Here's our summary of key economic events overnight that affect New Zealand, with news the US downgrade is seeing the trend of higher interest rates extend.
And in the US, we have more negative signals. The Conference Board's Leading Economic Index (LEI) "plunged" by -1.0% in April, after declining sharply by -0.8% in March. The LEI has declined by -2.0% in the six-month period ending April and is now just shy of signaling 'recession' they say. But it is actually back lower than in the last Trump presidency when there was recession.
At an investor day in New York, the boss of the US's largest bank, JPMorgan Chase, said investors are underestimating geopolitical and inflation risks. “Credit today is a bad risk,” he said earlier today. “The people who haven’t been through a major downturn are missing the point about what can happen in credit.”
In Canada, their largest province has announced a Budget that prioritises higher spending and larger deficits in the coming year in a direct effort to "protect Ontario". The next federal Canadian budget isn't due until at least September.
In China, retail sales rose by +5.1% in April from the same month a year ago, moderating from March's over 1-year high of +5.9% and missing market estimates of +5.5%. But is was one of the still-good data releases from China, one that is in a rising trend and even better because they have virtually no inflation.
Another positive data release from China came from their industrial production which grew by a claimed +6.1% in April from a year ago and better than the expected +5.5% gain. However, the latest figure eased from the +7.7% growth recorded in March. Meanwhile, electricity production rose only +0.9% in April, hardly supporting the much stronger industrial production data.
China, which regulates the wholesale price of petrol and diesel, announced cuts overnight, to take effect immediately.
Meanwhile their national real estate development investment fell sharply yet again, and the residential sector was down -9.6% from April last year. And prices for new, and previously-owned housing are still down sharply on a year-on-year basis even if there are small pockets of regional improvements.
Meanwhile, Chinese residents trading foreign stocks or holding offshore accounts are being put on notice as authorities take fuller advantage of cross-border data to trace unreported earnings.
In the EU, their economy is projected to grow by +1.1% in 2025 and +1.5% in 2026, and both are downgrades from the levels forecasted last autumn. This is according to the European Commission’s Spring outlook. The downgrade is primarily attributed to the impact of rising tariffs and increased uncertainty stemming from recent abrupt shifts in US trade policy. On the inflation front, disinflation is now expected to proceed more rapidly than previously anticipated. Inflation in the Eurozone is projected to ease to 2.1% by mid-2025, reaching the ECB’s target earlier than previously expected, and to decline further to 1.7% in 2026. (Some countries - and we are looking at you, New Zealand - would love to have even the modest positive results for growth and inflation the EU has, at this time.)
And staying in Europe, we should probably note that BNPL giant Klarna, which also operates in New Zealand, is seeing its losses grow. In Q1-2025 they doubled to -US$100 mln as "consumer credit losses" rose sharply, even as revenue grew.
Later today (at 4:30pm NZT), the Australian central bank will review its cash rate target, currently at 4.10%. It is widely expected to be cut by -25 bps to 3.85%. That would put it still above the New Zealand OCR at 3.50% and our official rate is also expected to be cut by -25 bps mid next week to 3.25%, restoring the differential. But although both cuts are expected and priced in, more attention will focus on the next likely shift. Some see the RBA 'done' at one cut with the next move a rise. Background inflation risks are still elevated there, their labour market isn't suffering, and growth prospects are still there even in the current turbulent world.
The UST 10yr yield is at 4.47%, up a mere +3 bps from this time yesterday, but curves are steeper. The key 2-10 yield curve is now steeper at +50 bps. Their 1-5 curve is still inverted, and by -4 bps. And their 3 mth-10yr curve is steeper at +18 bps. The Australian 10 year bond yield starts today at 4.59% and up a sharp +13 bps from yesterday ahead of the RBA signals. The China 10 year bond rate is up +2 bps at 1.68%. The NZ Government 10 year bond rate is holding at 4.69% and up +8 bps.
Wall Street started its week lower, but has clawed back early losses so that the S&P500 is now down just -0.1%. Overnight European markets varied between Paris's no-change and Frankfurt's +0.7% rise which is a notable record high. Yesterday Tokyo ended its Monday session down -0.7%, Hong Kong was down -0.1%, and Shanghai was unchanged. Singapore ended down -0.6% however. And that was matched on the ASX200. The NZX50 ended down -1.2% in a retreat that grew all day.
The price of gold will start today at US$3227/oz, and up +US$25 from yesterday.
Oil prices are holding again today at just over US$62.50/bbl in the US but the international Brent price is -50 USc lower at US$65/bbl.
The Kiwi dollar is now at 58.9 USc, up +10 bps from yesterday at this time. Against the Aussie we are unchanged at 91.8 AUc. Against the euro we are also unchanged at 52.7 euro cents. That all means our TWI-5 starts today still just over 67.5 and up +10 bps from yesterday.
The bitcoin price starts today at US$105,393 and essentially unchanged from yesterday. Volatility over the past 24 hours has been moderate however at just under +/-2.2%.
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8 Comments
Being a dying hegemony is not a mistake.
It's a repercussion
https://www.planetcritical.com/p/the-crisis-of-imagination
Why not both. As in a repercussion of a series of bad decisions.
Absolutely agree.
I was hinting at DC's insistent truncation.
Presumably it's his website to convey what perspective he chooses.
American hegemony was always going to be temporary, like any of them. Can't say how they'd be able to stretch it out a lot longer, other than a much less inclusive post WW2 plan, and a suppression of globalization.
Theyre trying now, 80 years too late.
Or journalism could be a goal
Your expectation of journalism involves a solitary thesis. That is a dangerous proposition. There's no room to entertain context or nuance, or day I say it, alternate thesis.
There's a wide range of views on seemingly any publicized happenstance. Some of these are tribal or political, and most involve some manner of selection bias when forming views.
I tend to canvas a range of views to define some sort of aggregated middle ground, or discard the more implausible.
I don't personally consider the Trump presidency a mistake, just a hyper acceleration, sped further by ineptitude. The Biden and Obama presidencies were attempting similar aims (isolationism, trade protection), using less blunt tools.
'I tend to canvas a range of views to define some sort of aggregated middle ground, or discard the more implausible.'
That's going to fail. Canvas by all means, but middle-ground? When dealing with absolutes - like the 2nd Law of Thermodynamics - there is no 'middle ground'. A mistake many make, is to believe that human will can alter absolutes - and that mistake is made by the overwhelming majority. The middle of a mistake is still a mistake.
Until money - currently fiat-levered keystroke-issued debt - is actually referenced to reality, a whole society fixated on money was always going to be sideswiped by the Limits to Growth. And if choosing to remain blind, one seizes on an immediate manifestation to blame.
From 'morning in America' (think about it) Reagan on, the attempt has been to perpetuate a past-peak hegemony. Repeal of Glass-Steagall by Clinton, was a classic move, as was Obama bailing the banks. But as the peddled narrative has continued to diverge from what the average punter experiences (GDP growth lauded vs increasing desperation) the punters have rejected mainstream leaders.
Interesting times...
Canvas by all means, but middle-ground?
There's a high probability of hyperbole on the fringes.
So say for instance with tarrifs, there's a lot of media on the left that won't factor in some of the problematic aspects of how global trade has evolved.
When dealing with absolutes - like the 2nd Law of Thermodynamics - there is no 'middle ground'.
With the law, sure. With how humans choose to apply it, most definitely.
Until money - currently fiat-levered keystroke-issued debt - is actually referenced to reality
There is an association between money and reality. When you incorporate debt into the equation, a 1:1 relationship is likely impossible, because no one has ever managed to predict the future with 100% accuracy.
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