Here's our summary of key economic events overnight that affect New Zealand with news retaliation on retaliation seems to be the order of the day in the US tariff policy - exactly has observers had expected. The whole thing is a no-win battle and a repeat of a history lesson that failed the first time - one it should be noted that resulted in the 1929 Depression.
Both Canada and the EU responded with retaliatory tariffs on imports from the US. Washington threatened more on them for responding.
Separately, in the US, lower energy costs brought their CPI inflation rate down to 2.8% in February from 3.0% in January. This was a better result than expected. A year ago, CPI inflation was running at 3.2% and decreasing, when it dropped to 2.4% in September.
But no-one expects the dip to last, as the tariff costs get passed on to consumers.
Another fall in the long term US benchmark interest rates has brought another healthy rise in mortgage applications hast week, up at an +11% annual rate from the prior week. Again it was a continuing sharp surge in refinance activity (+16%), that drove the increase, rather than new lending (+4%).
There was another well-supported US Treasury bond auction overnight, this one for their ten year maturity. It resulted in a median yield of 4.27%, sharply lower than the 4.56% at the prior equivalent event a month ago. Safe haven demand is strong.
The Bank of Canada cut its key interest rate by -25 bps to 2.75% in its March decision, as expected and previously signaled, to mark -225 bps in rate cuts since the start of its loosening cycle in June 2024. More rate cuts are expected, especially now they can see a major economic bump coming from the tariff war.
Japanese PPI is still rising at +4.0% year-on-year in February, reinforcing how embedded inflation has now become in Japan. And probably at a higher level than they are comfortable with. It's the sixth straight month it has exceeded 3%.
In China, their national set-piece policy meetings adopted a 4% to GDP debt limit, but even local observers pointed out this will end up far higher than what will turn out in 2025. They will need massive new debt to achieve their 5% growth target. That much more debt creates a local government honey-pot rush.
India's CPI inflation rate fell sharply in February, down from 4.30% in January to 3.60% in February, a fall larger than the 4.0% expected. The pace of the drop in food price inflation drove the moderation. This will probably lead to more rate cuts by their central bank.
On the other hand, India's industrial production rose faster than expected. It was expected to be +3.5% higher in January than a year ago matching the December expansion. But in fact it came in +5.0% higher.
In Greenland, the 56,000 mostly Inuit voters have chosen the opposition centre-right, pro-business party as their new government. And declared they don't want to be American (or Danes, for that matter).
Also rising was Russian CPI inflation, which came in at +10.1% in February, up from 9.9% in January, driven by the +11.7% rise in food prices.
In Australia, regulator ASIC is suing Australia's largest superannuation fund for delayed, unfair and inefficient processing of death benefit transfers for almost 7000 people. It is far from the first time regulators have had to step in to enforce proper operations. AustralianSuper is the world's 16th largest retirement fund at AU$340 bln and is essentially controlled by Australian unions, although its trustee is formally owned by the ACTU, and the employer peak body Australian Industry Group.
In an extension of targeting its 'friends', the US confirmed that there will be no exemptions for tariffs on Australian steel and aluminium. Of course, the US still expects those it offends to keep buying US products and services.
The UST 10yr yield is now at 4.30%, up +4 bps from yesterday at this time. The key 2-10 yield curve is a little flatter at +33 bps. Their 1-5 curve inversion is now +1 bp. And their 3 mth-10yr curve inversion is at +2 bps. The Australian 10 year bond yield starts today at 4.51% and up +2 bps from yesterday. The China 10 year bond rate is now at 1.92% and also up +2 bps. The NZ Government 10 year bond rate is now at 4.69%, up +6 bps from yesterday.
Wall Street has stopped falling, up +0.4% on the S&P500. Overnight, European markets were all higher with London up +0.5 and Frankfurt up +1.5%. Yesterday, Tokyo ended its Wednesday session up +0.1%. Hong Kong was down -0.8%, and Shanghai was down -0.2%. Singapore was up +0.2%. The ASX ended its Wednesday trade down -1.3% and that matched the NZX50, also down -1.3%.
The price of gold will start today at just over US$2933/oz and up another +US$17 from yesterday.
Oil prices are up +US$1 at just over US$67.50/bbl in the US and the international Brent price is at just under US$71/bbl.
The Kiwi dollar is now at 57.3 USc and up +20 bps from yesterday. Against the Aussie however we are unchanged at 90.8 AUc. Against the euro we are up +20 bps at 52.5 euro cents. That all means our TWI-5 starts today just under 66.5, and up +20 bps from yesterday.
The bitcoin price started today at US$82,161 and up +1.0% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.0%.
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15 Comments
"If the world’s fertility rate were the same as in the United States today, then the global population would fall from a peak of around 10 billion to less than two billion about 300 years later, over perhaps 10 generations. And if family sizes remained small, we would continue declining."
'one it should be noted that resulted in the 1929 Depression.'
No, David. Contributed to, maybe, led to, no.
The Great Depression was a wavelength reaction to 1920's overproduction (Nash had written to fellow car-makers warning of what we would now call 'market saturation', in the mid-20s.). Then there was the speculation Ponzi - read Groucho or Harpo Marx's autobiographies; they were all on the bandwagon, all levering on lever on lever. All blindsided
Tariffs are a protectionist reaction, not a front-foot move. Always ask: Why? Back one pace, could the GD have been avoided, and how? Industrialisation - the conveyor-belt - outran consumption capability, but everyone wanted the up-graph to continue. Which it did via the Ponzi, until it didn't.
Nine or so years earlier under President Harding the government budget was more or less halved and tax rates slashed. At the time a depression was on the horizon. What America got instead was the roaring twenties, until 1929. Just providing comparative history as there are some other parallels such as 4% of the population holding 33% of the nation’s wealth, which echo today.
The following link is a bit of a long watch for a Youtube video (42 minutes, which is more than double the typical attention span) but would you or anyone else like to give an opinion on it's accuracy?
You Are Witnessing the Death of American Capitalism
It does give reference to the Great Depression and the similarities with current economic indicators.
UNSTOPPABLE Financial Crisis - Great Depression 2.0 Coming with Peter Schiff
https://www.youtube.com/watch?v=4ORLm4-1UTE
I think the economy is in a lot of trouble. I think that’s why Trump was elected. The voters are living in this economy, and despite what they’re being told by the media and Wall Street that we have a great economy, they know that’s not the case. They’re struggling to get by. Many people are working two or three jobs, whereas they used to be able to pay the bills with one. They can see prices rising rapidly for everything they need to buy as their debts are rising. People have their savings depleted. They’ve got record amounts of debt. The interest rates on that debt are much higher now than they’ve been in many, many years or decades. I think we’re a real mess.
This post bears repeating
by Independent_Observer | 10th Mar 25, 6:01pm
Interesting chart from Hussman - wages from incomes vs corporate profits (adjusted relative to GDP).
Like the housing market, something appeared to break in the 1990s where massive $$ flowed into asset prices or corporate profits in comparison to remuneration to workers.
https://x.com/hussmanjp/status/1898780388316909754?s=46&t=MUwQeKa7MkEJ7…
Separately, in the US, lower energy costs brought their CPI inflation rate down to 2.8% in February from 3.0% in January. This was a better result than expected. A year ago, CPI inflation was running at 3.2% and decreasing, when it dropped to 2.4% in September.
Inflation down, bond yields up, didn't expect that. Has to be the tariffs.
The long and brutal slide in Tesla shares has left big money managers including Pinnacle and Magellan Financial, along with super funds, wearing big losses.
Going to be a real tit for tat if Aussie puts tariffs on rare earths etc towards USA.
US President Donald Trump is deliberately trying to weaken the US dollar to better serve America’s interest is a theory that is starting to gain traction in financial markets as investors grapple with the prospect of the world’s largest economy falling into a recession.
An idea that was once dismissed as crazy and implausible is now starting to be more widely discussed in financial circles. Dubbed the “Mar-a-Lago accord”, named after Trump’s private club in Florida, it aims to reshape global trade and the financial system in favour of the US.
Canada announced retaliatory tariffs on nearly $30bn worth of American imports after US tariffs on steel and aluminum imports went into effect on Wednesday.
The Canadian government said it will be following a “dollar-by-dollar” approach and institute 25% tariffs on American imports, including steel, computers and sports equipment.
Inflation down, bond yields up, didn't expect that. Has to be the tariffs.
There was another well-supported US Treasury bond auction overnight, this one for their ten year maturity. It resulted in a median yield of 4.27%, sharply lower than the 4.56% at the prior equivalent event a month ago. Safe haven demand is strong.
You only seem to comment when bonds go up, even though the trend is down.
1month change in UST
1y 4.27 -> 4.06
2y 4.31 -> 3.99
5y 4.38 -> 4.07
10y 4.52 -> 4.31
4.2% looks like resistance for the US10y, and the recent low was September 2024 at 3.65% (when the fed first cut). Take a wider view going back to August 2020 at 0.5% (when the 40 year bull market came to an end), you may just be cherry picking from last month.
I’ll admit, I do like a bit of a song and dance when they sell off during the day. But yields are still up a lot historically and I can't see them coming down in the current environment.
Right now there is a rush to safe haven so people are starting to park funds in treasuries, especially shorter dates.
If this selloff becomes more of a "thing" people may prefer short dated treasuries over money market activity, and then its all bets are off, treasury rates could plummet while overnight money market spike (fed normally injects funds at these times to avoid issues)
A Financial crisis is very bad for low liquidity risk asset markets ie NZ houses. So while some spruikers would get the low rates they want, it would come with a 1989 style property market. In the UK this resulted in massive negative equity positions.
In summary if rates slowly fall its supportive to housing.
A sudden fall, not so much.
We're all good then :-)
Doesn't Scott Bessent have to issue a lot more long-dated Treasuries this year since Janet Yellen issued record amounts of short-term debt during Biden? Won't this extra supply push yields higher? Could a US recession and a stock market crash be enough to bring yields down with a move into Treasuries? And that move would likely be into shorter dates. With the current US debt, who’s buying the longer dates? If the 10y remains high US mortgage rates stay around 7%. A recession, even with lower rates, will likely bring higher unemployment and lower house prices.
I don’t think Trump and Elon are going to save the stock market this time... they’re trying to get treasury rates down to manage the US debt. A stock market crash won’t be a crisis the Fed starts QE for.
I’ll admit there’s a good chance with a US recession that UST gets a bid and US rates come down some. But take a look at the debt market in Europe. If the UK has a crisis because it looks like their rates are moving higher getting levels around Liz Truss moment July-September 2022, how many Kiwis are moving to the UK for more affordable housing? Maybe the UK and NZ housing crash together. BoE probably won’t cut rates this year due to inflation forecasts.
Brutal. Whitney Webb exposes Mark Carney.
"Mark Carney, Canada's new yet unelected Prime Minister, has spent the last several years selling a new version of neo-colonial debt slavery as "sustainable development." A complete snake, please read my past reports on his predatory endeavors."
- Whitney Webb
Today, MDBs are used as “instruments of power” that utilize debt to force developing nations to implement policies that benefit foreign interests rather than their own national interests. If GFANZ gets its way, the MDBs of tomorrow will be used to essentially eliminate national sovereignty, privatize the “natural assets” (e.g., ecosystems, ecological processes) of the developing world, and force increasingly technocratic policies designed by global governance institutions and think tanks on ever more disenfranchised populations.
Though GFANZ has cloaked itself in lofty rhetoric of “saving the planet,” its plans ultimately amount to a corporate-led coup that will make the global financial system even more corrupt and predatory and further reduce the sovereignty of national governments in the developing world.
https://unlimitedhangout.com/2021/11/investigative-reports/un-backed-ba…
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