Here's our summary of key economic events overnight that affect New Zealand with news inflation is still not beat and the new tariff wars are messing with when that might happen.
First up today, there was another dairy auction, and this one came in weaker than the derivatives markets had anticipated. Prices slipped overall by -0.6% in USD terms and by -1.5% in NZD terms. It was a much lower SMP price that was the surprise undershoot, down -2.5% from the prior event and last week's Pulse event. Cheddar cheese also took a -3.4% tumble, whereas the WMP price was only -0.2% lower than the last event, but it didn't fall as much as the derivatives market anticipated. Going the other way, there was a +2.2% rise in the butter price, taking it to almost matching its record high in June 2024. It is at its record high in NZD.
Overall, of note today, "North Asia" (ie China) returned with renewed demand to be the top buyer, after largely sitting on the sidelines recently.
In the US, the New York region factory survey turned from a negative to a positive expansion in February, a continuation of an improving trend that started in early 2024 but one that has been volatile.
But their national survey of house builders turned more cautious in February, hurt by tariff-talk and the expected resulting inflation.
In Canada they reported January CPI inflation, and that came in at 1.9% and pretty much as expected. But the "trimmed mean" core rate came in at 2.7%, the one the Bank of Canada follows, above the December level of 2.6% and well above the expected 2.5% level. This is going the wrong way for them and they may now skip the expected March rate cut.
We should probably note that German business sentiment rose in February, ahead of this weekend's federal elections, on the hope that a new government won't get stuck in coalition paralysis. More broadly, EU business sentiment is rising too.
The Reserve Bank of Australia cuts its policy rate by -25 bps to 4.1%, much as expected by financial markets, citing progress on getting inflation down towards its target range. It was their first cut since 2020. But it was a hawkish cut, and post-election there may not be any more until the clear inflation pressures ease, especially those expected from the looming tariff war. Despite that, financial markets are still pricing in at least two more rate cuts in 2025.
The UST 10yr yield is at 4.54%, up +5 bps from yesterday at this time. The key 2-10 yield curve is still at +24 bps. Their 1-5 curve is steeper at +13 bps. And their 3 mth-10yr curve is also steeper at +20 bps. The Australian 10 year bond yield starts today under 4.55% and up +5 bps from yesterday. The China 10 year bond rate is now at 1.70% and up +2 bps bps. The NZ Government 10 year bond rate is now under 4.66%, up +3 bps from yesterday.
Wall Street is back from holiday but with virtually no change in its Tuesday trade. Overnight European markets all rose, a minor +0.2% except London who had a minor dip. Tokyo ended its Tuesday trade up +0.2%. Hong Kong was up a strong +1.6%. Shanghai however fell -0.9%. Singapore ended up +0.5%. The ASX200 ended its Tuesday trade down -0.7%, whereas the NZX50 ended down only -0.1%.
The price of gold will start today at just under US$2931/oz and up +US$33 from yesterday.
Oil prices are up +50 USc at just over US$71.50/bbl in the US and the international Brent price is now at US$75.50/bbl.
The Kiwi dollar is now at 57 USc and down -40 bps from yesterday. Against the Aussie we are down -30 bps at 89.8 AUc. Against the euro we are down -20 bps at 54.6 euro cents. That all means our TWI-5 starts today just over 66.9, and down -30 bps from this time yesterday and has been among the largest devaluers over the past 24 hours.
The bitcoin price starts today at US$94,789 and down another -0.7% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.1%.
Join us at 2pm this afternoon for full coverage of the RBNZ's Monetary Policy Statement. And before that, we will have the January REINZ results at 9am.
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52 Comments
I was also saying about 6 weeks ago that the US 10Y would reach 5% by March. The Fed then paused and didn’t cut rates. The 10Y went from 4.8% to 4.4%. It’s now heading back to 4.6%. I think we’ll see 5% this year, and if we do, the long end of the yield curve for many, if not all, countries is telling us inflation remains a concern.
Few fists pumps this morning reading about 🇨🇦 Kraken!
It might cost me a dollar more with the apparently soon to be highly inflated price of a pie…but I’ll still bet one that Orr-some won’t rise in ‘25 (not super catchy, has a slight rhyme though)…this comment might age terribly, who knows 🤷🏻♂️😂
Well reportedly, by some media the usual suspects etc, Trump is re-honing his golf game, re-inventing himself in the image and function of Napoleon and preparing for the a quick card game of Snap with Putin from which Trump will anticipate the award of the Nobel Peace prize. Could that in turn mean there are now far greater priorities and distractions to hand, rather than ladling out tariffs and the rekindling of global inflation pressures.
You repeating Trump's lies doesn't make them true.
The US aid to Ukraine was mainly obsolete military assets (which would have been disposed at US taxpayers cost), funding the American military sector to renew their own assets and financial help largely funded by dividends from frozen Russian assets.
Also the figure stated by Trump is complete garbage and serves only to convince the gullible that Europe is not paying enough.
Financial aid by the EU exceeds US funding which by large remains inside the US to create jobs.
Possibly but purely in speculation how about - you guys have neglected your defence obligations, you can’t defend yourselves from Russia without our military, that you’ve taken for granted for decades, and not only that by your fault our own security has been compromised. To fix that we need Greenland and without that don’t look for any more military from us let alone increases.
On many levels it is exactly that simple.
I've been reading a little US military history recently, specifically around the cold war. There are article being produced today that openly admit that the US built up 'enemies' to pressurise Congress to provide funds for the development and construction of military equipment. Go too long doing that without having a real, shooting war (even if it is not the one postulated) and congress will eventually figure they've been suckered. The MIC profits hugely, but so does so many other areas. Employment is huge. Technological advances race ahead.
Without a military to drive technology, and that includes conceptualising through development and test (often fraught) with a level of persistence much of this would never be achieved. And most tech we used everywhere today was originally built for a military somewhere.
it invades or installs friendly administrations and then rapes the natural resources of that country...
its not hard to see how its done, it also enforces , via swift, the continued use of USD as settlement for the worlds trade (see the bitter lake agreement with Saudi).
Rinse and repeat.
as long as energy is traded and priced in USD the USA rules the world.
The ultimate decision in either preventing or proceeding war comes down to deterrence. If you start one will you then receive more punishment than you give out. For example battleships were once the relative deterrent. They have now been replaced by nuke powered, and numbered within, nuke armed submarines. The USA under President Einsenhower understood this prospect in the 1950s. That is why today the USA fleet outnumbers, let’s say the opposition, more than three to one. Numbers don’t mean so much as superiority as one vessel has enough on board for sufficient mass destruction but that number of prospective launchers, whereabouts unknown, is an undeniable deterrent.
Doesn’t really matter how they got it though does it. What counts is what they have got now and what they can do with it. Similarly Israel would have been overrun by now if not for their nuclear capability. Not saying right or wrong, just what the martial reality is and how the effectiveness deterrence needs to rely on is known power for the obvious reasons.
You're not getting it are you Baywatch? Since Nixon kicked the Gold Standard into touch, the US can just print the money it needs. For their MIC it's all internal spending, except where they don't have sufficient natural resources to meet the demand.
As Foxy has said, that's not really relevant. What is, is what they have produced with it.....
interesting article here Foxy.....
https://www.newsweek.com/our-allies-must-abandon-america-their-own-good…
Some commentators in the US seem to get it.
More than apparent now that the USA did too much for too long and one affect of that has been to both unsettle and distort the balance of power that European nations, for better or worse, having being engaged in for centuries. You can argue too, that while post WW2 the retirement of debt owed to them coupled with the generosity of the Marshall plan’s, economic and infrastructural rebuild, served to contain further expansion of the iron curtain but it also provided vast output for American industry which anchored itself there. Very uncertain times as Trump goes after the apple cart like Quixote after the mill. Personally and indeed subjectively, I can only answer the question of what’s it all about, with the answer, regardless of it all I would sooner live under the regime of Washington DC and/or London than that of Moscow and/or Beijing.
I think America enjoys being the biggest kid on the block. That has allowed it to get away with a lot of stuff that perhaps they shouldn't have over the years. Now Trump is having them turn their back on a lot of countries they used to call 'friend', and the consequences of that might backfire on them.
And as those former friends build their resilience and independence, free of US input.......People only tend to put up with others shit when those people have something they want. If the US will no longer provide what others want, then they may find they no longer have the traction in the world they are used to getting, and may even get called to account for some of what they do. Strap in, this could get interesting......
But yes, I too would rather live in the US than China or Russia.
It wasn’t until the advent of the 20th century that the USA really got onto the world stage. Firstly grabbing Hawaii and then defeating Spain for the Philippines, Puerto Rico and Cuba too if the senate hadn’t intervened. Yet leading up and into both WW 1 & 2 the nation remained decidedly isolationist. Modern history seems to have passed a lot faster than previous history given the ever increasing technology, speed of communication etc. But if you think about it up until WW1 military engagements, Russo - Turkey, Crimea, the Boxer rebellion, the Boer war were pretty traditional affairs. The arrival of oil powering armaments was a devastating development. So getting back to the discussion about Europe in little more than 100 years it has centred two world wars and out of the first found a Bolshevik communist power right on its north east frontier and out of the second the much needed presence of the USA as both saviour and protector. Perhaps the concept of the EEC come EU was an intended measure of adaptation but you could easily conclude that Europe has experienced more upheaval in the last 100 years than a 1000 before. Yet all the old historical grievances and bitterness, Schleswig- Holstein for instance, still lie only skin deep and all of that seems to be percolating right now.
Ref to Murray’s answer 10.09am as above. But in support of that, I recall a plane trip in the USA about 2003 alongside a high up executive in BF Goodrich a company established producing motor vehicle tyres that grew to giant proportions primarily by next engaging in the production of military & space hardware and technology. Mr Buffet himself had declared it as being in his top investment portfolio. So it comes back to what I have been saying on here ever since Trump first arrived politically with the view that the USA can take care of itself. He obviously believes the world needs the USA more than the other way round and is now setting out to prove it and to do so he wants to return home much of the industry that globalisation has off-shored. Will he succeed? Not easily.
If their former allies cannot depend on them for their military industrial strength, they'l develop their own. The US MIC will almost certainly have something to say about that.
The US supplies engines for example to SAAB for their Gripen aircraft, but Rolls Royce can make turbine and compressor blades and other parts of the engines. There's always alternatives if they get too snooty or greedy.....
Being busy does not mean you benefit.
https://crux.org.nz/crux-news/economist-low-wage-tourism-drags-down-que…
In the piece is a reference to 2002 as a point they've been saying such things.
Still crickets.
It's pretty obvious to everyone not an economist or politician that expanding tourism is a dead end for Aotearoa. But really it's all they have, well other than trickle down from high net worth immigration which is equally hopeless.
Meanwhile everyday I and 40,000 other farmworkers send $4k of produce out the gate, more than $1m per year, each tourism job is what? $80,000 per year?
Thats why a bunch of Kiwis go to Australia and then return back to NZ, unwilling to perform work at the required productivity level Australian employers demand. "Work Life Balance" (ie. the ability to work half days from home before heading out to pick up the kids from daycare/school/rugby practice) people are barely one step above the welfare beneficiaries in being a drain on NZ.
The public sector has been growing as a portion of the workforce since 2017, when it accounted for 17.9% of the workforce. By June 2024, it made up 19.2% of the workforce.
Its no wonder we are in recession with the recent cutbacks to public service... I think unemployment keeps rising here as this right sizing continues.
The government-NGO-climate industry circle jerk paid for by the long suffering taxpayer.
"11% had NGO funding Those studies were ~9x more likely to find " a positive association between climate change and geophysical characteristics of hurricanes"
https://x.com/RogerPielkeJr/status/1891952078802583810
...Another important finding of our study is that NGO funding was positively associated with a finding of a positive association between climate change and geophysical characteristics of hurricanes. This finding was statistically significant (p = 0.03), and the effect size was large (OR = 8.72). This finding suggests that environmental and industry-oriented NGOs may be influencing climate science to promote a political agenda much in the same way that pharmaceutical and biotechnology companies have influenced biomedical and public health research to promote their own profits (Resnik 2007; Michaels 2008; Dunn et al...)
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