Here's our summary of key economic events overnight that affect New Zealand with news there are plenty of bumps in the economic road to note today.
But first up today, there was another full dairy auction overnight, one that analysts had been nervous about and the derivatives market saw downside risks (on the uncertainties of how dairy product distortions would fare in the growing tariff disputes). In the end overall prices were unchanged - so no bump here - which the industry will take as a 'win'. But that is in USD terms. In NZD terms it certainly wasn't with prices down -3.3% overall as the USD weakened. Butter inched higher, and to a new record level. So did cheese. But WMP was little-changed, and SMP fell -0.4%. China was in there buying although not with notable enthusiasm.
All eyes now turn to Fonterra's interim report on Thursday Friday, and the expectations are for only minor tweaks to their payout levels over that they have already announced at record highs.
In the US, the retail impulse tracking though the Redbook index still shows a strong year-on-year +5.2% gain compared to the same week a year ago, but the advantage is fading and has done so each week in March so far. We don't get a week-on-week reading but for that year-on-year gain to fall from +6.6% three week ago, there must be a sharpish recent fall away.
American housing starts unexpectedly jumped +11.2% in February from January, but that was just making back the -11.5% fall the prior month. The February 2025 build rate was at 1.501 mln units whereas the February 2024 build rate was at 1,546 mln units so a -2.9% retreat on that basis.
It was a similar story for US industrial production - up more in February from January (+0.7%) than expected (+0.3%), but the gains were less (+1.4%) than year-ago levels (+1.7%).
There was a US Treasury 20 year bond auction earlier today and it brought less support, and at a median yield of 4.60%. The better supported prior equivalent event a month ago was at a median yield of 4.77%.
Canada reported its CPI inflation rate at 2.6%, which was a notable rise from their January level of 1.9% and an expectation of 2.2%. It is probably only going to get worse from here due to the snarky tariff war the Americans started and the Canadians collective reactions. Their monetary policy decisions are based on "trimmed mean" rates, and they only moved up slightly.
Across the Atlantic in Germany, and by a two thirds majority, their parliament has approved a massive €1 tln funding increase to allow it to build its defence capability and support Ukraine. It is a massive change in attitude to their fiscal policy direction.
In the Pacific, Indonesia's stock market halted trading yesterday for the first time since 2020 after their market plunged more than -7% from Monday's close. Substantial concerns over economic stability and consumer sentiment are behind the move.
In China the property sector woes are far from over. Another major developer, Sunac, has issued a major 'profit warning', actually a major warning about huge losses. Demand for its projects is very weak.
In Australia, a superannuation fund has been convicted of greenwashing and ordered to pay a fine of more than AU$10 mln for making false claims about how it invested funds.
And staying in Australia, in Melbourne, Chinese/Hong Kong authorities have sent 'wanted' letters for information and a bounty for a democracy activist who fled after the Umbrella protests. The Guardian is reporting that a bounty of HKD$1 mln is offered. Australian government officials are alarmed by the move. It is similar to a Chinese campaign being waged in the UK. Do you know of similar moves in New Zealand?
The UST 10yr yield is now at 4.27%, down -3 bps from yesterday at this time. The key 2-10 yield curve is holding at +26 bps. Their 1-5 curve inversion is now -5 bp. And their 3 mth-10yr curve inversion is -1 bps. The Australian 10 year bond yield starts today at 4.46% and up +2 bps from yesterday. The China 10 year bond rate is now at 1.96% and up +1 bp. The NZ Government 10 year bond rate is now at 4.68%, down -2 bps from yesterday.
Wall Street has opened its Tuesday trade with the S&P500 down -1.1%. Overnight European markets were mixed in the range of London up +0.3% and Frankfurt up +1.0%. Yesterday, Tokyo closed up +1.2%. Hong Kong ended its Tuesday session up +2.5%. Shanghai was up +0.1%. Singapore was up +0.7%. The ASX200 ended its Tuesday trade up just +0.1%. But the NZX50 previewed New York and fell -0.7% in Tuesday trade.
And we should probably note that the Tesla share price is down another -6% so far today.
The price of gold will start today at just on US$3036/oz and up a net +US$42 from yesterday, and another all-time high.
Oil prices are down -50 USc from yesterday at just under US$67/bbl in the US and the international Brent price is at just under US$70.50/bbl.
The Kiwi dollar is now at 58.2 USc and unchanged from this time yesterday and maintaining its recent gains. Against the Aussie we are up +20 bps at 91.4 AUc and a new three-month high. Against the euro we are unchanged at 53.2 euro cents. That all means our TWI-5 starts today just over 67.3, and marginally firmer.
The bitcoin price starts today at US$81,895 and down -1.9% from this time yesterday. Volatility over the past 24 hours has again been moderate at +/- 2.1%.
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18 Comments
Yes a massive policy introduction for Germany and obviously rearmament beyond just defensive capacity. Other European nations will be encouraged to follow suit and it would be prudent for the resources and manufacturing existing in Europe to be geared up accordingly rather than reliance on USA weaponry. Putin has just given the USA the old don’t ring me I’ll ring you thumbed nose.
Latest from the US - Chief Justice of the Supreme Court tells Donald Trump to back off;
https://www.youtube.com/watch?v=56hV7TuK8OQ&list=PL36GQAccexbzeCLQusnec…
In the words of Ricky Baker;
https://www.youtube.com/watch?v=RiPPl8o3znQ
We're getting closer to the showdown - does Trump accept the role of the judiciary, or attempt to steamroll them and seize more power for the executive? Congress and the Senate are pretty much subservient for now, one more branch to go.
You are exactly right.
As I read it - the Chief Justice is only objecting to the talk of impeachment of judges - not the merits of any f these unconstitutional action cases.
There are already a number of impeachment articles (for various judges) that have been written by GOP elected members. Will one or more of them actually make it to a vote? If they do and are successful - the Supreme Court loses any/all power and control. Effectively they become redundant with respect to judgement on any of the legality of these executive orders.
John Roberts is saying to Trump - just follow the process to get these matters up to us. But if they start impeaching lower court judges, it's game over. As John Locke said: "Where the law ends, tyranny begins". It's carved in stone on the DOJ Building in DC
For all the officials, authorities and politicians regardless of who or where they are and what they are saying or doing it is the people of the USA that hold the ultimate sway. They were told emphatically by Trump that they were going to be made better off, not worse off. There is nothing greater than perceived betrayal and/or injustice to burgeon protest and as evidenced four years ago or so in Washington DC it can get pretty ugly.
And that will show up in the mid=terms; nothing like the need to get re-elected...
As one of my nephews commented right after Trump's re-election - he doubts he'll ever get another chance to vote.
Oh, I'm sure he will be able to vote. The thing in question is whether it's a 'Western Democracy' style election or more like, say, a Russian election. Putin has somehow managed to go from a 53% share of the Presidential vote in 2000 up to 87% in 2024 - what a great example for the Trump clan.
Assuming Trump is not going to try to do a Putin and change the rules to allow himself a third term, then would he really care what happens in the mid terms?
Germany's economic turn around from 'balanced books' to an 'expansionary' fiscal policy makes absolute macroeconomic sense when you look at what is happening right now to German exports and their car industry in particular. It is in decline and stuck with outdated combustion engine technology and production methods.
For the past 30 or 40 (maybe longer) years the German economy was able to replenish its money supply from running an export led trade surplus - which gave it room to run constrained government budgets. The exports from Germany are going to shrink or stagnate the next 5 to 10 years and the economy will need to replenish it's money supply with direct government spending instead.
The fact that the increase in spending is on 'military build up' and 'security' will act as a cover for a general increase in investment in infrastructure, education and health and transitioning their manufacturing base to modern industries - all of which can be categorized as essential for 'security'.
This is very smart and forward looking economic thinking.
They can do it. Recall a discussion I had at the Pima air museum in Arizona in front of an example of a Dornier Alpha jet developed between Germany in France 60/70s. Beautiful aircraft essentially a trainer/ light attack but easily able to be upgraded. The UK, France, Germany, Italy all have economies about the same size as Russia. Spain, Sweden, Holland not far behind. Collectively, with the rest of them, they should be able to handle their own defence. As the Polish prime minister explained as Europeans we are 450 million asking 340 million Americans to protect us from 140 million Russians.
The US only really got it's position because their industrial capability could not realistically be attacked during WW2 and for a while after. that's not the case today.
But they will pay a heavy price for what they are doing. The US leadership will soon learn they will not have the influence they are used to across the world. Trump, I believe is in the process of organising Ukraine's surrender at least of part of its territory. They won't agree to that, and will be backed by the Europeans. The question is what will Trump do then?
Withdrawal of US forces stationed on the continent and simultaneously undermine the unification of NATO. Russia has put regular troops from Nth Korea onto the battlefield. Likewise the insertion of an international force from the West now looks likely. Ostensibly in a peacekeeping role but with capacity to step up beyond that in need.
Issue threats and insult other leaders.
Trump and the US will become less and less geo-strategically relevant to the Europeans. IMO that's good, everyone wins, even Russia. Dismantling of NATO would come next, along with a broad NATO like agreement from the EU, particularly regarding nuclear weaponed armed members (France/UK). Russia would win by not having the US on its doorstep. US loses more relevance as it would likely withdraw its bases as they become pointless (removal of German and Turkish ones would be huge). While some say it might embolden Russia, a stalemate with Europe putting troops into Ukraine would both give the Europeans recent battle experience and upping their defence spending, means they would still be stalemated with Western powers. Russia wouldn't have the threat of a lunatic in the whitehouse, the EU would have to stand on it's own feet. Wins all around.
I also imagine a bunch of the European armed forces being like "Finally, we get to do something", having been sidelined for way too long.
Keynes - perhaps you need to read more widely.
It's bollocks.
They used to use easy-to-get energy, and did a lot of work (in the physics sense). That they exported some, and piled up some electronic digits, is an aside.
That energy is getting harder to obtain (lowering EROEI) and that is true for more and more nations. Indeed, there's too little planet left, and already too many forwards bets on the remainder. So they're starting to realise there will be a fight (or fights) over what's left. That is a physical fight, and the loser takes nothing.
Not financial, not fiscal, not smart - just pragmatic survival.
Homework time - economics doesn't teach the real world, sorry.
The EU is a hotch potch of countries with the commission calling all the shots. EU poking its nose into Romania, probably Italy and Germany. Little collective action and sucking the hind teat of the US. DT has given the EU a wake up call. Poland is rearming but Romania, Slovakia and Hungary unlikely any where near the same extent as Germany and Poland. The EU has treated Russia with contempt over the last 20-30 years, hiding behind the US who have always wanted to weaken Russia and the EU economically.
Since WW2 seventy years without a major war on the continent. You would be hard pressed to find a similar gap in all of the preceding centuries. Perhaps it took American presence and guarantees to keep the peace so to speak. That being the case, Europe then still can’t seem to sort anything out without having a fight.
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