Weekend briefing: US faces glum future, China avoids blowback

Economy / news

US consumer sentiment data quite negative and financial markets follow; Canada jobs surprise; China data positive; Taiwan stars again; UST 10yr at 4.08%; gold and oil firms slightly; NZ$1 = 56.2 USc; TWI-5 = 60.8

8th Nov 25, 8:29am by David Chaston

Here's our summary of key economic events overnight that affect New Zealand, with news American investors are turning quite negative about future prospects.

We start today with more negative news from the world's largest economy. The November update of the University of Michigan's consumer sentiment index has fallen to near an all-time low in a survey that began almost 80 years ago. Only the June 2022 recording was lower. A small dip was expected but this time a large dip was recorded. Americans are worried about both current personal finances and in year-ahead expected business conditions. It's glum reading and the index is now -30% lower than year-ago levels. American consumer attitudes are in a full bear mode.

It will be no surprise to know that financial markets are in full retreat, flashing 'extreme fear' signals and risk-aversion.

Meanwhile, the New York Fed's latest update of their Survey of Consumer Expectations reports inflation expectations dipped to 3.2% and some key opinions about their labour market weakened.

US consumer credit flows fell sharply in October, especially for revolving (credit card) debt, yet another indication of tightening economic conditions there.

And the US federal government shutdown continues with the White House unable to get its way in the Senate, either with the Democrats changing their healthcare bottom line, or the Republicans adoption the 'nuclear option'. And that means the air traffic restrictions are rolling out and become more pervasive. Thousands of flights have now been cancelled or delayed.

In Canada they delivered something of an unexpected positive surprise from their labour market in October, You may recall the unusually strong +60,000 September jobs gain, driven by very strong full-time employment. Analysts had expected a pause. But in fact, they reported a +67,000 jobs gain in October, although this one was largely driven by a rise in part-time jobs. Rather than the expected rise, their jobless rate fell (but by most standards, it is still pretty high).

China reported that their October foreign exchange reserves swelled more than expected and are back to their highest level in a decade.

China also said its exports dipped unexpectedly from October a year ago as shipments fell -18% to the US. Imports from the US fell even more. But other than that it seems to be business-as-normal. Australia and New Zealand both recorded healthy trade surpluses with China in October. Overall, China's October trade surplus came in at +US$90 bln for the month, and missing many analysts expectations that it might top +US$100 bln as it did in August.

In Taiwan, exports from the island nation surged +50% from October a year ago to a record high of US$62 bln, accelerating from a +34% rise in the previous month which itself was very impressive. Taiwanese exports were one fifth those of China, despite only having 1.6% of the population level. For reference, Australia's exports in October are expected to be reported on December 4 at US$30 bln - and Australia has a similar population to Taiwan. The comparison emphases how special the Taiwan export prowess is.

(China is grumpy that a cross-party group of MPs attended an official Taiwanese event in Wellington recently. Punishment may well be some trade interruptions, if prior form repeats.)

German exports were also reported overnight, but for September. They rose +2.0% from the same month in 2024, to US$151 bln.

In Australia, new data reveals the size of the surge by investors back into residential housing chasing rising capital gains (even with a CGT), essentially driving their unaffordability issues.

The UST 10yr yield is now at 4.08%, unchanged from yesterday at this time, down -3 bps from a week ago. The key 2-10 yield curve is still at +53 bps. Their 1-5 curve is now +4 bps positive and the 3 mth-10yr curve is now +14 bps positive. The China 10 year bond rate is little-changed at 1.75%. The Australian 10 year bond yield starts today at 4.33%, up +2 bps from yesterday, up +1 bps from a week ago. The NZ Government 10 year bond rate starts today at just under 4.12%, down -4 bps from yesterday, up +3 bps from this time last week.

Wall Street has ended its Friday with the S&P500 down another -0.1% in an extending risk pullback. That makes it down -2.9% for the week. Overnight, European markets were all negative between Paris's -0.2% and Frankfurt's -0.7%. Tokyo was down -1.2% yesterday for a weekly -2.6% retreat. Hong Kong fell -0.9% but up +0.9% for its week and Shanghai was down -0.3% for a +1.1% weekly rise. Singapore ended its Friday session up +0.2%. The ASX200 also ended down -0.7% on Friday to end the week down -1.0%. The NZX50 rose +0.2% for a weekly rise of +0.3%.

The Fear & Greed index is now well into the 'extreme fear' zone, from last week's 'fear' zone.

The price of gold will start today at US$4005/oz, up +US$26 from this time yesterday, basically back to week-ago levels.

American oil prices are +50 USc firmer from yesterday at just on US$59.50/bbl, with the international Brent price now just under US$63.50/bbl. These levels are -US$1 lower than a week ago.

The Kiwi dollar is now at just on 56.2 USc, and down -10 bps from yesterday, down a full -1c for the week. That is its lowest level in seven months. Against the Aussie we are -30 bps lower at 86.7 AUc but that is a 12 year low. Against the euro we are down -30 bps at 48.5 ~~49.5~~ euro cents. That all means our TWI-5 starts today at just over 60.8 and down -10 bps from yesterday, and its lowest since July 2009, a 16 year low.

The bitcoin price starts today at US$102,148 and recovering +1.6% from yesterday's drop. For the week ii is down-6.5% Volatility over the past 24 hours has been modest at just on +/- 1.6%.

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34 Comments

by JimboJones | 8th Nov 25, 8:34am 1762544045

It shows how rubbish those surveys are. Sure Trump’s done stupid stuff, but the worst in 80 years? Worse than Covid, GFC, wars, etc?

by Foxglove. | 8th Nov 25, 8:53am 1762545213

Well they weren’t too good when Biden took over and they weren’t any better when Trump came back for another go.So all up that’s nine years now of dismay and unhappiness at large and current indications are hardly encouraging either. Trump told the electorate they would be better off. Would suggest he now has something of a tiger by the tail.

by JimboJones | 8th Nov 25, 9:17am 1762546672

They were doing bloody well under Biden, and not that bad with Trump. Either that or numbers like unemployment rate, GDP growth, wage growth etc are lies. Which might be true now.

by Foxglove. | 8th Nov 25, 9:52am 1762548732

They were not doing bloody well under Biden if the lead up to , and the result of the 2024 , election is considered as being meaningful.

by JimboJones | 8th Nov 25, 10:00am 1762549229

I don’t think people know what hardship is. These days it’s only eating takeaways 5 days a week and only having 3 TV subscriptions.

After the war my Grandad was in charge of cutting up the newspaper to make into toilet paper.

by Foxglove. | 8th Nov 25, 10:56am 1762552607

Understand all of that. Kids at school with hankies made out of old sheets. Kerosine lamps and wet back incinerator when the electricity couldn’t be paid. And agree entirely with your take on perception relative to that and that is exactly illustrated by such as I heard on a radio interview - in four years under Biden my healthcare plan has gone from 10k per annum to 16k. Unfortunately it takes a real bad destructive event, a war, a cyclone, an earthquake etc etc to compel people to reconsider their priorities in terms of basic necessities.

by JimboJones | 8th Nov 25, 10:55am 1762552545

The yanks would be loving that, there’s nothing they hate more than affordable healthcare. But again it’s not necessarily that the cost has gone up, it’s the expectations that have gone up. I’ve heard that the GP will send you to an MRI for the smallest thing, and why not when insurance will pay.

In Grandads day you wouldn’t go to the doctor unless you were pretty much dead, and if you did he’d probably finish you off. And if everyone did the amount of exercise he did and ate home cooked meals like he did, healthcare would probably be halved.

by Pa1nter | 8th Nov 25, 11:19am 1762553986

Unemployment moved from 3% to 5%! Makes the great depression look like a pony ride.

by JimboJones | 8th Nov 25, 11:26am 1762554378

4.3% in the US. That’s pretty much as good as it gets, but apparently the worst in 80 years. And their median wage of $2,100 NZD a week, how do they cope? Imagine raising a family on only $4200 a week, poor buggers.

by Zachary Smith | 9th Nov 25, 12:06pm 1762643204

Is that with both mum and dad earning the median wage?

Regardless, the median wage in the US has gone up 4.6% which has outpaced inflation. If I were Trump I would be rather annoyed at all the whining going on.

by profile | 8th Nov 25, 9:19am 1762546764

Export prowess/origin washing.

“Chinese manufacturers that have the U.S. as their main market must find a way to survive,” Taiwanese businessman Lee Meng-chu told Radio Free Asia, noting the “huge demand” for transit solutions that enable exporters to sell to the U.S. but evade the 145% U.S. tariffs imposed on Chinese imports.

Freight forwarders, or customs brokers, have emerged as key facilitators, managing customs declaration documents, clearance, and certificates of origin, with their service fees set to rise with the spike in demand, said Lee. Some freight forwarders are even helping exporters change or reload containers to disguise origins, he said.

https://www.rfa.org/english/china/2025/05/06/china-tariff-exports-origi…

by Rhumline | 8th Nov 25, 9:35am 1762547740

48.5 euro cents to the NZ dollar not 49.5? Wishing otherwise...

by Wilco | 8th Nov 25, 10:05am 1762549541

Why is our dollar getting sold down? Not just against the USD, against the basket. Farming is firing on all cylinders, retail is quiet but not dead, future interest rates are looking reasonable stable, what am I missing?

Have we just been recategorized as a major loser going forward as we depend so much on international trade while nationalism is back in fashion?

by WinHonourHelp | 8th Nov 25, 11:07am 1762553245

Been wondering the same, this level could well feed imported inflation which could cause the currency to correct via a higher local interest rate. Maybe immigration/migration is having an impact via less purchases of kiwi dollar. But exports are high so should balance out the currency flows as exporters sell USD.

by Pa1nter | 8th Nov 25, 11:36am 1762555015

I feel with a lot of market movements, they're occuring due to interest in the momentum, as opposed to any sort of objective appraisal.

by DonKerrBab | 8th Nov 25, 1:51pm 1762563061

Last time NZ cash rate was this much lower than Aussies the NZDAUD was around 0.8000 so using historical data as analysis in terms of that part of the TWI we should be even lower.

No idea why GBP does what it does and the USD is relatively strong on its index so we aren’t that remarkable right now

by Yvil | 8th Nov 25, 10:17am 1762550273

In Taiwan, exports from the island nation surged +50% from October a year ago to a record high of US$62 bln

It's not too hard to imagine some exports from China being re-routed via Taiwan to be "re-exported" from Taiwan to avoid higher tariffs imposed upon China by the US. China benefits from lower tariffs, Taiwan benefits by clicking the ticket.

by Foxglove. | 8th Nov 25, 10:44am 1762551863

It is arguable, very much so in fact, that Taiwan, rather than a possession, is more valuable to China as it is. In terms of convenience of backdoor trade and other connections, daresay Taiwan has assumed much of that activity, previously managed by Hong Kong.

by Pa1nter | 8th Nov 25, 11:45am 1762555506

Chinese bureaucracy favours predictable stability. Territorial expansion brings with it a lot of chaos and uncertainty, very had to plan around.

So I feel the oft-publicized, imminent Chinese invasion is less about reality and more about cultivating anti Chinese support.

Then again it's an authoritarian dictatorship with closed internal information, so who knows where they're really at.

by Foxglove. | 8th Nov 25, 2:27pm 1762565232

Sth Korea has undertaken to build itself a nuclear powered deep water sub. Likely they have the capability to do that but the relative nuclear NATO members are unlikely not to lend expertise. On the same rationale, Japan could follow suit. Taiwan has built itself a diesel submarine, and like the other two, would have the technology to build a nuclear powered one too but likely no one would know that until it was operative.

by Pa1nter | 8th Nov 25, 3:31pm 1762569098

That's the other thing to consider when assessing the likelihood of a new Asian Imperialist power; most of the neighbors are far more organized, and far more militarily capable than the Asia of the 1930s.

I'd put more money on China reclaiming parts of Russia first.

by Foxglove. | 8th Nov 25, 4:24pm 1762572296

An overlooked and totally credible strategy. The Chinese military for obvious reasons is geared primarily for wide ranging land manoeuvres and while Russia may claim Ukraine as a heritable right China ironically could claim the same, the Mongolian empire that reached all the way as far away as nth east Ukraine. Would imagine if China has any reclamation ambitions Mongolia, Bhutan, Nepal May well be first on the hit list.

by Pa1nter | 8th Nov 25, 5:16pm 1762575392

They have some legitimate claims to parts of Manchuria the Russians took over in the 1800s. If Russia splinters it'd be plausible for the Chinese to push further West. But yeah their military is fairly weighted towards land, rather than sea battles. Island grabbing through the Pacific is a very resource intensive endeavour.

Bhutan and Nepal aren't very well armed, but they have a lot of natural geography on their side. And not a heap of value, outside of maybe a chokepoint for India - who are quite a bit closer politically to them both.

But who knows how crazy things could get.

by Foxglove. | 8th Nov 25, 6:22pm 1762579374

Seaboard invasions are no easier today than what the Americans encountered in WW2. Taiwan has had 75 years to set its defences and has significant retaliatory missile capability. What is seemingly either forgotten or unrecognised is that in this eastern region of Asia, firstly the Russian and Chinese relationships have often enough been more than unfriendly, secondly that Russia used to have the greater sway in the relationship, thirdly China is now superior economically, militarily and per population, fourthly the “adventure’ in Ukraine has weakened Russiaas much as it has strengthened China.

by Phoenix (FKA JC) | 8th Nov 25, 1:34pm 1762562091

Turns out that Albo's subprime policy for 5% house deposits was based on modelling that was done as late as July and suggested that the policy would further stoke the Ponzi. Team Albo went ahead regardless.

Supports my reckon that the policy is about propping up the Ponzi, even though the Aussie govt will argue that demand-side action is the solution of getting young people into homes.

Like Chippie, Ardern and Luxinda, they want to believe that the Ponzi and getting people into homes can coexist.

We really need better leaders.

https://thenightly.com.au/politics/treasury-warned-labors-5-per-cent-de…;

by Pa1nter | 8th Nov 25, 1:40pm 1762562414

They're sorta stuck. Encouraging FHBs usually comes with the downside of increasing demand in an already limited market, with a commensurate impact on prices.

They would need an end to end approach that couples new home buying with much cheaper new home building, but the levers for the latter involve 5-10+ year planning and implementation, and the levers they use to jolt FHB purchasing are often far more immediate.

In short, expect governments to botch this realm for many years to come.

by Phoenix (FKA JC) | 8th Nov 25, 5:44pm 1762577060

Hurtling towards a Minsky moment you reckon? It wouldn't be a surprise if they were asked for any modeling at all, even after the fact.

Anyway, it is what it is. Inflation will continue to strangle h'holds because you can't have a low inflation environment and a Ponzi at the same time. It's never occurred in history.

And ironically high inflation is ultimately the catalyst for any Minsky moment.

Place your bets accordingly.

by Pa1nter | 8th Nov 25, 6:10pm 1762578638

Hurtling towards a Minsky moment you reckon?

That'd imply speed. Crawling?

by Phoenix (FKA JC) | 8th Nov 25, 9:45pm 1762591542

Well P, if Aussie and Aotearoa are anything like the U.S. where 70% now live paycheck to paycheck with varying degrees of difficulty in paying monthly bills, things are moving at a steady clip.

Only 2 years ago, the proportion was only 60%. The bifurcation of h'holds is accelerating across the Anglosphere.

Today, more consumers are struggling to get by. More than one in four, or 26%, had difficulties paying their bills last month—the highest share in at least two years. Overall, nearly seven in 10 consumers are now living paycheck to paycheck, with varying degrees of difficulty in paying monthly bills—the second-highest level over two years and nearly equal to the record high this summer.

https://www.pymnts.com/study_posts/seven-in-10-americans-live-paycheck-…

by Pa1nter | 8th Nov 25, 10:51pm 1762595506

Interestingly, Japan has a higher poverty rate than the US.

Although I'm not sure how any of that relates to a minsky moment, it's pointing out life's gotten harder, not that it's over.

And you're assuming in this minsky moment, your existing "bets" are suddenly not only going to be higher returning than your current average, but also manage to out-strip inflation? Or do you have several decades worth of expenses stored?

by Phoenix (FKA JC) | 9th Nov 25, 3:17pm 1762654672

Although I'm not sure how any of that relates to a minsky moment, it's pointing out life's gotten harder, not that it's over.

Minsky did not explicitly theorize “paycheck to paycheck” living, but his framework explains why large numbers of financially fragile households make the macroeconomy less stable, and why their prevalence is a warning sign for systemic risk. It's consistent with his Financial Instability Hypothesis.

by interesting1234 | 9th Nov 25, 8:59pm 1762675183

Turns out that Albo's subprime policy for 5% house deposits was based on modelling that was done as late as July and suggested that the policy would further stoke the Ponzi. Team Albo went ahead regardless.

What're your thoughts on the medium to long term in AUS? They have necessary, vast mineral wealth to export as the world needs it and draw a base income from as a security net, yet they have, much like ourselves, overcooked the immigration trigger of which the effects take years to play out.

On one hand they have faster response to interest rate changes via the majority floating their mortgages, yet they are pumping their housing ponzi to the moon as if they cannot survive without it, or also logical, the elite are drunk on asset price inflation for their own gain.

Will they pump it until a colossal collapse based on international events? Will they have the exports to soften the blow? OR will they simultaneously suffer a debilitating blow from a US crash of which the rest of the western world will feel the waves from?

by Pa1nter | 8th Nov 25, 8:55pm 1762588527

Interesting graph:

https://www.visualcapitalist.com/ranked-countries-that-use-the-most-cas…

Shows the percentage of cash transactions per country. Interestingly China, Sth Korea, and much of the anglosphere use very little cash, but Japan, Belgium, Thailand and a few other countries still use a lot of cash.

by interesting1234 | 9th Nov 25, 9:00pm 1762675231

Wouldn't live anywhere that didn't have it personally. Privacy is a right, not a privilage