Markets recoil at how US policy is playing out; US reports distorted trends; Canada GDP surprises higher; Indian GDP growth up; air travel rises sharply; UST 10yr at 4.23%; gold down and oil holds; NZ$1 = 56 USc; TWI = 66.2

Here's our summary of key economic events overnight that affect New Zealand with news the global distortion are growing, and quite quickly now. After hitting an all-time high two weeks ago, the S&P500 has since fallen -4.4%.

Although today's news will probably be overshadowed by an unruly public spat in the Whitehouse with Trump trying to bully Ukraine's president (and interestingly not succeeding other than threatening standover tactics and repeating Moscow's talking points), there was important economic news all the same.

In the US, the widely watched PCE inflation level came in at 2.5% for January, down from 2.6% in December, and back to November's level. (The US CPI rate for January was 3.0%.) From a year ago, personal disposable incomes were up +1.8% and personal expenditures up +3.0%, so this isn't tracking in a favourable direction now. People will notice that and take household budget actions, such as increasing debt or cutting spending. When uncertainty levels are high, spending cutbacks are the more likely.

The sharp jerk in trade policy direction has brought sharp changes in American commercial behaviour. First there was a large spike in imports, up 12%, driving their merchandise trade deficit to a mammoth -$US$153 bln in January. That is an all-time record and by a country mile.

Secondly, American wholesale inventories jumped in January, especially for consumer goods which were up +2.1% from a year ago. Retail inventories rose even faster, up +5.1%.

The Chicago PMI, which was in deep contraction over the December/January period recovered in February, but it is still contracting, just less so.

North of the border, the good Canadian data continues. This time it is their Q4-2024 GDP growth rate, up +2.6% from a year ago, better than the Q3-2024 growth of +2.2%, and much better than the expected Q4 rate of +1.9%. Driving the rise was rising household spending, rising exports, and rising business investment. Of course, things for Q1-2025 are much more uncertain, although it will be interesting to see the echo of the 'Buy Canadian, Bye Americans' movement on their GDP. Perhaps it may give a Q1 fillip?

India also reported Q4-2024 GDP results and those came in at a +6.2% rate, better than the +5.6% in Q3, but just missing analyst estimates of +6.3%.

Global air travel is rising fast. International passenger travel rose +12.4% in January from the same month in 2024. That makes it an all-time high, eclipsing pre-pandemic levels. Asia/Pacific travel rose more than +20%.

Meanwhile air cargo traffic rose +3.2% on the same basis, although up +7.5% in the Asia/Pacific region.

The UST 10yr yield is at 4.23%, down -6 bps from yesterday at this time, down -19 bps for the week as risk aversion takes hold. The key 2-10 yield curve is steeper at +22 bps. But their 1-5 curve is now inverted by -8 bps. And their 3 mth-10yr curve is also now inverted -8 bps, both deeper inversions. The Australian 10 year bond yield starts today at 4.36% and down -3 bps from yesterday, down -17 bps for the week. The China 10 year bond rate is now at 1.78% and down -1 bp. The NZ Government 10 year bond rate is now at 4.50%, down -9 bps from yesterday, down -17 bps for the week.

Wall Street has opened its Friday session with the S&P500 little-changed. For the week it is down -2.9% however. Overnight, European markets were also little-changed but London rose +0.6%. Tokyo ended its Friday session down -2.9% for a weekly loss of -3.6%, Hong Kong fell -3.3% yesterday to be -2.3% lower for the week, while Shanghai fell -2.0% on Friday to be down -1.6% for the week. Singapore fell -0.7%. The ASX200 was down -1.2% in Friday trade taking its weekly fall to -1.5%. But the NZX50 bucked the global sell-off trend, up +0.5% on Friday but down -1.3% for the week.

The Fear & Greed Index ends the week having slipped into the 'extreme fear' zone, and out of the 'fear' zone where it was last week.

The price of gold will start today at just under US$2845/oz and down -US$30 from yesterday. A week ago it was at US$2938/oz so a -US$93 drop since then.

Oil prices are little-changed at just under US$70/bbl in the US but the international Brent price is down -US$1 at US$73/bbl. Both prices are -US$1 lower than a week ago.

The Kiwi dollar is now at 56 USc and down -50 bps from yesterday. That is a -150 bps drop in a week. Against the Aussie however we are little-changed at 90.2 AUc. Against the euro we are down -30 bps at 53.9 euro cents. That all means our TWI-5 starts today just over 66.2, and down a net -30 bps from yesterday, down -100 bps for the week.

The bitcoin price started today at US$83,689 and down a net -1.5% from this time yesterday. In between it fell as low as US$78,524 before recovering. Volatility over the past 24 hours has been highat +/- 3.9%.

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