Here's our summary of key economic events overnight that affect New Zealand with news it seems the Americans are getting what they voted for, but not what they wanted. They seem to have thrown out good economic conditions and gotten economic chaos. It's only been two months since their election, less since the transition of power, but the economic data, especially the forward looking data, does look like Americans are realising what has been wrought. And they don't like it.
January non-farm payrolls growth came in less that expected, up +144,000 when the average of market estimates was +170,000. In 2024 that would have been regarded as a "big miss'.
The data collectors said that wildfires in LA and severe winter weather in other parts of the country, had “no discernible effect” on employment in the month.
Their jobless rate ticked down to 4.0% and average weekly earnings rose +4.2% from a year ago, so overall a mixed picture.
But the University of Michigan consumer sentiment survey for February fell from January and quite sharply. It's the second straight month of retreat and is now its lowest reading since July 2024. Both the 'conditions' and 'expectations' measures fell. There was also a large slide in buying conditions for durables, in part due to a perception that it may be too late to avoid the negative impact of their tariff policy. In addition, inflation expectations for the year ahead soared to 4.3%, the highest since November 2023, from 3.3%. This is only the fifth time in 14 years we have seen such a large one-month rise in year-ahead inflation expectations. Many consumers appear worried that high inflation will return within the next year.
Not only is this measure of sentiment down in February from January (-4.6%), it is down even more sharply from February a year ago (-12%).
And it is not going to get better. Trump is signaling 'reciprocal tariffs' on many countries, also expected to raise costs for Americans. It will be a major international escalation. No indication here on how that will affect New Zealand that basically doesn't have any tariffs with anyone. (In his alternate reality, he may just invent that we have some, of course.)
An uncertain and fearful American middle class may have a much bigger impact on the global economy than even their new public policy direction. Of course the two are related.
But Wall Street is happy. "At this stage of the fourth quarter earnings season, S&P 500 companies are reporting strong results relative to expectations. Both the percentage of S&P 500 companies reporting positive earnings surprises and the magnitude of earnings surprises are above their 10-year averages. As a result, the index is reporting higher earnings for the fourth quarter today (Friday, February 7) relative to the end of last week and relative to the end of the quarter. In addition, the index is reporting its highest year-over-year earnings growth rate for Q4 2024 in three years." But it is hard to see this being sustained if inflation rises and consumers pull back buying plans as a result.
North of the border, Canada turned in a very strong jobs report again, it's second consecutive big gain. +76,000 new jobs were added in January, far higher than the +25,000 expected. Their jobless rate fell to 6.6%. Of course, this too is much more uncertain when looking ahead, for the same US-based reasons.
As the New Zealand dairy industry knows, Canada has an [illegal] trade protection scheme operating for its dairy industry, a system of "supply management". Their industry leaders "don't think it being threatened" in the current stoush with the US.
Japan is reporting that household spending jumped in December and by very much more than anticipated. It was up +2.7% in December from November when only a +0.5% rise was anticipated. That large monthly shift now means that the year-on-year rise is +2.3%. If Japanese consumers are opening their wallets, it is both a sign that sentiment is rising, and it will be some counterbalance to the US ructions and the Chinese slowdown. We should not forget that Japan is the world's fourth largest economy, larger than India. It is similarly important for New Zealand exports.
India cut its policy rate by -25 bps tp 6.25%, its first cut since April 2020. Their forecasts indicate rising growth and falling inflation. Although that will be what PM Modi wants to hear, they may be 'brave' forecasts. But they are juicing up the stimulus, with this rate cut part of a two-part action to compliment last week's tax cuts.
China said its official reserves rose marginally in January, now at US$3.2 tln. US$769 bln of that is US Treasury debt, and falling (Nov-24). (Those holdings may now be lower than those the UK hold in US Treasuries.)
Global world food prices were little-changed in January and are still running lower than a year ago. There was a small dip in sheepmeat prices, a rise in beef prices, and big rise in dairy prices. In fact dairy prices are now at two year highs, but are still -10% lower than when they peaked in June 2022.
The UST 10yr yield is at 4.49%, up +4 bps from yesterday at this time, but down -2 bps from a week ago. The key 2-10 yield curve is flatter at +21 bps. Their 1-5 curve is holding flatter at +11 bps. And their 3 mth-10yr curve is now at +17 bps and little-changed from yesterday. The Australian 10 year bond yield starts today over 4.45% and up another +5 bps. The China 10 year bond rate is still at 1.61% and near its lows. The NZ Government 10 year bond rate is now at 4.56%, up +1 bp from yesterday but down -3 bps from a week ago.
Wall Street has opened its Friday trade with a -0.9% fall on the S&P500 but that would lock in a +1.0% gain for the week. Overnight European markets were all down about -0.4%. Yesterday Tokyo closed down -0.7% for a weekly -0.4% dip. Hong Kong jumped another +1.2% for a +5.4% weekly surge. Shanghai was up +1.0% on Friday for a +2.5% weekly gain. Singapore ended up +0.8%. The ASX200 ended its Friday session downa minor -0.1% for a -0.2% weekly dip. And the NZX50 rose +0.5% on Friday to also record a -0.2% weekly dip.
The Fear & Greed Index ends the week in the 'fear' zone, and backing away from the 'neutral' zone of last week.
The price of gold will start today at US$2861/oz and up +US$11 from yesterday. And this is up +US$51/oz from a week ago. In between, gold hit its record high of US$2883/oz.
Oil prices are little-changed at just on US$71/bbl in the US and the international Brent price is still at US$74.50/bbl. But these levels are -US$1.50 lower than week-ago levels.
The Kiwi dollar is now at 56.5 USc and down -20 bps from this time yesterday. A week ago it was at 56.7 USc, so little net change. Against the Aussie we are down -10 bps at 90.2 AUc. Against the euro we are up +10 bps at just under 54.8 euro cents. That all means our TWI-5 starts today just on 66.9, and down -10 bps from yesterday, down -30 bps from a week ago.
The bitcoin price starts today at US$97,785 and up +1.3% from this time yesterday. But it is -6.8% lower than this time last week. Volatility over the past 24 hours has been moderate at +/- 2.3%. And we should note that El Salvador has ended its experiment where bitcoin was legal tender. It isn't anymore.
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42 Comments
A lot of negativity about Trump and what his administration is heading America towards. Very early in the piece though. The fact that even when he lost office in 2020 he still had a very big vote and sustained and increased that to succeed last year obviously evidences a huge level in support from Americans in general, twelve years worth. “Things” tend to move en masse in the USA population wise and it takes a bit of time for momentum to build. If though those expectations of being better off don’t materialise then yes “things” will certainly come to the boil.
And replace them with new clowns? With exactly the same circus?
It takes some sort of stupid to believe what we have now is a real change from previous, even more to have voted for it.
edit.
From RNZ headlines, clownship evidence
Government backpedals on some automatic speed reversals, says consultation now possible
Labour have to ask themselves, how could you have gone from single party rule to such a defeat. Its not for us here to explain., Perhaps you could articulate why Labour lost by so much? If you cannot answer, you cannot position for future victory.
New Zealand Prime Minister Jacinda Ardern has won a landslide victory in the country's general election.
With all votes tallied, Ms Ardern's centre-left Labour Party won 49.1%, bringing a projected 64 seats and a rare outright parliamentary majority. The opposition centre-right National Party won 26.8% in Saturday's poll - just 35 seats in the 120-seat assembly.
to
From the moment the votes started coming in on Saturday night, it was clear that change was on the cards. New Zealand’s voting public had demanded change at the ballot box.
Political commentators described this as a complete rejection of the legacy of former Prime Minister Dame Jacinda Ardern.
Pollster David Farrar told media this was the biggest swing since the emergence of the two-party system in 1938, serving as an indication of just how significant this turnaround was. Key Labour candidates lost electorate seats in defeats that no one saw coming.
A majority of people who vote don't really know what they're voting for, it's just a popularity contest between the leaders. MMP isn't fit for purpose in this sense. But they did have a choice, vote for a party that's bad or one that appears 'less bad'.
Both Labour and National don't represent who they originally were set up to anymore.
It's not even really a popularity contest. People in this country are stubbornly partisan, they'll vote Red or Blue based on the social identity they want to portray irrespective of the party's policies or performance.
Even funnier when people vote blindly for a party that'll undermine their personal circumstances. For example, a mate of mine is very pro-National. His wife is in ECE and was enjoying the steps towards pay parity until National repealed the Fair Pay Agreements Act in December 2023. I wonder how many people made redundant in the Public Sector voted National, they'll probably still blame Cindy.
Only in algebra does two minuses make a plus. They were only capable, and very much so, of creating the mess. Another three years would have just heaped bad onto bad. That is why NZrs will choose not to extend parliamentary terms beyond three years. Just think if there had been eight not six years.
Because as Chris Trotter opined quite early in 2023 that the electorate had little option other than to vote for the least worst. That is evidenced in a way by the in, out, and in results of NZF. A handbrake in 2017, discarded in 2020 reinstalled 2023. Personally I haven’t voted for one of the major parties this century although I did vote for the Labour MP in our electorate when she stood because she was a gem, a hardworking stalwart for all of us.
Just had a thought about KiwiSaver. Now that some people's balances will be in the 100s of thousands, I wonder when it will start to be worthwhile for providers to provide cash incentives for switching similar to the mortgage industry?
Are there any regulations that prevent this? Does anyone have an experience of receiving an incentive to switch?
I hadn't tracked yesterdays comments. I can tell you it degenerated into silly culture war slanging. Many violated our comment policy. When I find time, I will clean out the violations, and display them again. Yes, it is censorship of violations of the policy commenters signed up to, some serious. Calling others you disagree with 'pedophiles' isn't civil conversation. We don't have an absolutist approach. We require sensible adult comment. If you want unrestrained libel and Musk-type accusations, go to X.
Aotearoan moves to Sydney and gets an $800,000 mortgage to dump down on an apartment with a 5% deposit. Non-news? Perhaps. Does it sound like Sydney is desperate to keep the Ponzi momentum humming? 100%.
I wouldn't call this subprime, but it's looking something similar will be inevitable in the not-too-distant future both in Aussie and in Aotearoa.
A New Zealander has made a surprising claim about getting into the Australian property market after starting out with “no expectations” she’d ever be able to afford it.
Libby Angus, 29, works in marketing. She’s originally from New Zealand and didn’t have any “rich parents” around when she decided she wanted to try and buy in Sydney.
Sydney is famously Australia’s most expensive city. The median house price has soared past $1.5 million, and the median rent is now $775 per week.
Ms Angus had heard all the horror stories about how hard it is to buy right now and she was braced for her dreams of home ownership to be squashed.
“I hate to say it but it was relatively easy,” she told news.com.au.
https://www.news.com.au/finance/real-estate/buying/thought-it-was-going…
https://www.oneroof.co.nz/news/work-in-progress-winston-peters-hints-fo…
$5mil plus property owners... here comes Xmas....
LNG. I felt sorry for the Canadians when the media session with the Japanese Prime Minister in the Oval Office revealed that the Americans and Japan will move together on LNG from Alaska just when the Canadians have in place now the ability to ship LNG to Japan and lessen their reliance on the US.
It appears the large orders last week for military purchases from the US defence industry has bought Japan some time, as well as Nippon Steel now very much in play if Japan invests into US steel it seems being held over them gave Japan some breathig space, of a kind.
However the retailitory tariff bill being rushed through Congress upends so much. And leaves more questions than answers going forward.
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