China hits back as US-China trade now pointless; US consumers turn very glum; credit crunch coming for non-prime US business; China faces its own debt stress; UST 10yr at 4.49%; gold and oil up; NZ$1 = 58.2 USc; TWI = 66.9

Here's our summary of key economic events overnight that affect New Zealand, with news things are turning sour in the trenches of the US economy - for consumers and many non-prime corporate borrowers.

The big news today however is that China is standing its ground. Beijing raised tariffs on American imports to 125% on Friday, hitting back against Trump's decision to hike duties on Chinese goods to 145%, and raising the stakes in the trade war. They repeated the "fight to the end" rhetoric, also saying they will "counterattack". "Even if the US continues to impose higher tariffs, it will no longer make economic sense and will become a joke in the history of world economy. At the current tariff level, there is no market acceptance for US goods exported to China."

On immediate consequence of all this is that investors are turning away from the US dollar as a safe hoven. And perhaps turning away from US Treasuries too.

But first up today, equity markets seem to be ignoring a sharp change in US consumer sentiment. The University of Michigan survey plunged in April to its lowest level since June 2022 and well below what was anticipated. That's the fourth straight month of pullback, and this survey is now more than 30% lower since the November 2024 election. It is signaling growing worries about trade war developments that have oscillated over the course of the year.

American consumers report multiple warning signs that raise the risk of recession: expectations for business conditions, personal finances, incomes, inflation, and labour markets all continued to deteriorate this month. The gauge for current economic conditions fell along with the component measuring expectations which is now at its lowest since May 1980. Meanwhile, year-ahead inflation expectations surged to 6.7%, the highest reading since 1981, from 5% in March. The five-year inflation expectations gauge edged up to 4.4% from 4.1%.

Meanwhile, March producer price inflation actually eased to 2.7% its lowest in five months, aided by a sharp drop in energy costs. Without those fuel cost drops, the index would have risen slightly to 3.3%.

There are signs that lending activity is tightening sharply in the US. For two weeks, there have been no - zero - high yield leverage loans for corporates in the US. The funds making these loans are having sharp investor outflows, and banks have become quite risk averse. A credit crunch is underway for most non-prime borrowers. If it extends, there will be real trouble.

In Canada, not only are they rejecting American products and travel option now, a new trend is that they are net sellers of US real estate they had as holiday homes.

India released February industrial production data overnight and that showed growth decelerated sharply to +2.9% from a year ago, down from an upwardly revised +5.2% in January. Markets had expected a +4.0% rise in February, so this is a big miss and is the weakest expansion since August.

China's vehicle sales jumped in March from February to 2.9 mln units, but the near-term change is distorted by the Chinese New Year holiday period. NEVs rose to 1.2 mln of those units, now 42% of all sales. They seem to be on target to sell almost 33 mln vehicles in 2025, almost double the level in the US.

Meanwhile, State-linked Chinese funds (the 'home team') stepped in to rescue Chinese stocks this week. But it’s an expensive exercise, involving more than US$1 tln so far and likely to have to go up much more than that. China's own credit crunch is coming.

In Europe, German CPI inflation came in at 2.2% in March (2.3% on an EU harmonised basis), slightly lower than in February, and lower than expected. Food prices were up +3.0% and the price of services were up +3.5%. It is also falling energy costs that are keeping a lid on their inflation.

Coal and steel prices are falling, with the coal price now down to a level it first achieved in 2016.

The UST 10yr yield is now at 4.49%, up +9 bps from this time yesterday. A week ago it was 3.99% so a large move up since then. This is its highest level since mid-February. The key 2-10 yield curve is a little more steeper, now at +55 bps and more than a three year high. Their 1-5 curve is now +11 bps. And their 3 mth-10yr curve is now +18 bps. The Australian 10 year bond yield starts today at 4.42% and up +17 bps from yesterday. The China 10 year bond rate is now at 1.66% and little-changed. The NZ Government 10 year bond rate is now at 4.78%, and up +12 bps from yesterday at this time. It is up the same for the week.

The VIX volatility index is little-changed today from yesterday ending the week -19% lower than this time last week.

Wall Street was up +1.8% on the S&P500 in its Friday trade as the whipsaw trade and sentiment continues. And for the week it is ending up +8.2%. See this. Overnight, European markets were mixed with London up +0.6%, Paris down -0.3% and Frankfurt down -0.9%.. Yesterday Tokyo ended its Friday session down -3.0% for a net +1.3% weekly gain. Hong Kong was up +1.1% for a net +0.9% weekly rise. Shanghai rose +0.5% to finish its week up +1.4%. However Singapore was sell -1.8% on Friday. The ASX ended its Friday session down -0.8% and down -0.3% for the week. The NZX50 ended down -1.5% in its final session, to be a net -1.7% lower for the week.

The Fear & Greed Index ends the week hard over in the 'extreme fear' zone. This is unchanged from last week.

The price of gold will start today at just on US$3234/oz, and up another +US$72 from yesterday, and yet another new record high. That is up +US$215 or +7.1% from this time last week.

Oil prices have risen +US$1.50 from yesterday to be just on US$61.50/bbl in the US and the international Brent price is now just over US$64.50/bbl. These are the same levels we had a week ago. For some reason the US naively thinks that Europe should buy its oil and gas, overlooking the now-extreme sovereignty risks for any dependency on the US.

The Kiwi dollar is now at 58.2 USc, up +80 bps from yesterday at this time and the highest since mid-December. A week ago it was 55.6 USc so a mammoth +260 bps appreciation or +4.7%. Against the Aussie we are up +20 bps at 92.6 AUc. Against the euro we up +10 bps from yesterday at just on 51.4 euro cents. That all means our TWI-5 starts today now just under 66.9 and up +40 bps from yesterday, up 130 bps from a week ago.

The bitcoin price starts today at US$83,758 and rising, and up +6.0% from this time yesterday. This time last week it was at US$83,808, so little net change from then. Volatility over the past 24 hours has been high at +/- 3.0%.

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