tariff distortion news in the US, interest rate distortions in Canada, inflation distortions in the EU, and financial advice distortions in Australia.
But first, the alternate US inflation measure, "the one the Fed watches", their personal consumption expenditures price index, rose +0.3% in December from November, the highest gain in eight months, but it was the rise expected. That means their year-on-year PCE inflation came in at 2.6% and its highest in seven months by this measure.
There were no surprises in any of the income, consumption, or savings data.
The January Chicago PMI recovered from the weak December result on the back of better new order inflows and higher production levels. But it remains in deep contraction territory. The outlook responses in this regional survey weren't very bright.
In Canada, they are wrestling with what the 25 year 'extreme' difference means between their policy interest rate, 3.00% and the US Fed's "4.25% to 4.50%". In market terms that is a 140 bps discount the Canadians carry. It has been thought that +/-100 bps is in the comfort zone for financial markets, so we may start to see reactions and implications. These could be lessons for other economies, although Canada may face extra pressures if the US imposes punitive tariffs. Those tariffs were signaled on "day one'. Then they slid to February 1. Now they are being threatened for March 1. Who knows? The Canadians seem to be setting themselves up for a "robust response". And this looks like it includes their policy interest rate settings.
Japanese industrial production rose in December from November and that limited the year-on-year decrease to less than expected.
Japanese retail sales rose +3.7% in December from the same month in 2023, up from a +2.8% gain in November, and better than market expectations of a +3.2% rise. This is the 33rd straight month of expansion in retail sales and the fastest growth since June 2024. Rising pay levels are getting the credit for the expansion.
In Argentina, their central bank cut its policy interest rate by -300 bps to 29% on Friday NZT, as inflation eased again. But annual inflation in Argentina was still at 118% in December, the softest increase since July 2023, down from 166% in November.
EU inflation expectations rose to 2.8% in the ECB's December survey, taking it back to early 2024 levels. In the ECB MPS yesterday, they noted there is still more work to do to quash these expectations. Actual EU inflation ended 2024 at 2.7% and it too is rising.
Aussie producer prices rose +3.7% in December from a year ago, but even if that is high, it was their slowest rise since early 2021.
And staying in Australia, they have a scheme to build a AU$20 mln fund to pay out compensation to victims of bad financial advice. All advisers pay into it. But there have been some huge claims, especially from the Dixon failure and the UGC failure. And the growing losses are threatening to bankrupt the compensation fund and impose large costs directly on the advisory industry to make up the shortfalls. Advisers there are squealing and they have won a delay from the Government. Socialising these losses seems the most likely outcome.
The UST 10yr yield is at 4.51%, down -2 bps from yesterday at this time. It is down -11 bps from this time last week. The key 2-10 yield curve is marginally flatter at +31 bps. Their 1-5 curve is also slightly flatter at +15 bps. And their 3 mth-10yr curve is now at +18 bps and flatter. The Australian 10 year bond yield starts today over 4.45% and little-changed. The China 10 year bond rate is unchanged (while they are on holiday) at 1.64%. The NZ Government 10 year bond rate is now at 4.59%, up +2 bps from yesterday and down -4 bps for the week..
Wall Street is little-changed today with the S&P500 giving up earlier gains in its Friday trade. But it is back touching its all-time high and is up +1.7% for the week. Overnight, European markets were all very slightly higher. Yesterday Tokyo rose +0.1% but was down -1.4% for the week. Hong Kong, Shanghai and Singapore were all closed for CNY. The ASX200 ended up +0.5% yesterday, up +1.8% for the week and also a new record high. And the NZX50 ended up +0.5% in Friday trade, but down -0.2% for the week. The NZX50 is still -4.2% below its record high which was achieved in January 2021.
The Fear & Greed Index ends the week in the middle of the 'neutral' zone, and where it was last week.
The price of gold will start today at US$2810/oz and up +US$22 from yesterday to a new all-time high. And that is up +US$34 from this time last week.
Oil prices are down -50 USc at just under US$72.50/bbl in the US and the international Brent price is now under US$75.50/bbl with a much larger retreat. And they are down from US$74.50/US$78.00 a week ago. Weak demand is getting the blame.
The Kiwi dollar is now at 56.7 USc and up +20 bps from this time yesterday but down -50 bps from this time last week. Against the Aussie we are up +10 bps at 90.8 AUc. Against the euro we are little-changed at just over 54.4 euro cents. That all means our TWI-5 starts today just on 67.2, and up +20 bps from yesterday, but down -20 bps from a week ago.
The bitcoin price starts today at US$104,962 and down -0.7% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.8%.
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10 Comments
Drama at the LBMA
https://www.zerohedge.com/news/2025-01-30/lbma-cant-deliver-gold-supply-chain-breaks
London's bullion market is under strain. A surge in gold shipments to the U.S. has left traders scrambling to borrow from central banks, with wait times at the Bank of England stretching from days to weeks. The gold supply chain, long considered reliable, is now exposed to cracks that weren’t apparent before.
The free float—gold available for immediate OTC trading—has declined after the wave of shipments to New York. Despite the logistics claims, many have said that this is just a good old fashioned stock-out
Stand back a pace or two, DC.
The US is a dying hegemony. At the end of the day, they're just ever-bigger vacuum-cleaners of resources from elsewhere, and the returns always peak, then decline (there is no physical alternative). That is exascerbated by the best-first, worst last trend, and by increasing entropy.
The cracks are showing, the pretenders are in the wings, but they, too, are inserting their tubes into a finite planet, and they've left their run too late to suck as fast as the US topped-out at.
Trump has articulated what the US has been doing for years - financial and political and military thuggery to obtain said resources - just without the sheep's clothing. He (they) will increasingly ostracise those who clustered around since WW2 - Canada, NZ, Australia, Britain, and new alliances will form in the vacuum. I see a middle cluster of the 4 remaining 'eyes', plus Europe, acting as the Eastern Empire split-part of Rome (when it suffered the same predicament).
But can the financial/internet connection stand such a schism? Kiwisaver, anyone? Investments? Good luck to us all if/when that seizes up. Too many rentiers too dependent on that all continuing...
You're better than that, Painter.
:)
The other, isn't...
We are entering the 'final show-down as to who gets the remains of what? There will be back-casters (I was just reading about the psychology of that; essentially a denial of one's guaranteed death) who fiercely disparage - but don't encourage them eh? The sheer rates of current extraction, tell us we're on the cusp.
As I said, you're better than that. This is a serious topic - perhaps the most serious there is. Sure, we can still have fun - I'm loading my gear up for a national champs in my chosen sport as we speak, and I'm past my 70th birthday - but this needs to be dealt with/discussed, not obfuscated.
Go well
There's also an often unacknowledged arrogance to the position that WE have seen the peak and it is all downhill from here. Nothing will ever get better from what we had, so we're not missing out on anything amazing in the future when time's inevitable toll comes for us.
https://scheerpost.com/2025/01/28/yanis-varoufakis-on-cloud-capital-vs-…
He got squashed out by the blob, was a student of Steve Keen's - no slug.
And in Automotive tech news from Russia: While decadent West collapses under its own wokeness, glorious heterosexual workers of the motherland install cutting edge LED headlights to the pinnacle of Russian automotive engineering. A Lada that first rolled off the production lines 50 years ago.
https://www.drive.com.au/news/2024-lada-niva-scores-futuristic-2004-tec…
She gets 3 hectares to a quart of kerosine.
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