Breakfast briefing: Volatility without guardrails

Economy / news

US consumers see higher prices, fewer jobs; Washington becomes a crime center; Canada rethinks rate cut track; China reaps huge trade benefit from tariff threats; UST 10yr at 4.37%; gold and oil dip; NZ$1 = 58.8 USc; TWI-5 = 67.3

15th Apr 25, 7:19am by David Chaston

Here's our summary of key economic events overnight that affect New Zealand, with news the week started with a strong risk-on mood and equities rose on Monday in Asia, and especially in Europe. Wall Street opened with the same vibe, but lost momentum in the middle sessions, although it is returning in the later session. It's volatile.

But first in main street US, the New York Fed's consumer expectations survey mirrored the other recent sentiment surveys, noting a defensive turn in the mood. Consumers’ year-ahead expectations about their households’ financial situations deteriorated in March, with the share of households expecting a worse financial situation one year from now rising to 30%, the highest level since October 2023. Those surveyed said they see higher inflation in a year, up to 3.6% from 3.0% in the February survey. The expectations for earnings growth fell, and for joblessness to rise. Of course, this one was taken before the heavy tariff policies hit in early April. The April update will be available on May 9 (NZT).

In Washington, the Trump administration is moving swiftly to end enforcement of white collar crime, dismissing federal prosecutors involved in enforcing foreign bribery cases, crypto crime, and money laundering crime. Its open season for white collar criminals. Washington is also apparently open for far-right Russians.

It is so risky to visit the US, EU diplomats are now being issued with burner phones for their visits, just like they do when visiting China or Russia.

On the tariff front, exemptions are coming for car parts, new tariffs for pharmaceuticals. The common thread is bolstering profits for campaign supporters. Need a favour? Go to Washington with money for Trump.

In Canada, their central bank is about to review its monetary policy settings. It was on a rate cutting track, but is now more likely to leave its policy rate unchanged given the inflationary threats from the trade war.

In China, their exports surged by +12.4% in March to US$314 bln, far above market forecasts of +4.4% rose and accelerating sharply from a +2.3% rise in the January–February period. It marked the fastest increase in overseas sales since last October, driven by the urgent frontloading before the American tariffs took effect. Since November when talk of tariffs first became a credible risk, the rise of Chinese exports has been exceptional. Meanwhile, March imports fell -4.3%. As a consequence, China's merchandise trade surplus has hit record levels in 2025.

We exported +13% more to them in Q1-2025 from a year ago, and imported -5% less. Australia exported -29% less, and imported -5% less, for comparison.

The UST 10yr yield is now at 4.37%, down -13 bps from this time yesterday. The key 2-10 yield curve is a little steeper, now at +55 bps. Their 1-5 curve is now only +2 bps, a lot flatter. And their 3 mth-10yr curve is now +8 bps, also a lot flatter. The Australian 10 year bond yield starts today at 4.39% and up +3 bps from yesterday. The China 10 year bond rate is now at 1.66% and up +1 bp. The NZ Government 10 year bond rate is down -5 bps at 4.73%.

Wall Street has started its week as the futures trading suggested with the S&P500 up +1.2% in its Monday afternoon trade. But that is well back on the opening enthusiasm, which waned pretty quickly. But then returned. European markets all started the week with a rush exceeding +2.5%. Tokyo ended yesterday up +1.2%. Hong Kong was up +2.4%. Shanghai was up +0.8%, and Singapore gained a full +1.0%. The ASX200 ended its Monday session up +1.3%, but the NZX50 only managed half that, ending up +0.7%.

The price of gold will start today at just on US$3213/oz, and down -US$23 from yesterday.

Oil prices have dipped -50 USc from yesterday to be now at US$61/bbl in the US and the international Brent price is now just under US$64.50/bbl.

The Kiwi dollar is now at 58.8 USc, up +½c from yesterday at this time and the highest since mid-December. The fall of the USD extends. Against the Aussie we are up another +20 bps at 93 AUc. Against the euro we up +60 bps from yesterday at just on 51.9 euro cents. That all means our TWI-5 starts today now just on 67.3 and up +40 bps from yesterday.

The bitcoin price starts today at US$84,546 and holding, and down a mere -0.3% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.6%.

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

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14 Comments

by Foxglove. | 15th Apr 25, 9:15am 1744665358

“Volatility without guardrails.” Aye, that puts it well. The American market is the most lucrative market in the world. That’s why everyone wants in there. But it is not just one market. Ten states individually have economies larger or similar to the larger EU nations or Russia for that matter. It is a vast playing field but astonishingly diverse by regional, ethnical, climatic influences and population density. The market sorts itself out in its own particular manner but that performance, the requisite services and supply, are in themselves highly intricate and challenging to balance, every day. Call it a gigantic juggling act if you like. Introducing overnight , non specific general tariffs, then stop starting them, then making some specific, some not, is crazy stuff. The platform for that juggler’s act is now very shaky indeed.

by murray86 | 15th Apr 25, 9:43am 1744667039

Is that going to continue at the same level though? The harm Trump is doing will raise costs to all Americans, with a connected drop in living standards resulting. this will come back to bite him and unless something changes significantly he will be toast at the next election. (Assuming he survives and turns over the law that prevents him from running again). The money to be made, which clearly depends on people having it to spend, will be much reduced. The vicissitudes falling out of their politics will likely increase the distrust of politicians and government in general. They have a history of retrenching to just buying their own products, and foreign business's could well struggle.

by powerdownkiwi | 15th Apr 25, 10:15am 1744668927

The 'costs' had to rise for most Americans - they'd been consuming more than they'd been producing and filling the gap with debt and deferred maintenance.

That was temporary with or without Trump.

There will likely be a race to be self-sufficient, in which China will likely outflank the US. Yes, incumbents US leaders will be jettisoned from here on. But I'm more and more of the opinion that big money will either assassinate Trump or impeach him, before this term is up. Or he'll throw his toys and walk...

by singautim | 15th Apr 25, 10:46am 1744670806

The race between China & USA. Two countries similar in size, both with vast empty areas and also rich productive farming areas. China has the disadvantage of triple the population but the advantage of far more engineers and far fewer lawyers.

by powerdownkiwi | 15th Apr 25, 3:12pm 1744686730

Both are depleting their food-soil resources, and their aquifers. I suspect the US is ahead in the depletion race, but it is a hard race to call.

Energy is the key - remembering always that food is energy...

by Foxglove. | 15th Apr 25, 11:08am 1744672115

There is though a big difference between 0.35 and 1.4 billion people to keep satisfied. That is protection from the elements, gainfully occupied, secure and fed. America has more or less defined and developed its geography vis a vis its population. China though in progressively shifting much of its vast population from rural to urban has still got quite some adapting pains and within that, challenges of energy and a consistent and safe food chain remain constant. As such achieving self sufficiency will remain questionable. As a great generalisation Americans though are neither accustomed nor receptive to seeing their apples falling off the cart, even if they should notice that the cart has a busted wheel. What Trump has commenced is yet to anywhere near impact, as what is potentially likely, and the extent of that will surely become known at the mid term elections. That is if nothing too much has already erupted.

by interesting1234 | 15th Apr 25, 11:43am 1744674213

But does the CCP really need to keep the population satisfied given they can rule with absolute authority?

by Pa1nter | 15th Apr 25, 12:15pm 1744676125

Their legitimacy for the past few decades has rested on delivering continual economic prosperity.

Which they did, but removing that now won't go down well.

by murray86 | 15th Apr 25, 11:59am 1744675172

You're talking bigger picture rather than the immediacy I was referring to, but yes they had to rise. the issue is under more normal circumstances the rise would be gradual, and absorbable without too much pain. What is happening now is a train wreck.

I agree with your second to last sentence, but don't think he can do the last. Once gone the protections of the office will not protect him for his corruption and the damage he has done.

by Yvil | 15th Apr 25, 11:02am 1744671767

The expectations for earnings growth fell, and for joblessness to rise

and

Wall Street has started its week with the S&P500 up +1.2% in its Monday afternoon trade

Go figure.........

by Colin Maxwell | 15th Apr 25, 1:51pm 1744681888

Check out the Dow Jones 1928-1932 graph, Yvil...

https://creditwritedowns.com/2008/06/chart-of-day-dow-1928-1932.html

by Yvil | 16th Apr 25, 9:22am 1744752176

Interesting, thanks Colin.

by Kate | 15th Apr 25, 12:14pm 1744676082

Its open season for white collar criminals.

It think Biden/Kamala did a great dis-service by handing over the keys. Biden needed to use those Presidential immunity powers granted by the Supreme Court to hold the orange guy and his co-conspirators in custody, pending the resolution of those two criminal trials.

But, when I thought that immediately post-election I never guessed he would take down the world along with the US.

This Project 2025 play book needed to be taken far more seriously by the Biden administration.

by Colin Maxwell | 15th Apr 25, 1:02pm 1744678925

Thanks, David.

As a new global financial/trading architecture is born, Western countries will learn the hard slow way, as to why China (like it or not) is currently the most successful industrial economy on the planet.

Not to mention, along with Japan, China is the U$A's key bank manager – one who the T-rump Admin should think twice about constantly insulting.

Prof Michael Hudson...

“Why is China so successful in developing what Americans call an unbalanced economy – that is because China has kept infrastructure in the public domain – it has not let it become privatised, and the most important public utility, that it has kept, that neither America nor other Westernised countries have kept in the public domain is MONEY (CREATION)”

What the West misses is that their predatory actions, and of late what the #47 Admins overt bludgeoning tactics have done, is to drive the Eastern powers from being, at times unfriendly rivals, into cooperative mindsets - of late this is happening with India and China now too.

Because of the appalling way Japan and South Korea have been treated, they are now looking at close trading relations with China as well - they have obvious proximity/logistical advantages, and the opportunity to avoid the customary ticket clipping as well

Also, within a few days of Trump publically insulting both Spain and the BRICS, their PM Pedro Sanchez, was in a meeting with Xi in Beijing - hmmm, I wonder what the main topic of discussion was there.

https://apnews.com/article/trump-spain-brics-nato-tariffs-defense-spend…

Trump then goes on to claim that he has already slain the BRICS dragon when he has zero clue who the members even are...

https://www.timesnownews.com/world/donald-trumps-big-claim-says-brics-b…

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The three countries below would have to be deaf dumb and blind not to recognise that their cooperation will make the 21st century theirs - these three global powers have massive complementary resources, logistics, and locations.

#1 Russia - the country with the most natural resources on the planet, a very strong balance sheet, and a central bank run as a public utility.

RUSSIA PROVIDES AFFORDABLE COMMODITIES

#2 China - a highly developed creditor nation with by far the largest productive economy on the planet, a central bank and many lower-tier banking services run as public utilities - as a result they have achieved the most affordable liquidity on Earth.

CHINA PROVIDES THE CAPITAL AND THE CHEAP FUNDING

#3 India - now the largest population on the planet with a massive low-cost labour force and a fast developing productive economy, with a healthy GDP and demographics profile.

INDIA PROVIDES THE CHEAP LABOUR (as developed nations, neither Russia nor China have particularly cheap labour any longer)

With the cooperative integration of these three economies - remember too that they are the R, the C, and the I, in BRICS, and you have an unstoppable financial/industrial juggernaut.

Captain Chao$ can huff and puff as much as he wants, believe his own lies, and those of his sycophantic cabinet parroted within their imagined construct, but it won't change the Realpolitik nor the reality on the ground

Rome II is burning and like it or not, #47 is pouring petrol on the fire. Once the U$ working population finds out that they have been sold the biggest crock of all time, they will come after Trump and his thieving gazillionaire club.

It's too late for the empire. I see state secession on the menu. For the best part of a century, there was only one U$ state (North Dakota) that conducted its state banking as a public utility (PBS) - they literally sailed through every single pump-and-dump plot that the private banking cartel threw at them.

Now there are at least 35 U$ states looking at the PBS model, and also at sound money initiatives and PM depositories as well - Why? - because most states, and especially ones like Tennessee, that have been fiscally responsible, no longer trust the Federal financial trainwreck.

The U$ described Russia as a "gas station masquerading as a country" and they fancied they could use Ukraine to win a proxy war against Russia, destabilise it, get rid of Putin and then promptly calve up the country and its vast resources like a side of beef - all with the primary goal that they could go after their financial rival China.

Well, Napoleon, and Hitler, tried a strikingly similar tactic, through Ukraine, and in the planned current combined offensive, the West has even used an entrenched Nazi presence to try to lay a corridor for a suicidal invasion of Russia.

Needless to say, none of this turned out as Napoleon and Hitler planned - and neither did this latest example of delusional idiocy.

Now the U$A empire is in the process of finding out the hard way - their predatory overreach and delusions of exceptionalism will be their downfall - this is the beginning of the end of the Western AAZ hegemony.

YCHMTSU

Col