Here's our summary of key economic events overnight that affect New Zealand with news the USD is wavering (down -1.7%) as policy missteps especially on the impact of the trade war hostilities. Benchmark interest rates are rising as risk premiums rise. Estimates for US growth are getting downgraded, while estimates for US inflation are being raised. These latest shifts will have global echoes.
And in a shameless move, the US President has ended enforcement of the Foreign Corrupt Practices Act, saying bribing foreign officials is now a part of US diplomacy. Previous you could go to jail for that, and many people did. The lack of enforcement will probably only apply to Trump's supporters.
The US Fed boss Powell is testifying before Congress, newly hostile because Trumps troops are gunning for lower policy interest rates. He also pushed back on 'being rushed' on rate cuts. At the accusation the Fed is overstaffed, he countered that they aren't, but they are overworked.
Last week's American retail Redbook index rose +5.3% above year-ago levels, a slowing but still a notable rose.
Also at a good level is SME business optimism. But uncertainty is on the rise. This January survey by the NFIB was expected to rise from December, but it fell.
There was another large, but well-supported US Treasury three year bond auction earlier today and that went for a yield of 4.26%. This was slightly below the prior equivalent event a month ago at 4.29%. Fear is being priced in more than uncertainty.
The February USDA WASDE report has been released. It shows the US will likely produce more beef in 2025, and import levels will remain unchanged. But prices are rising they say on rising demand. They also so US milk production is in a declining phase with fewer cows milking. They see prices holding, in USD terms of course.
In Canada, December building permit levels rise sharply and by much more than expected. They were +11% more than in November and a massive +30% higher than in December 2023. Although this metric does tend to jump around a bit, there are some substantial gains here.
In India, their central bank has intervened in currency markets trying to stop the fall and speculative shorting of the rupee. It had ballooned out to almost 88 to the USD and the intervention brought it back to 87. However even that level is a notable devaluation. The RBI probably doesn't have the resources to fight market shorters.
In China, President XI is out visiting the regions, and emphasising the importance of food security. Beijing must be worried if they give it this much repeated exposure.
And yet another large property developer is throwing in the towel, not opposing its winding up.
The social-media-recorded pushback during the Covid lockdowns in China that "we are the last generation" is continuing to echo, and echo loudly there. After rising slightly in 2023, marriages fell sharply in 2024 and to their lowest since China's public records began in 1986. This means the public efforts to stop the sharp fall in births are not working. (And yes, if you try to follow the link to the data, you may well find yourself blocked. But it is the source data for this item.)
In Australia, the Westpac-Melbourne Institute consumer sentiment survey reported no improvement in January from the flat levels that have been around for the two prior months. But the NAB Business Sentiment survey is reporting that their responders are finding a more positive mood.
The UST 10yr yield is at 4.54%, up +5 bps from yesterday at this time. The key 2-10 yield curve is steeper at +19 bps. Their 1-5 curve is steeper at +12 bps. And their 3 mth-10yr curve is little-changed at +24 bps. The Australian 10 year bond yield starts today over 4.48% and up another +5 bps from yesterday. The China 10 year bond rate is now at 1.63% and up +1 bp. The NZ Government 10 year bond rate is now at 4.61%, up +1 bp from yesterday.
Wall Street has opened its Tuesday trade down -0.2% on the S&P500. Overnight, European markets all closed about +0.4% higher, except London which was up only +0.1%. Yesterday Tokyo closed essentially unchanged again. Hong Kong ended its Tuesday trade down -1.1%. Shanghai was down -0.1%. Singapore was down -0.4%. But the ASX200 ended little-changed. That was bettered by the NZX50's +0.3% rise.
The price of gold will start today at just under US$2904/oz and up +US$4 from yesterday..
Oil prices are up +50 USc at just on US$73/bbl in the US and the international Brent price is now just under US$77/bbl and back to week-ago levels.
The Kiwi dollar is now at 56.6 USc and up +10 bps from this time yesterday. Against the Aussie we are down -10 bps at 89.9 AUc. Against the euro we are also down -10 bps at just under 54.7 euro cents. That all means our TWI-5 starts today just on 66.8, essentially unchanged from yesterday at this time.
The bitcoin price starts today at US$96,409down -0.9% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.2%.
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56 Comments
Maybe an NZ journalist could follow up on that 'final generation' thing?
Nup, won't happen. Fiercely won't happen.
Food/energy well explained: https://gardenearth.substack.com/p/eating-oil
And the systemic dilemma likewise: https://by-my-solitary-hearth.net/2025/02/10/the-daily-10-february-2025/
' That is what this increased cost of everything is all about. We are running out of the affordable material bases of our economy, and so our economy is contracting. Money can not buy as much as it once did simply because there is not as much to buy. Relative to contracting material supply, money has lost its value. And material supply is contracting quickly, maybe not in absolute terms, but in affordable terms. There may be plenty of oil to sustain drilling in the Arctic, but it will take almost as much in energy to extract oil in those adverse conditions as we will get out of burning it. This is true of everything. There may be deposits. But all the easy-access and high quality materials are gone. For what is left, the cost of extracting resources is more than the benefit in using them — even if you calculate benefit as a capitalist does and ignore all the externalities like maintaining a viable planet.'
I couldn't have put it better...
I agree, and there will be a lot of fear if OCR gets there quickly, that it might rise again... that will not help either.
NAct need to sort out the Watercare issues real fast if they want growth growth growth, its the elephant in the room for Auckland.
Massive amount of land around the Silverdale motorway has been rezoned , but Watercare may just say no. Also a 4,500 house development behind Ara hills... may go on hold, perhaps Watercare is just playing hard ball for development contributions?
If you want construction to restart in Auckland , you need secure water connections.
It doesn't seem affordable infrastructure-wise to sprawl everywhere. Watercare are probably just being realistic.
There's still a massive amount of intensification that could be withstood closer to the centre of Auckland where infrastructure already exists (and was designed for more water per person than we now use). And then cheaper to upgrade than to lay massive new sprawl (according to former Watercare engineers I've talked to).
Out of interest - are your 300 acres up that way? Not assuming so, but checking.
Amazing a country blessed (past tense) with an abundance of quality water resources could be hitting the wall in such a short time span. Says something about the quality of governance over the last few decades. We could always do toilet to tap like they do in LA. Just imagine, all the benefits of of consuming a nice glass of water with healthy additives like blood thinners and birth control hormones?
Good thing the goal of exponential growth measures all the dollar benefits of creating all this infrastructural signature of declining quality of life, rather than the insanity of needing it in the first place. Insanity growth has a more honest ring to it. Harder to market to the plebs at election lolly scramble time though.
In Auckland it actually says more about the decades preceding the last couple. Councils took in contributions for waters and used them elsewhere. Splitting Watercare out finally enabled them to get started on the backlog.
Wellington...well, seems from a distance that the folk involved in Vision Wellington now (former mayors etc) presided over simply more kicking the can down the road to keep rates artificially low.
A lot of it may be processed in China, but the food component of what's in the packet likely came from somewhere else.
Ahhh globalism, where a $1 fruit pot grew in Sth America, before getting shipped to SE Asia for processing and packaging, and then shipped down to us to put on a supermarket shelf, where it's still cheaper by weight than fruit grown down the road.
Mainly this. Also the advent of the steel standardised shipping container decimated transportation costs.
It costs more to ship it from the port to the warehouse, and the warehouse to the supermarket here, than it does to ship it from South America to South East Asia, and then from South East Asia to the port here.
Sea is the cheapest but our larger cost problem will be human handling.
Port handling (and usually customs)
Freight
Distributor/Wholesaler
More freight
Retailer
You (plus maybe more freight if you shipped the item to yourself from the retailer)
That's a few mouths to feed. Whether a portion of that went by road or rail, doesn't alter the cost to move things around as much as we'd like to think.
Central Otago looks like an interesting case in coming years. The railway to Clyde was obviously ripped up long ago (though the land is still there for the cycle trail), and the population is growing as more and more Aucklanders and others look to retire down there. Truck volumes and thus road maintenance will be something to see, as it doesn't seem like there's any other way to get goods in. Might need to raise rates significantly, or add tolls on some roads.
Perhaps in the end we'll have to buy less stuff (including electricity, from the looks of it).
A few years back a quarry company wanted to get aggregate to Auckland from Northland. The barging was a fraction of the cost of transportation by road and with much lower environmental impact. Unfortunately the cost to unload the barges at Ports of Auckland (council owned monopoly) made it uneconomical.
Would be interesting as to what percentage of that could be regarded as staples. Just reflected that when I was growing up the only rice on offer was the short grains and thus the dreaded rice puddings. Long grain for quite a while was hard to get, in the SI anyway, recall in the 1960s it was known as Siamese and/or Burmese, but it has been a huge part of our family’s diet from that time.
I have been hearing a lot of negative news from NE China, house prices have been crushed, its a traditional manufacturing area and is having a tough time. He needs to give them a good news story, but there will not be the jobs in farming that where there in manufacturing. he has a rust belt problem on his hands.
Many of these workers are from the south, no job and idle hands = not good for social stability.
Perhaps PDK could consider another outcome of "that 'Final Generation' thing" and the falling marriages could have other impacts.
One of the cultural aspects for the region as i understand it is that families want sons so that they can support their parents when they age. But men are needed for armies. A significant drop in births, a potential secondary effect could put big constraints on China having a large standing military, or actually using it in some military adventurism like invading Taiwan. Armies coming home in body bags, or not at all, may well cause a revolt of the peasantry. The CCP may well be very worried about what is happening.
They crushed the education tutoring business for this reason, people could only afford to have one child as education/tutoring costs so much that people where not able to afford to have two kids. Its such a mess. You can see why , suddenly, physical gold is hot in China, they have lost trust in their institutions.
For those interested in the increased demand for physical gold. Most interestingly James is prepared to suggest some answers to issues that nobody else (that I'm aware of) has answered. Keep the cup away from the keyboard.
https://kingworldnews.com/is-the-world-about-to-witness-a-shocking-gold-revaluation/
The anomalies in the gold market over the past couple of months have become widely known. These include the huge spread at which futures and forward contracts are trading over spot, the huge flows of physical metal into the US, as well as the decline in the assets of GLD and some other paper-gold products.
What hasn’t been broadcast is why these anomalies are happening. And just as importantly, why now? Tariffs have been generally dismissed as the proximate cause, even before some of the tariff related tensions started to ease. But the anomalies remain.
So I’d like to speculate on one possible reason for the anomalies and one possible outcome. And I stress it is just speculation, designed simply to open one’s mind to the countless possibilities given today’s unusual circumstances.
When there’s trouble at home history records trouble is then made abroad to redefine the population’s focus. Don’t believe Taiwan is any more of a target now than it ever has been but for China’s massive military, all dressed up with nowhere to go and logically geared for wide land manoeuvres, there is much to gain to the west and good friend Russia in no position to object.
Thoughtful reasoning. Idle speculation but perhaps in that vein, the flash up with Vietnam in the late 1970s was such a long term marker. Much commentary believed it was mostly about letting Russia understand they wereno longer in a position to involve themselves as before.
Accepted historically but as the US has shown , and history teaches, one must have a force to hold any territory gained. Can China afford to leave large portions of it's military, or alternatively send police units ( or some other paramilitary force) to hold conquered territory. Troops tend to want to go home when the fighting is finished. True liberation will allow that without the need for a holding force, subjugation on the other hand.... Taiwan would be subjugation.
So USA's time is up then?
USSR also didnt last that long - maybe their model was just a bit to murderous
I find it interesting that Trump's new foreign policy seems to be overtly (rather than covertly) all about whats in it for us/me - but in the background I would see that this has always been their policy and actually it is now no different from China's belt and road initiatives which is all about China empire building and economic growth. Not sure that they will put that at risk by invading Taiwan -much easier to start "helping" Russia develop Siberia
@murray86, here's a really interesting and relevant website in these globally shaky times;
https://www.globalfirepower.com/countries-listing.php
You can drill down by country by category of military assets - manpower being just one of those comparisons. Very interesting to compare countries.
The only thing better than watching the 10Y yield move higher is seeing both the 10Y and 2Y move higher.
It looks like the NZ2Y yield is happily bouncing off 3.6% and ready to keep climbing, following a very similar pattern to the US2Y, UK2Y, and AU2Y. We may have already seen the bottom.
If you're worried this may lead to higher mortgage rates or have concerns about Trump and tariffs, just get out there and enjoy the beautiful day we're having. Life’s too short!
Les rendements obligataires vers la lune ! 🚀🥂
Indeed, he was more than quick-off-the-mark when answering "NO" to a question from Bret Baier as to whether JD Vance was his pick for his successor. Super quick and an adamant "no".
It will become a North Korean style line of succession and I suspect next in line is his son, Barron Trump.
Trump seemingly enjoys provoking and then observing the rage of his opponents. It is also a tactical smokescreen. How about this as a suggestion - by the time of the mid terms, the people will realise how great this presidency is and will then return my supporters in enough numbers to the congress and the senate, to change the constitution to allow me to remain as president.
And in a shameless move, the US President has ended enforcement of the Foreign Corrupt Practices Act,
Of course, as he's the Bribester in Chief now.
Next move will be to grant pre-emptive pardons to all his Cabinet and senior departmental officials so that that cannot be held in contempt of court.
Humans tend to not react overly well to mandated restrictions of freedoms. China's birth plummet is to be expected. As is NZ's socio-economic matrices falling off a cliff. Maybe your average Chinese Citizen was more accommodating of being locked in a shoe box apartment than his Kiwi counterpart; the impact is relevant to baseline.
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