Breakfast briefing: Wall Street cancels tariff optimism, resumes selloff

Economy / news

US inflation falls on big oil price drop; US federal deficit back to Trump-I depths; Taiwanese exports surge; China in deflation again; Aussies face higher inflation; UST 10yr at 4.40%; gold up and oil down; NZ$1 = 57.4 USc; TWI = 66.5

11th Apr 25, 7:22am by David Chaston

Here's our summary of key economic events overnight that affect New Zealand, with news equity markets are winding back yesterday's relief rally.

But first in the US, initial jobless claims rose last week to 215,000, +7.7% higher than the week before, but identical to the same week a year ago. There are now just under 2 mln people on these benefits, up slightly from the 1.93 mln a year ago.

US CPI inflation fell to 2.4% in March, its lowest level since February 2021. Because this was data taken before the tariff chaos, it seems this may be the low point for the foreseeable future. Food was up +3.0% and rents were up +4.0%. Medical care was up +3.0%. However petrol prices restrained the overall rises, down -9.8%. Very low oil prices will keep a lid on the total even if other living costs rise much faster.

Today's UST 30 yr bond auction was well supported, but the median yield came in at 4.73%, up from 4.56% at the equivalent event a month ago.

The US government reported a budget deficit of -US$161 bln in March, a -32% decrease from the previous year, largely due to a calendar shift in benefit payments. Despite this monthly decline, the broader fiscal picture remains concerning, with the US Treasury reporting a -US$1.3 tln deficit for the first half of fiscal 2025, a +23% rise from the previous year. This marks the second highest deficit for the first six months of any fiscal year, trailing only the -US$1.7 tln gap in fiscal 2021. Tax cuts for the rich in this environment looks exceedingly irresponsible, especially if the tax rises on consumers via tariffs don't raise the outlandish sums forecasted.

Just how damaged the US government agencies have become, Musk's DOGE fired all the safety regulators that oversaw Tesla.

The April USDA WASDE report out overnight shows that US corn inventories are lower than expected. Beef exports are expected to fall on retaliatory tariff actions against the US and beef imports are expected to be lower too for the same tariff reason. The net result seen in lower prices for US producers. Lower prices for US milk producers too as exports shrink. US farmers will be net losers from the tariff hostilities.

Across the Pacific, Japanese producer inflation is rising, now its highest since mid-2023. Producer prices there rose +4.2% in March from the same month a year ago, above market estimates of 3.9%. It was their 49th straight month of producer inflation, with cost rising further for most components.

Taiwanese exports surged again in March, up +18.6% from a year ago and a record high for any month. A +8.5% rise was expected. That is two consecutive months of outsized expansion. April tariff actions may well affect this impressive result going forward, but if US customers have no alternative sources, the tariff taxes will fall on the buyer.

In China, they not only have to fight off the US tariff policies, they have a resurgence of domestic deflation issues. Their March CPI fell -0.1% when a +0.1% was anticipated. Their PPI fell -2.5% when a -2.3% retreat was anticipated. On the consumer price front, food prices are -0.6% lower than a year ago, of which beef prices fell -10.8% and lamb -5.4%. Milk prices fell -1.7% on the same basis. They want to shift to a consumer-based society, but in the meantime their existing export sector is going to take major hits which will affect consumption, and there seems little upside to consumer demand in the current circumstances. Their "over-capacity" is going to expose them. You wonder if they have any more appetite for capitalism's "creative destruction" than Western economies, who have proven to have virtually none.

In March Australian inflation expectations fell to 3.6%, a four year low. But in April they jumped back up to 4.2% underscoring the ongoing uncertainty surrounding their domestic economic outlook and inflation trajectory in the face of fallout from the tariff war. Given they have both a jobs, and an inflation mandate, the RBA is in for a tricky period ahead with its policy choices.

Container freight rates rose +3% in the past week to be -23% lower than a year ago. Basically trans-Pacific rates firmed slightly while trans-Atlantic rates eased. Bulk freight rates fell a very sharp -21% in the past week to be -20% lower than year ago levels.

The UST 10yr yield is now at 4.40%, unchanged from this time yesterday. The key 2-10 yield curve is a little less steep, now at +51 bps. Their 1-5 curve is now +2 bps. And their 3 mth-10yr curve is now +4 bps. The Australian 10 year bond yield starts today at 4.35% and down -4 bps on Thursday. The China 10 year bond rate is now at 1.65% and unchanged. The NZ Government 10 year bond rate is now at 4.66%, and down -9 bps from yesterday at this time.

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

Wall Street is currently down -3.4% on the S&P500 in its Thursday trade as the tariff-pause relief rally runs out of puff in the face of realities and reverses. Overnight, European markets were all up more than +3% following the Wednesday signals from Wall Street. Yesterday Tokyo ended its Thursday session up an eye-catching +9.1%. Hong Kong was up +21%. Shanghai rose +1.2%. However Singapore was up an outsized +5.4%. The ASX ended its Thursday session up +4.5% and the NZX50 ended up +3.3%.

The price of gold will start today at just on US$3162/oz, and up another +US$92 from yesterday.

Oil prices have fallen -US$2 from yesterday to be just under US$60/bbl in the US and the international Brent price is now just on US$63/bbl.

The Kiwi dollar is now at 57.4 USc, up +120 bps from yesterday at this time and a three week high. Against the Aussie we are up +30 bps at 92.4 AUc. Against the euro we up +20 bps from yesterday at just on 51.3 euro cents. That all means our TWI-5 starts today now just under 66.5 and up +70 bps from yesterday.

The bitcoin price starts today at US$79,207 and falling, and down -2.4% from this time yesterday. Volatility over the past 24 hours has been moderate at +/- 2.8%.

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

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54 Comments

by Pa1nter | 11th Apr 25, 7:32am 1744313558

As a glimmer of hope for the morning

While it's apparent right wing populism is on the rise, and that this will only speed up the rate of Western decline, I think the Trump presidency is going to reduce others' appetites for similar regimes

We just need viable alternate change agents. Which is few if any of the existing options.

by Foxglove. | 11th Apr 25, 7:43am 1744314233

Whatever you want to call the Trump administration the fact is it is present and in full swing. A presidency with no restraint. How that has impacted on the American people will be revealed in the mid term elections and therefore that outcome has the prospect of being one very momentous event.

by murray86 | 11th Apr 25, 8:19am 1744316350

Don't worry we already know the underlying message. If the Dems win, they will have stolen the elections.If it's the Republicans it's democracy in action!

But it has already been put out that the Republicans are sweating on their razor thin majorities. It will be interesting.

by interesting1234 | 11th Apr 25, 9:18am 1744319891

The mid-terms IMO will likely be an indicator of the level of education of the average voting american. Will they vote against self-destruction, or vote on idiotic loyalty to a regime they don't understand the machinations of, in how it is eroding their standard of living. If anything, I hope the current climate in the USA brings a realisation of the importance of education and understanding of politics and macroeconomic principals to the masses.

by Speedmax | 11th Apr 25, 9:28am 1744320533

They can’t come soon enough! But meanwhile I do agree with Painter’s point - Trump is quite likely to have discouraged voters in many other democracies from voting for this crap. Canada will show this first in coming election

by J.C. | 11th Apr 25, 8:20am 1744316448

We just need viable alternate change agents.

I take it you don't mean Sleepy Joe. It's quite astounding that people look back on that period as benign. When in reality the destruction of the US and Anglosphere societies and economies had already become the new normal.

by Pa1nter | 11th Apr 25, 8:51am 1744318273

Both the major left and right wing institutions are selling us down the same river.

The middle class is a historical anomaly and on the current trajectory it'll be largely stripped from existence over the rest of the century.

by DonKerrBab | 11th Apr 25, 10:36am 1744324602

Maybe the middle class was stripped due to globalisation. It clearly worked well for companies like Apple but did it work so well for middle America? The whole frazzle over the evil of Tariffs is only because of the assumption of current economic orthodoxy, gotta be honest I don't have a massive amount of respect for the profession of late. I mean Modern Monetary Theory, what even is that? A justification for Central Banks to pump the financial systems asset gains?

by Pa1nter | 11th Apr 25, 11:13am 1744326789

Maybe the middle class was stripped due to globalisation. It clearly worked well for companies like Apple but did it work so well for middle America?

Large global corporations suddenly had hundreds of millions/billions more consumers, with lower operating costs

Those in less developed nations got growth, higher incomes, better standards of living

The middle class in developed nations split, those in the newer services jobs doing well, but much of the rest less so.

The rise in credit has acted to smooth over the disparity. For a while.

by lost_ cause | 11th Apr 25, 1:00pm 1744333235

"Those in less developed nations got growth, higher incomes, better standards of living"

Or did they? And certainly not for all. The corporations/companies of the advanced countries moved their operations and outsourced their jobs to less developed countries and of those countries, to the ones where conditions were most favourable to them and their bottom line i.e. countries where lower wages prevailed and to those less developed countries which in order to attract and win that business had to accept the environmental damage/degradation that came with it.

Under globalisation third world countries have remained third world countries. The competitiveness of globalisation, simply pitted less developed nations against each other to attract jobs and incomes and advanced the race to the bottom whilst corporations increased earnings and have become the all too powerful behemoths that some of them are?

by Pa1nter | 11th Apr 25, 1:25pm 1744334747

Or did they?

The short answer is irrefutablely yes. You need only look at the two Koreas.

The longer answer involves many of your talking points

by lost_ cause | 11th Apr 25, 5:38pm 1744349896

I don't think that the two Koreas are a good comparison example when it comes to globalisation and free trade agreements given North Korea has been under a military dictatorship since the end of the Korean war and is one of the most isolated of countries. Trade with the outside world is practically non-existent.

by mfd | 11th Apr 25, 8:54am 1744318478

It was benign, certainly compared to the current administration. Policy was predictable and reasonable. Legal rulings meant something. Civil servants were hired based largely on merit rather than loyalty to the President. Americans were not being sent to gulags in El Salvador without due process. Law firms were not being bullied into only taking cases approved by the administration. The President didn't have his own meme coin as an open door to corruption, nor did he front-run policy changes by telling people it's a 'good time to buy'. Unelected officials weren't running around firing the people responsible for regulating their own companies. Leaders from other countries weren't openly bullied on live TV.

by powerdownkiwi | 11th Apr 25, 9:04am 1744319096

You miss the point - enough of the ex-middle-class were that disadvantaged (in their eyes) that they voted for Trump. Twice.

Thus democracy turns into autocracy, thus the trend to fascism.

Don't blame the players - blame the playing-field.

Goff and the Chinese Ambassador came across well on M/R this morning. Both better than Corin-I'm-irrevocably-steeped-in-the-neoliberal-growth-message-Dann.

by Pa1nter | 11th Apr 25, 9:13am 1744319582

Thus democracy turns into autocracy, thus the trend to fascism.

That is the key takehome. We are seeing shifts towards this sort of right wing fascism, winning elections by coming down on migrants, trans/wokeness battles, and a message that the state is useless and should be dismantled as soon as possible.

Should the Trump presidency be as bad for the masses as it appears, these sorts of groups in other countries will loose a lot of their lustre.

by J.C. | 11th Apr 25, 9:15am 1744319742

You miss the point - enough of the ex-middle-class were that disadvantaged (in their eyes) that they voted for Trump.

You reckon 4 more years of the spirit of Joe and / or his replacement would have been the remedy for socio-economic destruction Power?

I think many people like to convince themselves that this is an alternate reality. It's like people who claim Aotearoa was world beating on 'saving lives' during the Covid using non-sensical benchmarks. Their hatred of people like Trump or political alternatives to that to which they're invested is all consuming.

by Pa1nter | 11th Apr 25, 9:19am 1744319965

You reckon 4 more years of the spirit of Joe and / or his replacement would have been the remedy for socio-economic destruction Power?

The rate of decline would've been slower.

by mfd | 11th Apr 25, 9:23am 1744320231

I don't think anyone has said Biden had all the answers - it is you that keeps bringing him up. But it seems a clear and simple fact that his administration was more benign than the current one.

He clearly didn't do enough for many in America. The party got too caught up in culture wars, and didn't do enough on immigration, and that took focus from his genuine efforts to reshore manufacturing and bring back jobs like the IRA and CHIPS act.

The Dems didn't do enough, and Trump will make things worse. He has no interest in improving the lives of the poor, he represents the Wealthy.

by J.C. | 11th Apr 25, 9:35am 1744320921

But it seems a clear and simple fact that his administration was more benign than the current one.

In what respect? It was under the Biden admin that debt and money supply started expanding at USD1 trillion every 90 days. Yet at every water cooler and neighborhood BBQ, the majority of punters think this is 'normal', shrug their shoulders, and turn their attention back to discussing the Ponzi as if it's all part of the natural order.

by murray86 | 11th Apr 25, 10:14am 1744323251

that's the interesting point isn't it? Nixon untethering the US$ from gold effectively created a tap that I don't think they really understood the price of. They have been saved from being made to understand that by the external demand for the US$, but Trump has undone that. He hasn't turned the tap off (I don't think he even understands the issue) but he's pissed the rest of the world off to the degree that they are seriously looking at how they can do business without the US at the centre of it all, without guiding and influencing every thing. The end effect will be that much of the external demand for the US$ will vanish, and it's value will crash (not completely, the internal economy is too big). Right now they've opened a door for all the pigeons to line up at and they will start coming home to roost. Many of those pigeons have waited decades for the opportunity.

another aspect of this that the fallout may affect - what of the UN? Five or six nations on the security council have a veto power. Three of them have to all intents proven they will use it to undermine the entire intentions of the UN. Those vetos have been questioned before. Will that happen again and louder?

by Pa1nter | 11th Apr 25, 10:25am 1744323903

In what respect?

In the same respect a bull in a paddock does less damage than one in a China shop.

by murray86 | 11th Apr 25, 9:29am 1744320557

No. this relates to an earlier discussion we had. That the US system was broken was beyond doubt. the entrenchment of power and privilege for the 'elites' had gone on for too long. The political system had distorted to the point that the US was to all intents a two party state ( we often blast china for being a one party state) where in reality either choice was a bad one, and they would not allow any other voices into positions of influence for fear of diluting their own influence and privilege. In other words they undermined the entire democratic philosophy that the nation was built on.

It's not much different from NZ. It could easily be argued that the Dems lost the last election, rather than the Republicans winning, but it is also true that Trump is so radically different to the existing politicians that they saw him as a needed change. It may even be that they wanted to have someone turn their system on it's head and knew that it could never be allowed by an independent, so the disruptor had to come from the inside. That the GOP didn't see this coming, and I really don't believe they have grasped that yet, is the significant failure there. As is so often stated, they have got what they asked for. the question will be are they wiser for it?

by J.C. | 11th Apr 25, 8:13am 1744316008

The price of gold will start today at just on US$3162/oz, and up another +US$92 from yesterday.

Because on top of a global trade war, we now have currency wars and global devaluation. The new ATH for gold are signs of the mother of all debt crises. Capital flight to Gold and CHF

And gold miners ripping. Proxy GDX flying and now up 37% YTD.

And our ruling elite aren't even talking about. At least in public.

by NZGecko | 11th Apr 25, 8:32am 1744317165

Why is silver such a continual laggard? - while gold goes from peak to new peak with such ease?

by Pa1nter | 11th Apr 25, 8:52am 1744318329

That's sort of like asking why Super Rugby gets better attendance and ticket prices than your local club team.

by NZGecko | 11th Apr 25, 9:16am 1744319789

Such a great and worthy insight from you there, Head P-man......

by Pa1nter | 11th Apr 25, 10:15am 1744323325

It was saying silver is gold's poor cousin. It has similar properties to gold, but not it's popularity.

by Threecents | 11th Apr 25, 9:18am 1744319909

The silver price premium in Shanghai over the U.S. price on Wednesday was 7.40 percent.

" 'Da boyz' are particularly anxious to keep silver off the investment demand radar screen, as the moment it kicks in, it will be game over. "

ie the price managers don't want a lot of physical demand from the public - which could occur if Ag was rising like Au

by J.C. | 11th Apr 25, 9:19am 1744319997

Why is silver such a continual laggard? - while gold goes from peak to new peak with such ease?

Why is the silver price supposed to behave like that of gold? Just because silver had a parabolic move in the 70s doesn't mean history repeats.

Also, if it's all about price, you should perhaps zoom out. Silver is outperforming gold quite noticeably over the past 5 years.

by rastus | 11th Apr 25, 9:38am 1744321125

One reason is Central Bank demands on gold, not so on silver. Silver also has industrial demand and that at moment is off.

by J.C. | 11th Apr 25, 9:41am 1744321306

If you zoom out, the silver price is outstripping gold over past 5 years.

by rastus | 11th Apr 25, 11:03am 1744326182

Over 5 barely, over 10 not so. Suffice to say the sprott etf silver rise over last 5 years has been nice 88% or so gain. Long may it continue.

by Threecents | 11th Apr 25, 12:44pm 1744332274

Perhaps you should ask the NZ Mint why their market price for gold is 3% over spot while their market price for silver (1 ounce) is 12% over spot. For a 1kg bar their price is 8% over spot.

What could this say about the futures (paper) price of the metal?

by Let me be Frank | 11th Apr 25, 8:23am 1744316636

In the absence of 'creative destruction' we appear to be now relying upon political destruction.

Allowing the wealthy to accumulate so much power has had the inevitable outcome.

by Pa1nter | 11th Apr 25, 8:53am 1744318399

Everything that arises falls away

But revolutions are rarer than you think (especially if you have an aging population), and a small few can lord it over unwashed mashes for considerable periods of time.

by Retired-Poppy | 11th Apr 25, 9:04am 1744319060

unwashed mashes?

by powerdownkiwi | 11th Apr 25, 9:06am 1744319166

Mr Potato-head

by Retired-Poppy | 11th Apr 25, 9:10am 1744319454

😂🤣

by Let me be Frank | 11th Apr 25, 9:03am 1744318999

Some may say that we are living through a 'revolution'....it certainly could not be described as the staus quo.

by Pa1nter | 11th Apr 25, 9:14am 1744319676

We always are, just the rate of change varies.

On the current path though, expect an increase in internal suppression and policing.

by Let me be Frank | 11th Apr 25, 9:27am 1744320472

"On the current path though, expect an increase in internal suppression and policing."

Cant imagine why we should expect such in a constant state of change.

by rastus | 11th Apr 25, 9:15am 1744319730

An adult enters the room.

Singapore PM on the tariff mess. Pulls it together nicely. A path for NZ to join.

https://youtu.be/c5GMKzJVQJM?si=60itwdZ7Wp3fefCX

by Pa1nter | 11th Apr 25, 9:16am 1744319766

Most half reasonable people know this. I think a day or so back Kate showed something similar from the Canadian PM

But just stating this is one thing

Action is another all together. Our current institutions sacrifice expediency for thoroughness. They're running out of that luxury.

by J.C. | 11th Apr 25, 9:57am 1744322225

Most half reasonable people know this. I think a day or so back Kate showed something similar from the Canadian PM

Yes, 'reasonable people' in the Anglosphere seem to think Mark Carney is the cat's whiskers. Quite strange that ex-central bankers and elitists are seen as the new saviors.

by mfd | 11th Apr 25, 9:48am 1744321696

It's one of Trump's superpowers. After seeing him stomp and grump his way across the world stage, even the dullest of politicians suddenly starts to look appealing.

If Trump had kept his mouth shut Carney would be a lame duck right now.

by Pa1nter | 11th Apr 25, 10:24am 1744323863

It's kinda tribal how your tendency is to gravitate towards discussing people rather than the issues

Ashley Church!

Joe Biden!

Now whoever Mark Carney is.

They're all just totems.

by J.C. | 11th Apr 25, 11:19am 1744327189

Yes P. The mighty Ashley Church. An intellectual paragon of the Aotearoa Ponzi. Can see you hanging off the edge of your seat at the seminar in awe of the man.

by Pa1nter | 11th Apr 25, 11:31am 1744327866

Yeah this line of thinking is problematic.

Rather than have a direct discussion between you and me, you are bringing your imagination, and 3rd party actors into the equation.

Fine if I were holding these people up as my champions, but I have no affiliation with them, outside of your association. We end up splitting into tribes, rather than discussing the actual matter at hand

by profile | 11th Apr 25, 9:40am 1744321237

Just one word: Plastics

"The story with ethane is a lot less complex but a bigger deal for the export market. China imports all of its ethane from the U.S. and there is no other place to source waterborne ethane. Most of the new crackers in China that use ethane do not have feedstock flexibility, so they either run on U.S. ethane or they do not run."

"China was expected to add 25 billion pounds per year of propylene capacity, or nearly 470 Mb/d of additional propane demand. The only country with increasing propane supply and exports likely to meet that much additional demand is the U.S."

https://rbnenergy.com/bad-blood-burgeoning-us-china-trade-war-has-poten…

by rastus | 11th Apr 25, 11:08am 1744326537

Basically another example of how the globe is totally intertwined by open trade of the last few decades - and throwing a tariff grenade is incredibly stupid.

The reality tv star cannot distinguish his tv role from his true (in) abilities.

by murray86 | 11th Apr 25, 1:12pm 1744333953

Not disagreeing with Rastus, but less plastic production would be a good thing wouldn't it, considering its effects on the environment?

by redcows1 | 11th Apr 25, 2:13pm 1744337604

That was my first thought.

Been a bit skewed by the son in-law doing a thesis involving looking at whole of life of products. We really need way way less plastics

by Let me be Frank | 11th Apr 25, 5:36pm 1744349810

We do....but as has been noted our medical system would fall over (even faster) without them....not to mention our food distribution systems.

by linklater01 | 11th Apr 25, 1:50pm 1744336221

The wheels are falling off. This comes from Oilprice.com

Treasury Yield Spike Leaves Markets on Edge

In a stunning pivot, President Trump’s decision to pause reciprocal tariffs on most nations—while slamming China with a 125% levy—appears less a calculated masterstroke and more a frantic response to trembling financial markets.

Clay Lowery, a former Treasury heavyweight now at the Institute of International Finance, revealed the move was sparked by a panicked exodus of investors from stocks and Treasuries.

The 10-year Treasury yield’s alarming spike, he noted, sent shockwaves through the White House, Treasury, and Commerce Department, signaling a potential financial cliff.