Here's our summary of key economic events overnight that affect New Zealand, with news US Treasury yields are rising today on concern growing American recession fears may prompt investors to question the safety of US Treasuries as a safe haven asset. The risk premium jumped after a weekend to think about last week's yield falls.
But Wall Street equities have stopped falling. They are not rising either as investors ponder what to do. But last week's sell-off is baked in. They rose after reports of a tariff pause, but fell when this was denied.
Then Trump threatened China with 50% tariffs because they retaliated. Gloom returned.
And EU ministers are meeting to coordinate their response, and 25% retaliatory tariffs are likely on "some goods".
Everyone, except Trump (and his acolytes), can see that this mob-boss theatre will just produce a combination of recession and inflation. And the US won't be immune. The situation is an "urgent problem" for policymakers worldwide, including central banks. Ours meets tomorrow but because this is a fast developing situation, maybe it is too soon to expect a comprehensive response. It is a situation that will play out over years, but we will still want to see our fiscal and monetary policymakers working to contain the impending fallout as best they can.
In Canada, their central bank's Business Outlook Survey is reporting widespread concern. Business conditions have deteriorated due to the trade conflict with the United States. Sales outlooks have softened, particularly for exporters. Firms reported having sufficient capacity, and many are delaying investment and hiring decisions amid uncertainty. Firms expect the widespread tariffs will raise costs and lead to higher selling prices. In this context, expectations for inflation are higher.
China's FX reserves rose in March, but their overall reserves rose more, mostly because they purchased a little more gold and that took their holdings to just under 2300 tonnes. The March gold price zoomed higher, bolstering other reserves. This may reverse sharply in April if the gold price keeps on tracking down.
Away from the economic news, we probably should note that while China's overall population is in decline, not all regions are. The Pearl River Guangdong region in from Hong Kong grew by 740,000 to 127.8 million (+0.6%), and births rose by +100,000 to 1.13 mln (+0.8%) in the 2024 year. If this region was its own country, these demographic changes would be impressive. But it does highlight how fast some other parts of China are shrinking.
Overall, the recent Qingming Festival (Tomb Sweeping) holiday saw 790 million cross-regional trips in China, an increase of +7.1%, a record high for this holiday period.
European retail sales rose +2.3% in February in the euro area on a volume (real) basis, quite a bit better than expected and its best rose since September 2024. In the wider EU it was up +2.0% and still a quite positive shift.
German industrial production however was down a sharpish -4.0% in February from the same month a year ago, although to be fair the year-ago benchmark was unusually high. On a seasonally adjusted basis the decline was "only" -1.3%. German export growth is rising however.
In Australia yesterday, their pre-election Budget update was released. The underlying cash deficit in the 12 months ending June 30 will be -AU$28 bln, swelling to -AU$42 bln through June 2026, they now say. That's going from -1.0% of GDP to -1.5% of GDP. "[The] escalation in trade hostilities has created significant economic uncertainty and exacerbates the risks to the economic and fiscal outlook", they say.
The UST 10yr yield is now at 4.15%, up +15 bps from this time yesterday. Risk premiums are jumping. The key 2-10 yield curve is steeper at +42 bps. Their 1-5 curve is now inverted by only -4 bps. And their 3 mth-10yr curve is less inverted by -13 bps. The Australian 10 year bond yield starts today at 4.34% and up +17 bps on Monday. The China 10 year bond rate is now at 1.64% and down -15 bps. The NZ Government 10 year bond rate is now at 4.40%, and up +5 bps from yesterday at this time. We should also note that wholesale swap rates tumbled yesterday by about -7 bps.
The VIX volatility index has stayed very elevated.
Wall Street is unchanged on the S&P500 to start its week, after a volatile morning session (-4.4% to +0.7%). Overnight, European markets were all down -4.0%. Yesterday Tokyo ended its Monday session down -7.8%. Hong Kong was down a massive -13.2%. Shanghain fell -7.3% and very hard for them. Singapore was down a similar -7.5%. The ASX ended its Monday session down -4.2%. So the -3.7% drop on the NZX50, in the perspective of all those other markets doesn't look so bad.
The price of gold will start today at just on US$2966/oz, and down -US$71 from yesterday, down -2.3% and "just another commodity". Holders are selling to cover margin calls now.
Oil prices have dropped another -50 USc from yesterday at just on US$61.50/bbl in the US and the international Brent price is now just under US$65/bbl.
The Kiwi dollar is now at 55.5 USc, down -40 bps from yesterday. Against the Aussie we are unchanged at 92.5 AUc. Against the euro we down -40 bps from yesterday at just on 50.7 euro cents. That all means our TWI-5 starts today now just on 65.5 and down -30 bps from yesterday.
The bitcoin price starts today at US$78,846 and down -2.8% from this time yesterday. Volatility over the past 24 hours has been very high at +/- 4.1%.
[Due to staffing holidays, the video version of this review will not return until April 28, 2025.]
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18 Comments
From ghost cities to ghost factories. Great for the global consumer - unless you have been laid off at the factory or don't like things made out of coal.
‘The Tsunami Is Coming’: China’s Global Exports Are Just Getting Started
…Five years ago, before a housing bubble burst, cranes putting up apartment towers dotted practically every city in China. Today, many of those cranes are gone and the ones that are left seldom move. At Beijing’s behest, banks have rapidly shifted their lending from real estate to industry. Recent data from China’s central bank shows that state-controlled banks lent an extra $1.9 trillion to industrial borrowers over the past four years. As new factories come online, China’s exports are rapidly accelerating. They rose 13.3 percent in 2023 and then another 17.3 percent last year.
…China is exporting so much partly because its own people are buying so little. A housing market crash since 2021 has wiped out much of the savings of the middle class and ruined many wealthy families.
…Tax revenues are falling, but military spending is rising rapidly. That has left the government wary of spending on economic stimulus to help consumers. China has offset its housing debacle instead with its export campaign, creating millions of jobs to build, outfit and operate factories.
https://www.nytimes.com/2025/04/07/business/china-manufacturing-exports…
The old adage when the USA sneezes the world catches a cold is obviously, and amply, outdated and understated. Since the USA emerged from WW1 as an international force, a looming super power, it has grown itself, and been allowed to grow, to the biggest elephant in the room imaginable. Now the world is experiencing what a rogue elephant is capable of.
"When elephants fight, it is the grass that suffers." African proverb
The kknz quote re grass, is closer than many realise.
We forgot - chose not to - measure the grass. Meaning we have no idea how many elephants we can support, of what size?
Some folk are discussing this: https://www.youtube.com/watch?v=CJinJCNvxJY
Meaning we have one NZ journalist - admittedly perhaps the brightest we've ever produced - who cannot say they are unaware. The fellow on the right of the panel is the standout - he obviously gets it in spades. Well worth the watch.
Ours meets tomorrow but because this is a fast developing situation, maybe it is too soon to expect a comprehensive response. It is a situation that will play out over years, but we will still want to see our fiscal and monetary policymakers working to contain the impending fallout as best they can.
Realistically, what are they going to be able to do that would have any appreciable impact? Not much would be my guess.
Agreed.
It's a physical/ecological problem, being reflected as a political knee-jerk.
What it WILL do, is show up (even more) the shortcomings of 'fiscal' and 'monetary'; both as ways of thinking, and as levers.
It will also probably do something about the increasing variance between the collection of forward bets - think Kiwisaver - and the remaining physical forward underwrite.
The amount of grass remaining, so to speak. It is understandable that folk want to avoid that, as it undermines more than a few personal narratives, but clear thinking about what is evolving, demands we see things in proportion. Too little grass, too many elephants - they go to war. Is Collins up to the tusk?
It's a physical/ecological problem, being reflected as a political knee-jerk.
It is life unfolding.
There is a worthwhile premise in much of what you say, in that we take permanence as a given. But to try and shoehorn everything into a sole narrative, is a bit of folly.
In your 70+ years, presumably life has eventuated counter to your anticipations, many times. Things in your personal or commercial life, turned out counter to what you expected.
The answer should be to assume tomorrow will be like today, but to cater your view on life that change can occur at any time. Build a bit of resilience, put in so effort, but also take some time out to smell the roses.
Treating every day as if the sky will fall, is wasting many days.
Methinks you make false assumptions re moi. I'm betting that I spend more time rose-smelling than you. Just saying.
:)
I can only assume that (your assuming) has an underlying motive (most dissing of messengers can be traced to same) and I ask what that might be?
Some degree of denial of the message, is all I can come up with.
Go well
I'm betting that I spend more time rose-smelling than you. Just saying.
Well duh, you're a retiree, I'm still of working age, have children, etc.
Although most days allocate 1-2hrs to rose sniffing, then some times if the stars align I fit in a few weeks of months of doing it continuously. It greatly aids in interrupting the same circular though patterns. Stops the needle being stuck in the same groove, allows understanding to be a continual process, rather than a fixed point.
But sniffing roses is my advice to anyone, wasn't particularly aimed at you.
I can only assume that (your assuming) has an underlying motive (most dissing of messengers can be traced to same) and I ask what that might be?
I try to avoid being cryptic, it should be fairly apparent.
There's no guarantees and predicting the future is fraught with inaccuracy.
Trying to reinforce the same narrow argument by trying to bring any major happenstance under it's umbrella, is the opposite of open mindedness.
If every post is the same sermon, not really much of a discussion, is it?
Last sentence said it again
:)
Edit - and 'retiree' needs questioned too. I've never been busier; so many people equate 'work' with 'income'.
Last sentence said it again
Yeah it did.
"It's a physics/ecological problem", has no room for:
- has America the leverage to do what it intends?
- will someone (presumably China) be able to use this situation to its advantage?
- will there be new alliances?
- what will the fallout look like?
And so on, and such forth. Just a sole line of reasoning, with no breadth of understanding and inquiry.
You're wasting your time Pa1nter, PDK cannot see past his narrow blinkers, he's just not capable of considering anything else apart from "the planet is finite, we're running out of resources, the end is nigh"
PDK needs to be called out more often.
These minds are much like record players.
What we consider conscious thoughts, is often the replaying of a record.
Play the same track enough times, the needle wears the record, and skips the same segment, over and over again.
The EU need to respond with tariffs on US services, like all the tech companies, not goods. They could use the same flawed reasoning, the USA have a trade surplus on services with the EU (deficit for the EU), therefore it needs to be taxed via tariffs.
Vehicle insurance anecdote. I've renewed 2 vehicle policies this year, 1 comprehensive the other 3rd party. Both reduced by 23% (no other changes, claims or crimes). TradeMe/Tower.
Thank you for this intel, worth a lot to get these insights!
Things getting real. No more Alex at The Telegraph. No more Steve Braunius at Herald. And now we have to go without David for 90 seconds for three weeks!
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