Here's our summary of key economic events overnight that affect New Zealand with news that 100 days of mayhem has not only killed the global leadership position of the US, Americans themselves (consumers and business) are reacting by turning sharply defensive.
The US dollar is under pressure, Wall Street is down sharply, and benchmark bond yields are dropping hard.
The first US February PMI shows that output growth is faltering and payrolls are declining, as optimism slumps and costs rise. Their services sector is now contracting and at a 2 year low, their factory sector is expanding however and back to its mid-2024 levels.
And it isn't any better for consumers. The final survey results for the University of Michigan consumer sentiment tracking have come in weaker than the 'flash' result which indicated a sharpish turn lower. In fact it is now -10% weaker than in January, -16% weaker than a year ago. American consumers are spooked. One reason is that they see higher inflation ahead. The final reading for this indicates consumer prices are exdpcted to be +3.5% higher in a year, a worsening of the 'flash' February result we reported earlier of +3.3%.
January existing home sales slumped nearly -5% too from December, although they were up slightly from the same month a year ago. But the year-on-year improvement is being whittled back.
And new homes are likely to get more expensive in the US with global tariffs to be imposed on softwood timber.
Now more of Trump's billionaire backers are having second thoughts about what they funded.
In Canada retail sales volumes were up +2.5% in December, up +3.9% in value terms from a year ago. This is actually quite an impressive result. This will be an interesting metric to watch in future given the nationwide push by Canadians to shift away from buying American-made products in protest at the insults launched by the US President.
In Japan, they finally have inflation, real inflation this time. It climbed to 4.0% in January from 3.6% in the prior month, which is their highest reading since January 2023. Food prices rose at the steepest pace in 15 months up 7.8%, with fresh vegetables and fresh food contributing the most to the upturn. No doubt their central bank will react to this sharper than expected move.
Despite that, the Japanese February PMIs show improvements in activity in both their services and factory sectors, with their services sector expanding at a healthy rate for a developed economy, and their factory sector contracting less.
India is still expanding fast. Their February PMIs show a better-than-January rise for their services sector, and a weaker-than-January expansion for their factory sector. But both expansions are the envy of most other countries, even if it is from a low base.
The EU PMI survey for February records a small expansion, but it also records their fastest input cost inflation since April 2023. The overall expansion recorded is largely due a recovery in the German factory sector.
And speaking of Germany, they are voting in federal elections this weekend. There are many nervous observers, watching how the far-right Musk & Putin aided AfD party does.
In Australia, who will probably go to the polls themselves in May, their February PMIs report an improving economic activity situation, with their services activity at a six month high, and their factory PMI at a 27 month high. However, to be fair, neither levels are particularly strong compared to other countries.
And locally, the Chinese Navy's notice that it may conduct live-firing exercises in the Tasman Sea, diverting trans-Tasman air traffic, will no doubt focus minds in Canberra and Wellington.
The stumbling US is not good for commodity prices. We are seeing recent falls for metals (copper is down -1.4%), oil and gas are down sharply, uranium is at a 17 month low, aluminium is showing it may not be able to hold its recent highs, nickel is back to a fiver year low, and lead is staying down. Lithium is back to its pre-pandemic lows. Others like tin and zinc are holding their levels at the moment. American petrol prices were stable over the past week.
And the all-important cocoa price is down -10%.
The UST 10yr yield is at 4.42%, down -8 bps from yesterday at this time, down a net -3 bps for the week. The key 2-10 yield curve is flatter at +21 bps. Their 1-5 curve is now at +11 bps and also flatter. And their 3 mth-10yr curve is flatter at +13 bps. The Australian 10 year bond yield starts today at 4.53% and down -4 bps from yesterday. The China 10 year bond rate is now at 1.72% and up +2 bps. The NZ Government 10 year bond rate is now over 4.67%, unchanged from yesterday but up a net +6 bps from this time last week.
Wall Street is falling in its Friday trade, down -1.4% on the S&P500 and a weekly -1.4% retreat. Overnight European markets were mixed between London's no-change and Paris's +0.4%. Tokyo ended its Friday trade up +0.3% for a weekly drop of -0.8%. Hong Kong was up a strong +4.0% to end its week up +3.2%. Shanghai was up +0.8% for a weekly +0.7% rise. Singapore ended up +0.1%. The ASX200 ended its Friday trade down another -0.3% and a -3.0% weekly fall away, while the NZX50 ended down -1.0% on Friday and a -1.8% weekly retreat.
The Fear & Greed Index ends the week has slipped into the 'fear' zone, and out of the 'neutral' zone where it was last week.
The price of gold will start today at just under US$2938/oz and down -US$5 from yesterday. A week ago this price was US$2898 so a net +US$40 rise since then.
Oil prices are down -US$2 at just under US$71/bbl in the US and the international Brent price is now just under US$75/bbl. These markets are looking at a future of lower demand and higher output and inventories.
The Kiwi dollar is now at 57.5 USc and down -10 bps from yesterday, up +10 bps from a week ago. Against the Aussie we are up +20 bps at 90.2 AUc. Against the euro we are holding at 55 euro cents. That all means our TWI-5 starts today just over 67.2, unchanged from this time yesterday but down a mere -10 bps from a week ago.
The bitcoin price starts today at US$97.376 and down -0.47% from this time yesterday and down -1.3% from this time last week. Volatility over the past 24 hours has remained modest at +/- 1.3%.
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