Breakfast briefing: 'Unusual' is putting it mildly

Economy / news

Trump injects himself into Canadian election campaign; Texas turns glummer; Spain blacked out; India expansion slows; Aussie AAA rating at risk; UST 10yr at 4.21%; gold up; oil down; NZ$1 = 59.6 USc; TWI-5 = 67.7

29th Apr 25, 7:19am by David Chaston

Here's our summary of key economic events overnight that affect New Zealand, with news there have been some unusual events overnight. And that's putting it mildly.

Canadians are voting in federal elections, ones where the winner will need to tackle a weird US administration. The US president injected himself into the campaign at the last minute with a claim Canadians should vote for him to make Canada the 51st state of the US. There are no exit polls yet, but it is likely to steel Canadians to reject the call in record numbers whatever the result is.

The clear instability of the Trump action saw Wall Street fall almost immediately but has recovered slightly since. There are nerves on Wall Street about some impending Big Tech results out soon too.

In the real world, Canadian wholesale sales slipped -0.3% in March.

In the US, the Dallas Fed factory survey dived to its worst level since the pandemic, and before that its worst level since early 2016. The fall was worst in new orders. Inflation rose. Confidence in the future weakened. The US oil patch isn't a happy place.

In Europe, we should probably note that there has been a major electricity grid failure in Spain and Portugal with much of the country blacked out, although service is now being restored.

Separately, a key ECB figure said the European Central Bank may cut interest rates below the neutral level that keeps the economy in balance. He said euro zone inflation may come in lower than expected as a result of American tariff actions and require the much looser settings.

In Asia, India said its industrial production rose +3.0% in March from a year ago, similar to the slowdown reported in February, a lot more tamer than the expansion rate has been recently although back to its long term average. This is not evidence their economy is booming from manufacturing.

In China, their central bank is signaling that both rate cuts and reserve ratio cuts are on their to-do list "at the right time". Both will boost liquidity and shore up any economic wavering.

Singapore's unemployment rate ticked up a little, but only from an historically low level and only back to its long-run level.

Singapore has a national election on Saturday, May 3. No surprise is expected in a contest closely controlled by the ruling party.

Australia's federal election is on the same day and that outcome is a lot more uncertain.

Australia is one of very few countries to have a AAA credit rating from Moody's, S&P, and Fitch. Now analysts at S&P are openly concerned about the cost of election promises in light of their budget forecasts that earlier showed long-term deficits rising. Election victory might be a bit of a poisoned chalice if it also comes with a downgrade, higher debt servicing costs and rising deficits. Public policy choices then become very hard, very necessary, and very unpopular.

The UST 10yr yield is now at 4.21%, down -4 bps from this time yesterday. The key 2-10 yield curve has stayed at +53 bps. Their 1-5 curve is now inverted by -10 bps. And their 3 mth-10yr curve is inverted -8 bps. The Australian 10 year bond yield starts today at 4.17% and down -2 bps from yesterday. The China 10 year bond rate is now at 1.66% and unchanged. The NZ Government 10 year bond rate is down -6 bps at 4.45%.

Wall Street is down -0.4% in Monday trade on the S&P500 after falling almost -1% on the Trump/Canadian weirdness. Overnight, European markets were all little-changed except Paris which rose +0.5%. Yesterday. Tokyo rose +0.5% in Monday trade. Hong Kong was unchanged while Shanghai slipped -0.2%. Singapore slipped -0.3%. The ASX200 ended its Monday up +0.4% and the NZX50 did the best of the markets we follow, ending up +0.7%.

The price of gold will start today at US$3336/oz, and up +US$17 from yesterday.

Oil prices are down -US$1 at just under US$62/bbl in the US and the international Brent price is down a bit more, now just over US$65.50/bbl.

The Kiwi dollar is now at 59.6 USc, unchanged from Saturday at this time. Against the Aussie we are down -30 bps at 92.9 AUc. Against the euro we also down -30 bps at 52.2 euro cents. That all means our TWI-5 starts today still just on 67.7 and down -30 bps as well.

The bitcoin price starts today little-changed at US$94,137 and down just -0.1% from this time yesterday. Volatility over the past 24 hours has been modest at +/- 1.4%.

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Source: RBNZ

Source: CoinDesk

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20 Comments

by Yvil | 29th Apr 25, 10:24am 1745879047

I can comment.

by Pa1nter | 29th Apr 25, 10:33am 1745879628

How AI could make us all dumber:

https://youtu.be/iqVhUX4Vel8?si=E0PmJf5xONFyWvTC

So the future of humanity is for a shrinking number of stupid incels.

Makes The Matrix almost look like paradise.

by powerdownkiwi | 29th Apr 25, 11:08am 1745881689

It was happening already.

Those who were smart, chose to have few or no children; they saw the overpopulation/limits thing, and reacted intelligently. It follows that those who kept reproducing - particularly above replacement numbers - were less intelligent, and that the population was going to average downwards as a result. Huge implications for democracy - as I pointed out here years ago.

Friends of ours, a couple who both became Professors, chose the no-child approach - and I used to give them heaps; told them that was the very smarts we need reproduced...

by murray86 | 29th Apr 25, 11:11am 1745881897

Religion has done it to us. Ironic since we have just been watching them bury a Pope. But religion stifles thought and innovation. And people when given a tool to do their thinking will always find the easy way.

by Pa1nter | 29th Apr 25, 11:22am 1745882532

But religion stifles thought and innovation.

Except when it comes to areas like personal contentment and moral compass. Instead we are now civilisations of hungry ghosts.

by Pa1nter | 29th Apr 25, 11:16am 1745882175

Those who were smart, chose to have few or no children

Most of it wasn't by choice; educating a female to a high level and then having her pursue a career greatly shortens what is a limited window of time to have children.

by interesting1234 | 29th Apr 25, 3:14pm 1745896466

I put the no kids thing down as a personal choice, more than any resource link to the limits to growth. I'm of this age group, and many of my friends are currently due to have children or trying to. Others are not by choice, be it lack of maternal instinct, lifestyles they don't wish to give up understandably, or simply put they can't afford to if they wish to achieve their financial goals such as homeownership. Again, none of this relates to resources or levels of consumption, just my own observed generational anecdotes which I see as trends when catching up with other friends of my generation around the country, and the world,

by murray86 | 29th Apr 25, 10:35am 1745879753

With everything that is happening, most of it coming from Trump's America, to me it is clear that our government(s) need to shift their paradigms about a number of things that direct or guide how the country is governed.

COVID provided a strong lesson on a need for national resilience when logistical lines of supply are not functioning to the expected standard. But it seems the current attitude is we'll just push harder to export. When I hear that message, I wonder if at all they were told (or can figure) that in an increasingly unstable world, logistical lines of supply can be be assured.

It is clear we do not need to tax to spend, which means the basis for taxation can change to focus on managing the value of our currency, while using deficit spending to build the infrastructural basis of a solid economic base. Taxation, the breaks offered can support and drive innovation, the recreation of manufacturing in NZ, the employment and training of skilled people in the work force, creating more employment opportunities and higher standards of living. This approach can also encapsulate a sustainable approach that ensure we do not destroy our environment in the process.

The opportunity to re-write the future sits with our government, but it seems they have neither the imagination, the understanding or the will to do it.

by Pa1nter | 29th Apr 25, 10:45am 1745880318

A logical answer seems a shift away from consumerism. But the first mover nations are going to be looked upon as hermit kingdom luddites by much of the population, who will leave in droves.

But yes, our institutionalized polititians are psychologically incapable of much rumination over the changing nature of things - as are most of us. We'll cling to the status quo long after the ship has sailed.

by powerdownkiwi | 29th Apr 25, 11:01am 1745881307

Agree - and while Murray gets the need for change correct, he misses the 'what to'.

Self-sufficient is achievable, but not at this level of throughput.

by murray86 | 29th Apr 25, 11:05am 1745881525

I do get the 'What to', PDK but that is further down the path. Just getting our governments to start discussing it is the immediate goal.

We've do have to stop chasing 'growth'. But as a country we do need to put a focus on redirecting resources away from importing and into manufacturing ourselves. Internally it will look like growth, but it is building self sufficiency. A lack of manufacturing capability in the country can and will cost the country much more in the long term.

by powerdownkiwi | 29th Apr 25, 11:14am 1745882043

A great read (I've just finished it) is Peter Schiff's How and Economy Grows and why it Crashes. You'd like it.

He uses a fish analogy, and as far as describing the shortfalls of economics goes (the story explains 'fish reserve notes') he's spot on. But what he ignores - completely - is the stocks of fish.

by Pa1nter | 29th Apr 25, 11:14am 1745882087

But as a country we do need to put a focus on redirecting resources away from importing and into manufacturing ourselves.

There's a very long list of items which are "essential" to our day to day lives and commercial operations, that we'll never be capable of producing at a cost and quality level that we would deem satisfactory. Even America, with capital and other resources well in excess of us took a week or two to realize it wouldn't be able to produce the computers and electronics it requires to function.

A midway point might be that we mandate that most/many of our imported goods must be made to a quality level that has them lasting many more years than what they currently are, to reduce our dependence on a steady stream of disposable crap.

by murray86 | 29th Apr 25, 11:02am 1745881321

I'm not sure a total move away from "consumerism" is possible. I think we need to define it properly, but yes much of what we used today is excess. I have attended kids birthday parties in recent years and have been appalled at the crap that their parents and family have bought them. And it builds on the kids expectations. It is unnecessary for having a good, comfortable life where one is both busy and entertained. The attitudes today is towards getting more for less, or better more for nothing! Teaching people to have a job, work for a living and then learning to appreciate the value of money seems a lost skill in some parts of our communities, and the harm that comes from that can be extreme.

by Pa1nter | 29th Apr 25, 11:20am 1745882416

Sitting in my benevolent dictator armchair, a possible way forward would be to design and cultivate a lifestyle for every citizen that ensures them access to a raft of life's essentials; housing, utilities, education, etc.

Trouble is, I've also witnessed nations like Bhutan, who have initiated such plans, only to have their youth leave in droves for India, chasing the extra frills and opportunities offered by a more "progressive" economy and culture. And we have a neighbor next door that can offer the same thing.

by rastus | 29th Apr 25, 11:41am 1745883710

Does the US consumer really have any idea about what to is hit in a month with respect to price and availability?

If they are starting to grumble now, imagine that unrest that is on the way. Ugly is coming,

China freight ship traffic to busiest U.S. ports sees steep drop

by Pa1nter | 29th Apr 25, 11:46am 1745884010

Does the US consumer really have any idea about what to is hit in a month with respect to price and availability?

It's blaring at them on every form of media, so probably.

Good strategy by the Chinese, short term economic loss, in exchange for a societal meltdown in America when the shelves at Walmart are bare.

by rastus | 29th Apr 25, 2:21pm 1745893307

I doubt they will fully get it until t hits. I hear Temu just added 145% as import charged. Lets se how that goes with the maga crowd.

by Pa1nter | 29th Apr 25, 2:26pm 1745893607

I think it's even worse for the likes of Temu, previously this stuff swept in under the radar as it was under the $800 threshold. The new fees are still shifting around, but will likely exceed 145%

by mfd | 29th Apr 25, 2:54pm 1745895271

Is it blaring at them on right-wing media as well?

Could still be a surprise for those only paying attention to Fox News and similar, who have no incentive to report on the deteriorating economy (and might get in trouble with the Big Man if they do)