Here's our summary of key economic events overnight that affect New Zealand with news of mixed economic data out overnight. And a very sharp steepening in rate curves.
In the US, mortgage interest rates fell by -15 bps last week as the long term benchmark rates eased on recession fears. That triggered a huge +37% surge in mortgage refinancing action, and overall mortgage applications rose +20% from the week before. Applications for a mortgage to purchase a new home were +9% higher, breaking the six-week streak of no significant increases. Lower rates may not last however, given today's moves, which may explain why may borrowers jumped in last week.
Going the other way, private businesses in the US added 77,000 workers to their payrolls in February, the smallest increase in seven months, compared to an upwardly revised 186,000 in January and well below forecasts of 160,000. This ADP survey is noting hiring hesitancy and more layoffs on the policy uncertainty.
But the ISM services PMI was little changed with its good expansion maintaining at levels they have had for the past six months or so. New order levels expanded slower in February however. And we should probably note that the internationally-benchmarked S&P/Markit services PMI reported much weaker growth in February.
January factory orders in the US expanded, and at a slightly faster rate than in December. That makes them +3.5% higher than in the same month a year ago, marginally besting inflation. But without aircraft orders the gain was about half that.
US economic data is coming under fire from the MAGA crowd. Howard Lutnick, Trump's commerce secretary, suggested government spending should be excluded from data about American economic output, a twist to make the Trump Administration look good. It is a move that opens the door to all sorts of political interference.
On the tariff front, Lutnick also suggested a delay in imposing tariffs on Canada and Mexico could be imminent.
In China, their senior leadership is meeting in a big set-piece Congress. They have kept their 5% growth target but provided for substantial stimulus to get there while they fight the tariff wars. Maybe as much as 4% of GDP in stimulus will be required, so huge. China's promise to 'spend more' is in sharp contrast to Trump's US cutbacks.
In China, the private Caixin services PMI survey basically held its small expansion, and this was better than the slight slippage expected in February from January. The February level is mid-range compared to the past nine months. It was also reporting a better expansion than the official services PMI.
In Japan, their service sector saw rising activity in February. It was a fourth monthly rise in a row, with the rate of growth reaching the strongest since August.
In Singapore, retail sales recovered in January after a weakish December of trading. They were up +4.5% from the same month in 2024, rebounding from a -2.9% fall in December. This is their strongest expansion in retail trade in a year.
The Australian Q4-2024 economic activity was +1.3% higher in inflation-adjusted terms than the same quarter in 2023, not particularly strong but boosted by a better than expected Q4 expansion over Q3.
And staying in Australia, they reported a small rise in retail sales in January from December, but it may not have been quite what it seems. The data shows most of the monthly gain coming from basic food, which was affected by industrial action in December, with a sharp pull-back in household goods retailing as a ‘bargain hunting’ pull-forward unwound. Cafes and restaurants recorded a decent gain, boosted by major sports events. Sales fell -0.3% in NSW but rose across all other states. Nationally, sales turnover was up +4.1% from the same month a year ago, but only +2.6% in NSW.
Tropical cyclone Alfred, is still about 200 kms east of Brisbane and is expected to make landfall as a category 2 storm on Friday. Evacuation orders are in place for southern Queensland and northern NSW. It is likely to be a weather event that draws significant levels of insurance claims, and be the basis for yet another surge in premium cost with echoes in New Zealand because our general insurers (IAG and Suncorp) have exposures in the storm hit zones.
Today the UST 10yr yield is now at 4.28%, up +9 bps from yesterday. The key 2-10 yield curve is again steeper at +31 bps. Their 1-5 curve inversion has vanished. And their 3 mth-10yr curve is sharply flatter, with this inversion now back to -4 bps. The Australian 10 year bond yield starts today at 4.47% and up +15 bps from yesterday. The China 10 year bond rate is now at 1.76% and unchanged. The NZ Government 10 year bond rate is now at 4.62%, up +12 bps.
Wall Street has opened its Wednesday trading with the S&P500 up +0.2% after yesterday's big fall. The latest update to Q4 earnings have been strong. Overnight European markets were mixed with London down slightly but both Paris and Frankfurt up very strongly. Yesterday Tokyo closed up +0.2%. Hong Kong was up +2.8%, and Shanghai rose +0.5%. Singapore rose +0.2% The ASX200 ended its Wednesday session down another -0.7%. And the NZX50 also fell again, by-0.5%.
The price of gold will start today at just under US$2917/oz and up +US$5 from yesterday.
Oil prices are down -US$3/bbl to US$66.50/bbl in the US and the international Brent price is just over US$69/bbl. Lower expected demand expectations are building.
The Kiwi dollar is now at 57.1 USc and up +90 bps from yesterday. Against the Aussie however we are down -10 bps at 90.4 AUc. Against the euro we are down another -30 bps at 53.3 euro cents. That all means our TWI-5 starts today just over 66.6, and up +50 bps from yesterday.
The bitcoin price started today at US$89,8621 and up a net +8.4% from this time yesterday. Volatility over the past 24 hours has been very high at +/- 4.2%.
Due to some earlier technical issues, there will be no podcast or video versions today.
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