Here's our summary of key economic events overnight that affect New Zealand with news today is all about fear for the future, rather than looking at recent past data to get a sense of economic trends. The immediate past is irrelevant today. Tomorrow will be quite disconnected to the recent past.
Today's big news is that China has responded to the US tariffs with its own sweeping restrictions on trade with the US, with more to come. In all, we count eight major announcements on restriction of trade with the US.
China placed export restrictions on rare earth elements squeezing supply to the West of minerals used to make weapons, electronics and a range of consumer goods. That leaves American manufacturers scrambling for fresh supplies of the critical minerals they have relied upon for decades.
Yesterday we reported that Canada retaliated. But so far, we haven't heard of EU retaliation.
Fed boss Powell was speaking overnight and said the economic impact of new tariffs is likely to be significantly larger than expected, and the central bank must make sure that doesn’t lead to a growing inflation problem. "The same is likely to be true of the economic effects, which will include higher inflation and slower growth."
All this will have very large secondary effects on New Zealand, and our currency dived sharply on the news. It was an even larger negative reaction for Australia.
Commodity prices have taken outsized hits, all consistent with pricing for a deep recession. Copper is down -16.5% since its late-March peak. It is far from the only one, and the adjusting is still underway. Gold wasn't immune. Trump supporters are trying to create a narrative of 'success' leaving them even further in their deluded echo chamber, disconnected from the real world.
Secondary reactions will be widespread. The airfreight market is expected to be thrown into turmoil, up in the immediate scramble to get ordered goods, then a deep drought, as will shipping. Collapses will further hinder the reduced trade expected.
The key takeaway from all this is unsettling - this isn't the bottom. It may only be the start of a steep decline. It certainly is a 'Black Swan' event. Everyone should be worried, especially savers. Stagflation is the most likely future we face.
For the record, there were economic data out overnight. The US non-farm March payrolls came in better than anticipated with a +228,000 seasonally adjusted rise in the month. Canada reported a -33,000 drop in March employment. Deeper rate cuts are the likely Bank of Canada response, and soon - on April 17, NZT.
And across the Pacific, Japanese household income rose more than expected in February from the steep drop in January. But it wasn't enough to show a gain year-on-year.
German factory orders remained low in February, and unchanged from January in an undershoot.
But none of this recent-history data really means much any more.
The following changes are outsized, and still moving. But this is what we see now.
The UST 10yr yield is now at 3.99%, down -5 bps from yesterday at this time. A week ago it was at 4.25%. The key 2-10 yield curve is steeper at +34 bps. But their 1-5 curve is inverted by -19 bps, holding the sharp deepening. And their 3 mth-10yr curve is very much more inverted, now by -37 bps. The Australian 10 year bond yield starts today at 4.16% and down -11 bps from yesterday. The China 10 year bond rate is now at 1.79% and unchanged due to their Ching Ming Festival holiday. The NZ Government 10 year bond rate is now at 4.35%, and down -8 bps from yesterday at this time. A week ago it was at 4.66% so a -31 bps dump since then. We should also note that wholesale swap rates tumbled yesterday by about -10 bps, and after today's news are likely to fall sharply again on Monday. Every one of these moves is outsized in a fear-induced way.
The VIX volatility index has jumped suddenly, moving up towards an extreme level.
Wall Street is in its Friday session down another -6.0% on the S&P500 after the tariff announcements and showing no signs of improving. It is down -8.2% for the week, down -17.0% since Inauguration Day. It's facing a full bear market declaration. One stock hard it today is Tesla, down -10% on the day, down -50% from its end of 2024 peak. Overnight, European markets all fell about -5.0% too. Yesterday, Tokyo ended its Friday session down -2.8% for a weekly drop of -7.3%. Hong Kong was on holiday for their Ching Ming Festival to be down -3.5% for the week and Shanghai was on holiday too, and down -0.9% for their short week. Singapore fell -3.0%. The ASX200 ended its Friday session down -2.4% to be -3.9% lower for their week. But the NZX50 'only' fell -0.9% on Friday to be down a modest -0.5% for the week. But more reaction will come Monday in response to today's news.
The Fear & Greed Index ends the week hard over in the 'extreme fear' zone, and at a record-breaking level. They are going to have to invent a new extreme category.
The price of gold will start today at just on US$3020/oz and down a net -US$88 from yesterday, a huge move as gold is just being classed as "another commodity".
Oil prices have dropped another huge -US$5 from yesterday at just on US$61.50/bbl in the US and the international Brent price is now just under US$65/bbl. This market faces steep demand drops just as it wants to increase production.
The Kiwi dollar is now at 55.6 USc and an enormous -250 bps dump from this time yesterday, down -4.3% overnight. A week ago it was at 57.2 USc and the last time it was down at today's level was in March earlier this year. Against the Aussie we are up +110 bps at 92.6 AUc because the Aussie dollar has taken an even larger hit. Against the euro we are down -170 bps at just under 50.9 euro cents. That all means our TWI-5 starts today now just on 65.6 and down -140 bps to its lowest since the brief pandemic dive on March 20, 2020, and before that in March 2011 as the GFC bit hard..
The bitcoin price starts today at US$83,808 and up +2.0% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.9%.
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44 Comments
The trade war Krakken is unleashed, like nothing seen since the early 1930s.
All bets are off and would not be surprised to see the Dow drop -10,000 or much more, when the dust settles on a much lower shelf, in comming months.........
Bit like covid isn’t it. That is the lockout and lockdown was the easy part, the rest not so much. Whatever the USA is trying to achieve the first part, the tariff impositions, won’t simultaneously create the solutions being sought. Straightaway for instance is the question of what the USA doesn’t possess itself such as rare earth minerals. Furthermore the once strong industrial manufacturing base and requisite skill set can hardly be re-established overnight.
The US cannot produce stuff which it can afford - neither can we. They and we have constructed our consumption around 'cheap', and that intrinsically involved slave-level wages. Can their politics survive slave-level wages at home? Unlikely.
'Stagflation is the most likely future we face.'
DC - I've been pointing that out for years, but be very sure, stagflation, like Trump, is a consequence, not a driver. And this one may well lead to full collapse; notenough planet left to underwrite the collection of forward bets.
Furthermore the once strong industrial manufacturing base and requisite skill set can hardly be re-established overnight.
The options are grim
- kick the can around, make murmors about "investing in productivity", all the while ratcheting up debt for lifestyles that cannot be afforded
- set it all on fire and hope what's picked out of the ashes is of better promise than the present
Ah, you are back live on here. Good show.
Agreed, I've always called Pa1nter's contributions
Well, I walked off into the wilderness for a month or so, and it appears the world managed to make itself more interesting in my absense
It did indeed.
Didn't take me that long to regret coming back.
I've spent 5 years in a commercial holding pattern, waiting for conditions to become clearer/more predictable since COVID, now it's murkier again still.
One way tickets to the Himalayas are a bargain right now.
this winter is a great time to sail up into the pacific for a loop, not much will happen while you are away, I went during the GFC, easier to be connected with starlink now days as well.
The price of gold will start today at just on US$3020/oz and down a net -US$88 from yesterday, a huge move as gold is just being classed as "another commodity".
No doubt some traders/funds etc would have been struggling and needed to sell anything in a hurry, however the above statement is simplistic. Ed Steer has a PM newsletter and these were some of his comments..
The powers-that-be knew all too well what would happen when Globex trading began in New York yesterday evening -- and they were loaded for bear and laying in wait...helped along by an 11.1% margin rate increase in gold...plus an astronomical and totally unnecessary 25% increase in the margin rate for silver.
As Ted Butler pointed out years ago, the CME Group's sole purpose is to protect the big shorts -- and they did so by greasing the skids on the engineered price declines of Biblical proportions in the Big 6 commodities... particularly in silver, their No. 1 problem child above all others.
As a result -- and despite the fact that the dollar index tanked by the most in one day that I can remember, the President's Working Group/PPT prevented the mad rush from paper assets to hard assets that would have ensued if they hadn't. Only the bond market was allowed to benefit.
Gold always has a margin increase as markets crash (justified by vol increasing) , next few months create great buying as the way out of this is likely qe down the path.
Also there is always a buyer and margin clerks know that.
Yes I could see QE occurring as it did after the GFC. My understanding is that the futures margin increase has increased the cost to traders with existing contracts. If the cost to hold the contract increases then some traders will sell out as the increased cost will reduce potential profit etc. So this margin increase has encouraged further selling and helped decrease the PM prices. Anyone holding the contract with the expectation of taking delivery of physical is less likely to be concerned.
No doubt some traders/funds etc would have been struggling and needed to sell anything in a hurry, however the above statement is simplistic.
XAUUSD down approx 2.4%. But a different story against the Aotearoa Peso and Aussie dollar - up over 2%.
And look at JPY go. People have been warned but they pretend not to care.
But biggest surprise / question in all the turmoil: Has the ol' rat poison decoupled from everything?
Well, it's not performing a parallel function with gold presently.
So either the investors don't overlap well, or the motivations. Possibly both.
I don't think anyone really has a good take on what really drives BTC value, other than hyperactivity.
Blind faith in credit on credit, perhaps, Pa1nter???
Blind faith in credit on credit, perhaps, Pa1nter???
Look at what we do know alongside what we don't know.
Counterparty risk is in play, even with the mighty gold. But that risk is potentially even greater with the Ponzinomics plays of Aussie and Aotearoa, hence the trouncing of the currencies.
As for ratty, counterparty exists now, but maybe not to the extent that it can be controlled / behave like a puppet on a string. And maybe you need to think of BTC as a liquidity smoke alarm.
China placed export restrictions on rare earth elements squeezing supply to the West
A further incentive for the USA to make a selfish peace deal in Ukraine, and to invaded Canada and Greenland.
A sea of red: https://tradingeconomics.com/shares
Well, I'm certainly not crypto fan, but I'm happy to point out that Bitcoin is just about the only asset to not have crashed !
US dollar?
Its down 15% since the Feb 1st, it just took a healthy headstart on the rest.
All this worldwide chaos and turmoil because of one single idiot!
Called "LEVERAGE"
No, it isn't.
Some people have trouble learning - especially when their mana/lifestyle might be compromised...
Trump is a symptom, not a cause. He got in the second time, because of the cause.
Got it?
Edit - What a lot of folk think of as 'normal' (3% growth in consumption) was an aberration; an anomaly. That era is closing - as those of us who study the physical aspects, have long foretold. People who fixate on proxy-numbers are in for a shock - again, entirely predictable, and predicted. This era, and readjustment, was/is inevitable. Strap in for the ride.
get some solar panels while you can
I wonder what excuse you will use PDK, when the next, less crazy administration, takes power in the US, after Trump gets assassinated?
PDK could write his comments at practically any point in the history of human civilization.
Excuse?
The planet, in resource terms, is half-depleted (the best half).
I need no excuse - you (Yvill) are the one excusing; pretending that a person is somehow the problem, not the depletion.
As for the ZS comment - totally wrong. There have NEVER been 8 billion on the planet. Never. Ever. We had only gotten to 1 billion, by 1800. We've overshot and collapsed locally - but never globally. This is a never-to-be-repeated moment.
My 3 cents. On one level I understand that the US’s economic long-term future isn’t healthy, hence the measures with tariffs to try and improve their trade and DOGE to remove inefficiencies etc. However the presentation and delivery of these measures appears to be a shambles and doesn’t help what they are trying to achieve.
The good people want:
- the benefits of capitalist creative destruction
- long term stability including safe havens for surplus savings
- cheap goods
- high wages
These are not compatible aims, and we've been trying to sugarcoat reality for decades.
I like your generally balanced views 3cents. (you're also 1 cent up on all of us 😅)
Delivery has kicked off.
UNITED STATES AND ARGENTINA BECOME THE FIRST ZERO-TARIFF COUNTRIES Presidents Trump and Milei will sign the first international trade agreement free of tariffs for both American and Argentine products.
Lol..." zero tariff " calculated how exactly?....and didnt Canada/Mexico and Australia have trade agreements with the U.S.?
My guess is we'll see a lot of capital flight from the US.
No one would invest money in a start up manufacturer there now.
Dictators are troubling enough, but a coterie of insane dictators is a recipe for collapse.
Though, they could bounce back if fair elections are allowed to run in the midterms. Trump and his insane Cabinet members will all be impeached. And the rule of law restored.
- always the optimist.
No one would invest money in a start up manufacturer there now.
I'd say a lot of entities from mercantile nations are going to plow money into the place.
I'd also say future geopolitical guesses are factoring into US decisions. If we get the sort of global instability we're heading towards, a relatively safe place like the US isn't the worst place to park money.
Who do you consider to be mercantile nations?
For interest - biggest holders of US Treasuries;
https://www.statista.com/statistics/246420/major-foreign-holders-of-us-…
WMDs?
My guess is we'll see a lot of capital flight from the US.
No one would invest money in a start up manufacturer there now.
You're obviously not referring to the likes of Honda.
By the way, Treasury Secretary Scott Bessent was telling Tucker Carlson:
- The top 10% of Americans own 88% of equities, 88% of the stock market
- The next 40% owns 12% of the stock market
- The bottom 50% has debt
Thanks for the excellent summary, David.
My 2 cents worth of observations...
THE MOART AND THE PERFECT STORM - The Captain Chao$ obsession with "burning down the house to roast a pig".
Yes, the house is burning - amongst all of the symptoms of a terminally ill empire, there is arguably one statistic that couldn't be more tragic - ie, the largest asset on the U$ Federal Govt's balance sheet is student debt, and last time I checked it amounted to almost as much as all the other items combined.
If you took all of the most prominent economists of the last 200 years, there is likely only one subject that they would all universally agree on - ie, that tariffs are NOT a sound way to address sovereign trading account challenges.
In my eCONomics Part IV, written almost one year ago to the day, I listed 12 events, any combination of which could combine to create the perfect storm that could bring down the entire Western financial casino.
Rock on April 2, 2025, and the abject idiocy of Trumponomics shoots straight to the top of that list - it could well accomplish this quest singlehandedly.
https://globalsouth.co/2024/04/11/economics-part-v-2024-if-man-is-still…
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
My understanding of the calculation of the percentage of the tariffs is as follows -
The U$A has a trade deficit with Country 'XXX' of $100 million (TD)
Country 'XXX' exports to the U$ $300 million (EX)
(TD $100m) divide by (EX $300m) = 33%
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
This calculation of how Admin #47 arrived at these figures is as superficial and idiotic as the notion of tariffs being capable of solving trade imbalances in a positive spirit in itself. This chainsaw approach is moronic even by Trumpian standards.
Besides, services which are also GDP, are excluded from the calculation and yet the services component of global trade appears to be in the region of around 30% of total trade.
Expanding industries look to countries that are economically stable and predictable to invest in because building factories is a long-term commitment, and in some cases, it could take as long as a decade or more to recoup a serious return - in the case of a car assembly plant, the total long-term investment could be in the $-billions.
The U$ under Trump has proven itself to be as predictable as the last rapacious gazillionaire who spoke to him, or for that matter the last brainwave as to how King Donald could think up another plot to bash another entity to extort even more free lunches in exchange for endless paper promises.
The facade of economic stability is being lifted as the true extent of U$ indebtedness is revealed and the "predictability" factor has just gone up in smoke too, as Trump sets fire to the house.
U$ GDP will drop because of the dual effects of tariffs and the DOGE chainsaw - as someone recently stated, Muskrat's approach is tantamount to a brain surgeon operating with a chainsaw rather than a scalpel - clearly, they aren't expecting the patient to live.
The only presumed immediate winners (everyone will be a loser in the long run), are the dancing neofeudalist Trumpistadors and their cult club, just as it was with the 0.001% who cleaned up during Trump #45.
The short-term winners will be the multinational corporations that produce in many different countries - they will escape most of the effects of the tariffs as well as the retaliations. As usual, the workers won't benefit, that is the whole idea in this #47 brand of abject continued wealth transfer.
Trump claims he will use the tariff revenues for his tax cuts, but this con will once again benefit his kleptocratic club members, not to mention the shareholders in these corporations. But don't forget that the wealthiest cohorts own more than 90% of these shares anyway.
It's what they do, the same old neoliberal playbook, word for word - heads the thieving gazillionaire club wins handsomely, tails Mainstreet loses horribly. The only difference this time around is that not only has Trump declared economic war on Mainstreet America, but on the entire planet.
Have any of you 'Heard' of penguins?
https://www.msn.com/en-in/news/world/penguin-memes-galore-on-internet-a…
Well, the word is that even those on Heard Island are shocked by this latest idiocy.
The court jesters and the sycophantic appointments (read glorified clerks) that Captain Chao$ has surrounded himself with, can't even open their mouths to let him know how suicidal his 'plan' is - they have seen the #45 score-card - you could be here today and gone tomorrow - that's how the King-God Donald rocks.
Yes I know, as repulsive as this mental image is he will continue to glide around "nekkid" in his gold-gilded golf cart - well, at least that is until Mainstreet brings out the pitchforks when they discover en masse that they have been duped yet again, this time by the MOART (Mother Of All Rich-Man's Tricks).
By all accounts the only 4 countries on the planet, and that includes the penguin colonies, to escape his bludgeon, were Russia, Cuba, Belarus and North Korea - if the aim was simply to create even more confusion, it's certainly working.
YCHMTSU
Col
It certainly is a 'Black Swan' event. Everyone should be worried, especially savers. Stagflation is the most likely future we face.
Black Swan? Surely ye jest. Stagflation scenario possible for sure. Position yourself accordingly. Maybe doubling down on the Ponzi is to some extent our saving grace. But don't quote me on that. I'm just wondering that even if debt servicing is cut to near zero, what good does that really do for the nation.
It seems "Black Swan" has entered the hyperbole lexicon.
It would appear fair to observe that blanket tariffs imposed by Trump could hardly be classed as 'unpredictable' given previous events.
Aussie trying to desperately virtue signal?
Chinese firm Landbridge is set to be stripped of its controversial long-term lease of the Port of Darwin regardless of who wins the election, with the two main major parties pledging to take control of the facility if necessary.
https://www.smh.com.au/politics/federal/chinese-firm-landbridge-set-to-…
The Swiss two year note has gone negative. You get paid to borrow.
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