Here's our summary of key economic events overnight that affect New Zealand with news it seems the Americans are getting what they voted for, but not what they wanted. They seem to have thrown out good economic conditions and gotten economic chaos. It's only been two months since their election, less since the transition of power, but the economic data, especially the forward looking data, does look like Americans are realising what has been wrought. And they don't like it.
January non-farm payrolls growth came in less that expected, up +144,000 when the average of market estimates was +170,000. In 2024 that would have been regarded as a "big miss'.
The data collectors said that wildfires in LA and severe winter weather in other parts of the country, had “no discernible effect” on employment in the month.
Their jobless rate ticked down to 4.0% and average weekly earnings rose +4.2% from a year ago, so overall a mixed picture.
But the University of Michigan consumer sentiment survey for February fell from January and quite sharply. It's the second straight month of retreat and is now its lowest reading since July 2024. Both the 'conditions' and 'expectations' measures fell. There was also a large slide in buying conditions for durables, in part due to a perception that it may be too late to avoid the negative impact of their tariff policy. In addition, inflation expectations for the year ahead soared to 4.3%, the highest since November 2023, from 3.3%. This is only the fifth time in 14 years we have seen such a large one-month rise in year-ahead inflation expectations. Many consumers appear worried that high inflation will return within the next year.
Not only is this measure of sentiment down in February from January (-4.6%), it is down even more sharply from February a year ago (-12%).
And it is not going to get better. Trump is signaling 'reciprocal tariffs' on many countries, also expected to raise costs for Americans. It will be a major international escalation. No indication here on how that will affect New Zealand that basically doesn't have any tariffs with anyone. (In his alternate reality, he may just invent that we have some, of course.)
An uncertain and fearful American middle class may have a much bigger impact on the global economy than even their new public policy direction. Of course the two are related.
But Wall Street is happy. "At this stage of the fourth quarter earnings season, S&P 500 companies are reporting strong results relative to expectations. Both the percentage of S&P 500 companies reporting positive earnings surprises and the magnitude of earnings surprises are above their 10-year averages. As a result, the index is reporting higher earnings for the fourth quarter today (Friday, February 7) relative to the end of last week and relative to the end of the quarter. In addition, the index is reporting its highest year-over-year earnings growth rate for Q4 2024 in three years." But it is hard to see this being sustained if inflation rises and consumers pull back buying plans as a result.
North of the border, Canada turned in a very strong jobs report again, it's second consecutive big gain. +76,000 new jobs were added in January, far higher than the +25,000 expected. Their jobless rate fell to 6.6%. Of course, this too is much more uncertain when looking ahead, for the same US-based reasons.
As the New Zealand dairy industry knows, Canada has an [illegal] trade protection scheme operating for its dairy industry, a system of "supply management". Their industry leaders "don't think it being threatened" in the current stoush with the US.
Japan is reporting that household spending jumped in December and by very much more than anticipated. It was up +2.7% in December from November when only a +0.5% rise was anticipated. That large monthly shift now means that the year-on-year rise is +2.3%. If Japanese consumers are opening their wallets, it is both a sign that sentiment is rising, and it will be some counterbalance to the US ructions and the Chinese slowdown. We should not forget that Japan is the world's fourth largest economy, larger than India. It is similarly important for New Zealand exports.
India cut its policy rate by -25 bps tp 6.25%, its first cut since April 2020. Their forecasts indicate rising growth and falling inflation. Although that will be what PM Modi wants to hear, they may be 'brave' forecasts. But they are juicing up the stimulus, with this rate cut part of a two-part action to compliment last week's tax cuts.
China said its official reserves rose marginally in January, now at US$3.2 tln. US$769 bln of that is US Treasury debt, and falling (Nov-24). (Those holdings may now be lower than those the UK hold in US Treasuries.)
Global world food prices were little-changed in January and are still running lower than a year ago. There was a small dip in sheepmeat prices, a rise in beef prices, and big rise in dairy prices. In fact dairy prices are now at two year highs, but are still -10% lower than when they peaked in June 2022.
The UST 10yr yield is at 4.49%, up +4 bps from yesterday at this time, but down -2 bps from a week ago. The key 2-10 yield curve is flatter at +21 bps. Their 1-5 curve is holding flatter at +11 bps. And their 3 mth-10yr curve is now at +17 bps and little-changed from yesterday. The Australian 10 year bond yield starts today over 4.45% and up another +5 bps. The China 10 year bond rate is still at 1.61% and near its lows. The NZ Government 10 year bond rate is now at 4.56%, up +1 bp from yesterday but down -3 bps from a week ago.
Wall Street has opened its Friday trade with a -0.9% fall on the S&P500 but that would lock in a +1.0% gain for the week. Overnight European markets were all down about -0.4%. Yesterday Tokyo closed down -0.7% for a weekly -0.4% dip. Hong Kong jumped another +1.2% for a +5.4% weekly surge. Shanghai was up +1.0% on Friday for a +2.5% weekly gain. Singapore ended up +0.8%. The ASX200 ended its Friday session downa minor -0.1% for a -0.2% weekly dip. And the NZX50 rose +0.5% on Friday to also record a -0.2% weekly dip.
The Fear & Greed Index ends the week in the 'fear' zone, and backing away from the 'neutral' zone of last week.
The price of gold will start today at US$2861/oz and up +US$11 from yesterday. And this is up +US$51/oz from a week ago. In between, gold hit its record high of US$2883/oz.
Oil prices are little-changed at just on US$71/bbl in the US and the international Brent price is still at US$74.50/bbl. But these levels are -US$1.50 lower than week-ago levels.
The Kiwi dollar is now at 56.5 USc and down -20 bps from this time yesterday. A week ago it was at 56.7 USc, so little net change. Against the Aussie we are down -10 bps at 90.2 AUc. Against the euro we are up +10 bps at just under 54.8 euro cents. That all means our TWI-5 starts today just on 66.9, and down -10 bps from yesterday, down -30 bps from a week ago.
The bitcoin price starts today at US$97,785 and up +1.3% from this time yesterday. But it is -6.8% lower than this time last week. Volatility over the past 24 hours has been moderate at +/- 2.3%. And we should note that El Salvador has ended its experiment where bitcoin was legal tender. It isn't anymore.
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