Here's our summary of key economic events overnight that affect New Zealand, with news the shallow Trump policies are starting to fray, not only with the American public, but in Congress as well.
But first today, falling American consumer sentiment is hanging over the global economy. The University of Michigan consumer sentiment index dropped sharply in May from April when analysts expected it to rise. This is the fifth consecutive monthly decline, the lowest reading since June 2022, and the second-lowest on record. Hurting was rising inflation expectations largely around the impact of the tariff taxes. Sentiment is down by a quarter in a year.
And retailing giant Walmart is only now starting to roll out tariff price increases, so the pressure on inflation will become even more apparent in the coming months
Current assessments of personal finances sank nearly -10% on the basis of weakening incomes. Tariffs cost fears were spontaneously mentioned by nearly three-quarters of consumers, up from almost 60% in April. Inflation expectations for the year ahead surged to 7.3%, a new alltime-high from 6.5% and long-run inflation expectations edged up to 4.6% from 4.4%.
US housing starts stayed at a relatively low level and that was lower than expected. Given the impact of the tariff taxes, that won't really be any surprise. This is largely why new building consents fell further.
Meanwhile, Bloomberg is reporting that the US Fed will trim 2500 jobs or about 10% of its workforce "over the next several years".
And we should probably note that the Trump tax cut bill failed in a key US House of Representatives committee, mainly because conservative Republicans want greater spending cuts, including to Medicaid programs. (Also, the Trump SEC is now considering "revisions" to public disclosure requirements of CEO compensation.)
Update: Moody's Ratings has downgraded the US by one notch to Aa1 from Aaa, joining Fitch Ratings and S&P Global Ratings in grading the world’s biggest economy below the top AAA level. The cut comes more than a year after Moody’s changed its outlook on the US rating to negative. The US federal budget deficit is running near -US2 tln a year, or more than 6% of GDP, and Republicans are pushing through budget legislation that could add trillions more. “While we recognize the US’ significant economic and financial strengths, we believe these no longer fully counterbalance the decline in fiscal metrics,” Moody’s said.
In Canada, their senior loan officer survey of credit conditions tightened for both home loan lending and other lending. "Price" (the expectations of higher interest rates) was a key factor. But for non-mortgage lending the impact of tariffs was prominent also.
And staying in Canada, they have been struggling with what to do with postal deliveries now that the cost far outweighs the postage revenues. A commissioner's inquiry is recommending phasing out daily door-to-door letter mail delivery for individual addresses, but maintaining it for businesses.
In China, they may say they are best-buddies with Russia, but Russia can't afford to buy Chinese cars and has moved to block imports. It is hard to imagine China being happy with that because it will kill a trade of over 1 mln vehicles annually.
Singapore's non-oil exports surged +12.4% in April from a year ago, far exceeding expectations of a +4.0% increase and accelerating from a +5.4% rise in March. It is the third consecutive month of export growth and the fastest pace since last July. There were sharp rises in exports of both electronics and non-electronic products.
Although slightly dated now, we can report the Eurozone's trade surplus surged to a record +€37 bln in March, up from +€23 billion a year earlier, fueled by a sharp rise in exports, particularly to the US as buyers rushed orders ahead of incoming tariffs.
The IEA is noting that for the OECD countries, electricity generation rose +4.0% in February from the same month a year ago. Of the total, 48.0% was produced from fossil fuels, an increase, 34.9% from renewable sources, a decrease, and 16.7% from nuclear power, an increase.
The UST 10yr yield is at 4.44%, down -1 bp so far today. But it is +6 bps higher for the week. The key 2-10 yield curve is still at +46 bps. Their 1-5 curve is now inverted by -6 bps. And their 3 mth-10yr curve is still at +14 bps. The Australian 10 year bond yield starts today at 4.51% and down -5 bps from yesterday. The China 10 year bond rate is up +3 bps at 1.69%. The NZ Government 10 year bond rate is down -4 bps at 4.61%. A week ago it was at 4.51% so a +10 bps rise since then.
Wall Street is up +0.7% on the S&P500 in Friday trade with a late flourish, up +2.6% for the week. Here is the updated Wall Street earnings tracker. Overnight, European markets were mostly +0.4% firmer. Yesterday Tokyo ended little-changed to be up +0.2% for the week. Hong Kong fell -0.5% to be up +0.7% for its week and Shanghai fell -0.4% for a +0.4% weekly rise. Singapore rose rose +0.2%. The ASX200 ended its Friday session up +0.6% for a +1.4% weekly rise. And the NZX50 dropped -0.7% on Friday to also be +1.4% higher for the week.
The Fear & Greed index is now further over in the 'greed' zone, a shift to more 'greed'
The price of gold will start today at US$3187/oz, and down -US$30 from yesterday. And that is down -US$151 or -4.5% from this time last week.
Oil prices are +US$1 firmer today at just over US$62.50/bbl in the US and the international Brent price is just under US$65.50/bbl. Both are up +US$1.50 from a week ago.
The Kiwi dollar is now at 58.8 USc, up +0 bps from yesterday but down -40 bps from a week ago at this time. Against the Aussie we are up +10 bps at 91.8 AUc. Against the euro we are up +20 bps at 52.7 euro cents. That all means our TWI-5 starts today just under 67.4 and up a net +20 bps from this time yesterday, up +40 bps from a week ago.
The bitcoin price starts today at US$103,823 and down a minor -0.2% from yesterday. A week ago it was at US$103,122. Volatility over the past 24 hours has deen low at just under +/-0.9%.
And we should also note that a Wellington-based man was arrested by the NZ Police Financial Crime Group in Auckland yesterday morning as part of an FBI investigation into an organised criminal group who stole cryptocurrency from seven victims valued at US$265 mln (NZ$450 mln). Our courts granted him bail and name suppression.
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8 Comments
The Russian embargo on Chinese vehicles is interesting, perhaps even telling. The relationship between the two nations historically, has hardly been easy going, in fact it’s probably been more uneasy. With the protraction of its adventure in Ukraine, Russian has weakened itself, militarily, economically and socially and simultaneously created a great dependency on China. History does not throw up many examples of great dictators being great friends in the long term.
You only have to look at deteriorating trade with the US, and the size of the Rest of Europe's economy compared to Russia (and future Russian prospects) to see that being too close with Russia won't be in Chinas best interests. And the Russians know that too.
China needs to import fuel just as much as Russia needs to export it. But China now has the whip hand. Dictators find it difficult to resist the prospect of acquiring more territory especially if it once was their own territory. Russia is demonstrating that right now but China has history too, think Tibet. Not much over 100 years ago there was anguish enough over Mongolia seceding and then annoyance that Stalin’s Russia then settled in there, even after the Russian military had handed the Japanese Expeditionary Army quite a defeat in 1939. The Chinese don’t forget their history.
China needs to import fuel just as much as Russia needs to export it.
They're only buying as much from Russia at the moment because they can get it at a discount. OPEC (and Saudi in particular) are ramping production even with crude at a low price. Coincidence?
Spain to send China a bill?
"While inverters are built to allow remote access for updates and maintenance, the utility companies that use them typically install firewalls to prevent direct communication back to China.
However, rogue communication devices not listed in product documents have been found in some Chinese solar power inverters by U.S experts who strip down equipment hooked up to grids to check for security issues, the two people said.
Over the past nine months, undocumented communication devices, including cellular radios, have also been found in some batteries from multiple Chinese suppliers, one of them said."
https://www.reuters.com/sustainability/climate-energy/ghost-machine-rog…
This would sound scary, if the devices we use everyday weren't seemingly reading our minds and controlling what we see.
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