Trump makes tariff u-turn for most; equities rise on emotional reaction; China retaliates and Trump can't help himself; bond yields zoom higher; UST 10yr at 4.40%; gold and oil up; NZ$1 = 56.2 USc; TWI = 65.8

Here's our summary of key economic events overnight that affect New Zealand, with news that past notions of safe havens have been upended, and now it is the turn of the bond market to be roiled. The cost of long-term money is rising sharply as risk premiums leap.

First, China has reacted in equal measure to Trump's capricious 104% tariffs on their goods, with their own extras, a 50% retaliatory tariff. The predictions any junior could see from the known Smoot-Hawley tit-for-tat protectionism are playing out.

The first to blink hasn't been the Chinese. Trump has made an about-turn and paused higher reciprocal tariffs "for 90 days" that hit dozens of trade partners just after they became effective, while raising duties on China further to 125%. This u-turn surprised markets which is having an emotional relief reaction. But any gains today will be built on sand.

So we are in a period of unmoored 'policy', with all the impacts ahead of us. History tells us this doesn't end well, for anybody including us.

American homeowners know what's coming, and are rushing to fix their mortgage rates before they rise unaffordably. There was a sharp +20% rise in mortgage applications last week from the week prior, with the refinance component up an eye-popping +35% and almost double the level of a year ago. Borrowers sense they may not see rates this low again for a long time.

Meanwhile, at the other end of the interest rate market, US Treasury yields are leaping, which means prices are dropping and holders are taking large losses. Today's US Treasury 10 year bond auction was well supported but at notably higher yields. Today the median yield was 4.34% whereas at the prior equivalent event a month ago it was 4.27%. This is a market where participants have regulatory obligations to buy.

But in the open secondary market, the effects are starker. The UST 10 year yield rose +16 bps just from yesterday. (from a month ago, up +11 bps). Volatility is a new feature of these bond markets too.

There was some US wholesale inventory data out overnight, but it was for February, and these were up just +1.1% from a year ago. But of course this was from a period well before the April omnishambles.

Also out today were the US Fed minutes from their March 20 (NZT) meeting, but the views in these have all been overtaken by subsequent events, so have little current relevance. But even back then they sensed threats to inflation from Washington's tariffs, with heightened concerns about stagflation.

In Japan, machine tool orders jumped sharply in March driven by export orders. They were up +11.4% year-on-year for the sixth consecutive month. Domestic demand remained stable

In India, and as expected, their central bank cut its policy interest rate by -25 bps to 6.00%. They cited easing inflation, slowing economic output, and growing global trade tensions as the reasons why they cut for a second successive time.

The UST 10yr yield is now at 4.40%, up +16 bps from this time yesterday. Risk premiums are growing. The key 2-10 yield curve is steeper, now at +54 bps. Their 1-5 curve is now +4 bps. And their 3 mth-10yr curve is now +7 bps. The Australian 10 year bond yield starts today at 4.39% and up +11 bps on Wednesday. The China 10 year bond rate is now at 1.65% and down -1 bp. The NZ Government 10 year bond rate is now at 4.75%, and up +21 bps from yesterday at this time.

The VIX volatility index is volatile on the lower side today.

Wall Street is currently up +7.4% on the S&P500 in its Wednesday trade as the tariff-pause relief rally kicks in. Who knows where it will end today. Overnight, European markets were all down about -3%. Yesterday Tokyo ended its Wednesday session down -3.9%. Hong Kong was up +0.7%. Shanghai rose +1.3% as the home team kept buying with the Beijing put in place. However Singapore was down another -2.2%. The ASX ended its Wednesday session down -1.8% and the NZX50 ended down -0.7%.

The price of gold will start today at just under US$3070/oz, and up +US$91 from yesterday. Perhaps this is one commodity exhibiting traditional safe-haven attributes.

Oil prices have risen +US$2 from yesterday at just on US$62/bbl in the US and the international Brent price is now just on US$65/bbl.

The Kiwi dollar is now at 56.2 USc, up +70 bps from yesterday at this time. Against the Aussie we are down -80 bps at 92.1 AUc. Against the euro we up +30 bps from yesterday at just on 51.1 euro cents. That all means our TWI-5 starts today now just on 65.8 and up +20 bps from yesterday.

The bitcoin price starts today at US$81,930 and rising, and up +6.1% from this time yesterday. Volatility over the past 24 hours has been very high at +/- 4.2%.

[Due to staffing holidays, the video version of this review will not return until April 28, 2025.]

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