US PMIs positive but inflation lurks; Japan raises rates; Singapore loosens; India tests growth wobbles; Australia PMI contracts less; UST 10yr at 4.62%; gold up and oil down; NZ$1 = 57.2 USc; TWI = 67.4

Here's our summary of key economic events overnight that affect New Zealand with news gold is flashing 'safe haven' signals.

But first, the early 'flash' release of the globally-benchmarked S&P/Markit PMI for the US for January shows that their factory sector is back expanding with a small gain to a 7-month high. But there was a notable pullback in their services sector, still expanding but quite a bit slower than in December. So the composite PMI is at a nine-month low. (In January 2024 is was even, neither expanding nor contracting. In January 2023 is was contracting.)

US existing home sales were up +2.2% in December from November to an annualised rate of 4.38 mln units, the most since February 2024 and despite mortgage interest rates over 7%. But in a long term perspective, this level is still very low, similar to what they had in the mid-1990s

There was an update to the University of Michigan sentiment survey for January out overnight, and it was revised lower. But the inflation tracking in this survey was unchanged at 3.3%, an eight month high.

Across the Pacific, Japanese inflation jumped to 3.6% in December from 2.9% in the November, the highest level since January 2023 and well above the 3.2% level expected. Food prices were a notable driver, up 6.4%. Their core inflation rate climbed to a 16-month high of 3%, in line with market estimates.

This bolstered the case for the Bank of Japan to raise its policy by +25 bps to 0.5% at their review on Friday, and that is exactly what they did.

Meanwhile the Japanese factory PMI contracted a bit more in January than the very minor contraction in December. But their services PMI expanded more in January than in December, and by much more than expected.

Singapore's central bank loosened its monetary policy on Friday, its first such move in more than four years. Rather than interest rates, their monetary policy centers on exchange rates, via the S$NEER, allowing the Singapore dollar to rise or fall against the currencies of major trading partners to stabilise prices.

In China, we should remind readers that their week-long 'Spring Festival' holiday will start on Tuesday, January 28 and run until Monday, February 3, 2025. Only after that will they be back to normal. Chinese New Year is on Wednesday January 29, which ushers in the Year of the Snake.

In India, their January PMIs show 2025 beginning with the private sector slowing and services losing steam. Having noted that, the expansion there is still very strong. But inflation pressure, especially in their services sector, is rising suggesting growth at this level is creating distortions which will take the edge off it for most people.

In Europe, their January PMIs showed they "returned to growth". That came with the combination of their factory sector contracting less and their services sector expanding more.

In Argentina, and given his shouty firebrand stances, President Milei has presided over the largest collapse of his country's currency of all time - and that is saying something. When he came to power, the Argentine currency, the peso, took 356 to buy a US dollar. It now takes 1047. It is hard to claim he knows what he is doing or talking about. His 'dollarisation' election promise never happened. But inflation, which was running at 160% before he was elected jumped to 290% in the first year after. However it has faded, as spending has faded, to 'only' 120% now. Meanwhile their labour force participation rate has collapsed to just 48%. So Milei is turning to culture war rhetoric, now that is libertarian campaign policies have failed. He correctly identified that Argentina needed a shock reset to escape its long-run decline. But his set of policies haven't delivered any benefits; in fact they made things worse, much worse for most Argentinians. Their neighbours are getting a local lesson of what not to do. And they aren't. Chile, Brazil, Uruguay, are all going a different way and generally prospering.

Australia's factory PMI contracted noticeably less in January, and now is barely contracting at all. New orders rose, but prices rose faster too. Their service sector however expanded at a slower pace in the month.

And staying in Australia, Westpac is pointing out that tax cuts there are not boosting consumer spending in the way expected. Three quarters of these cuts are being used by households to either pay down debt or increase savings.

The UST 10yr yield has eased slightly to 4.62% with a -0.3 bps fall from this time yesterday but it is up from 4.60% at this time last week. The key 2-10 yield curve is more positive at +37 bps. Their 1-5 curve is positive at +25 bps and little-changed. And their 3 mth-10yr curve has flattened marginally, now to +29 bps. The Australian 10 year bond yield starts today over 4.52% and down -3 bps. The China 10 year bond rate is now at 1.67% and unchanged. The NZ Government 10 year bond rate is now at 4.63% and down -3 bps. A week ago it was 4.75% so a big -12 bps fall since then.

Wall Street is lower in Friday trade, down -0.4% on the S&P500 and retreating from Thursday's record high. And we should note, as Bloomberg is reporting, that for the first time ever, more trades are now occussing away from the public exchanges; so-called 'dark trades' are now the majority.. Overnight European markets were quite mixed between Paris up +0.4% and London down -0.7%. Yesterday, Tokyo dipped -0.1% to be up +3.3% for the week. Hong Kong rose +1.9% for a weekly gain of +1.3%. Shanghai rose +0.7% on Friday for a weekly dip of -0.1%. Singapore also dipped -0.1% on Friday. The ASX200 rose +0.4% in its Friday trade to be up +1.2% for the week, while the NZX50 fell -0.3% on Friday for a weekly -0.8% loss.

The Fear & Greed Index ends the week in the middle of the 'neutral' zone, and easing back from the 'fear' zone last week.

The price of gold will start today at US$2776/oz and up +US$19 from yesterday, up +US$60 for the week. It is approaching the US$2790 record high level it reached in October 2024. And it is making a push up there in today's trade.

Oil prices are down -US$1 at just under US$74.50/bbl in the US and the international Brent price is now over US$78/bbl. These prices are -US$4 lower than a week ago.

The Kiwi dollar is now at 57.2 USc and up +40 bps from this time yesterday and more than a one month high. It is up +1¼c from this time last week. Against the Aussie we up +20 bps at 90.5 AUc. Against the euro we are down -10 bps at 54.4 euro cents. That all means our TWI-5 starts today just on 67.4, up +20 bps from yesterday and up +60 bps for the week.

The bitcoin price starts today at US$106,413 and up +0.1% from this time yesterday. But it is up +1.4% from this time last week. Volatility over the past 24 hours has been moderate at +/- 2.0%.

Monday is the Auckland Anniversary holiday, and Australia Day, so the newsflow will be light. But we will have continuing regular service on Monday.

The easiest place to stay up with event risk is by following our Economic Calendar here ».