Here's our summary of key economic events over the weekend that affect New Zealand, with news inflation is rising more quickly in one large economy, the US, and policymakers and financial markets are getting skittish.
Firstly, this week will be dominated by the Reserve Bank of Australia's release of the minutes of its November 5 meeting. There will be intense interest on their views of inflation risks. Then the US Fed will release the minutes of its October 30 meeting and observers will be looking for similar clues.
Locally we will get another full dairy auction, and trade data this week, preceded this morning by the REINZ October results at 9am.
Trade, inflation and PMI data will be coming from a range of countries. From the US, we await how they will be catching up with their official data releases. There will be the usual prosaic private sector data releases but the new weekly ADP employment data will bring intense interest, as will some earnings reports, especially from Nvidia.
There will be little major data this coming week from China, because they released most of it this past weekend. And that was headlined by an big unexpected negative surprise from their fixed asset investment data. They said it fell -1.7% for the year to October. But that belies a huge -11% drop in the month from the same month a year earlier. For a country as large as China, that is a mammoth and sudden shift. The really large decrease was in the industrial northeast region. And it is puzzling analysts, especially in the light of the electricity data surge. Perhaps a clue is in this factoid in their data release: "fixed asset investment by foreign-invested enterprises decreased by 12.1%". The slump raises important questions about the health of their domestic demand which is still over-reliant on exporting. The internal economy still hasn't gotten over the real estate slump and the resulting defensive change in attitudes by their consumers.
China’s new home prices in October across their 70 major cities were unchanged from September, officially, but dropped -2.2% from the same month a year ago. This was the same year-on-year decline they had in September. Most analysts expected a lesser decline of -2.0%. Seven of the 70 cities posted modest year-on-year price gains. None posted any gains for resales.
Meanwhile, China's retail sales held up better than expected, up +2.9% from a year ago with better holiday spending. Their official industrial production was up +4.9% from a year ago in October, a rather large easing in their 6.0% September growth rate.
China's electricity production fell in October, but that was less than expected and less that the usual seasonal pattern so it was up an unusually large +7.9% from a year ago. That may have something to do with the electricity appetite by AI infrastructure.
In India, bank loan growth stayed very high in October to easily a new record, even if the percentage rise wasn't as high as September. That is now three consecutive months where new debt has risen by more than +11% from the same month a year ago.
In Canada, they released some September data over the weekend and it was quite positive. Their manufacturing sales rose +2.7% real, and their wholesale trade rose +0.6% real, both from August. Year-on-year it isn't so positive although manufacturing sales are almost back to those levels (-0.8%) after being down -4.1% in May. Both data sets indicate remarkable resilience, and their fast transition even after being dumped-on capriciously by the US.
And there was some interesting data out over the weekend from the EU, where their trade surplus rose to +€19 bln in September. That was its best in five months and +50% better that year ago results. Driving the gains were exports to the US and the UK, offset somewhat by imports from India and Mexico. Imports from the US rose too but at a slower pace than the export activity. Imports from South Korea fell sharply. Trade activity with China was little-changed although it remains deeply negative (that is, more imports from China than exports to China).
In the US there are clear signs investors are getting quite skittish about the risks of bonds tied to AI companies. Don't forget bonds have priority over equities, so the dive for insurance on bonds isn't a great sign. Bloomberg is reporting the demand for credit default swaps is surging for these bonds and they cite what is happening in Oracle's case. A surge in debt is expected to flood debt markets soon as these AI companies ramp up funding of their plans.
And there is the news that Trump is now rolling back some of his tariff-taxes, because even he can see they have caused household inflation and the 'affordability crisis' he is being blamed for. US inflation pressure is moving the dial in money markets. The chance of a Fed rate cut on December 11 (NZT) is fading, and quite quickly, as professional traders scale back the bets on a cut rather sharply.
The UST 10yr yield is now at 4.15%, up another +1 bp from Saturday at this time up +7 bps for the week. The key 2-10 yield curve is still at +53 bps. Their 1-5 curve is +3 bps positive and the 3 mth-10yr curve is now +19 bps positive. The China 10 year bond rate is unchanged at 1.81%, up +6 bps for the week. The Australian 10 year bond yield starts today at 4.44%, down -3 bps from Saturday, up +11 bps for the week driven by the labour market data which has changed financial market views. The NZ Government 10 year bond rate starts today unchanged at 4.19%, up +7 bps for the week.
The price of gold will start today at US$4081/oz, and down -US$17 from this time Saturday. That is up +US$17 for the week.
American oil prices have held from Saturday to be just over US$60/bbl, with the international Brent price now just under US$64.50/bbl, up less than +US$1 from a week ago.
The Kiwi dollar is now at just on 56.8 USc, and unchanged from Saturday, up +60 bps from a week ago. Against the Aussie we are up +10 bps at 86.9 AUc. Against the euro we are unchanged at 48.9 euro cents. That all means our TWI-5 starts today at just over 61.3, little-changed from Saturday, up +60 bps for the week.
The bitcoin price starts today at US$94,374 and down another -1.5% from Saturday. That is its lowest since May 2025 and down -8.9% for the week. Volatility over the past 24 hours has been moderate at just on +/- 2.7%.
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7 Comments
Supposedly even though President Trump’s staple diet is largely Big Macs or similar he did not understand that the US needs to import lean beef to blend with their fattier domestic product, to produce the requisite patties for the gigantic burger trade and putting up the price of imported beef by way of tariffs would put up the price of burgers for every Tom, Dick and Harry and be very very unpopular. Blimey, only fools and horses!
Wasn't their revenue from tariffs supposed to bail out the soy bean growers?
He's desperately trying to deflect attention away from the Epstein files.
I saw a YouTube clip on the weekend where a US Democrat Senator was asking when paedophiles started being protected by the Republicans. The desperation is going to get a lot worse before it goes away.
Not even in the actual chair for a year yet, and then three more to go. The worm, and it’s a big one at that, is turning. The man, like his predecessor, is way, way too old for the job and pressure such as the escalating Epstein scandal is compounding, and like rust, it never sleeps. The latest election reversals to the Republicans, according to Trump, were caused by his lack of presence in them. That rather confirms that without Trump on board the whole Republican outfit will burst open should Trump lose his grip.
China increased energy generation and ai data centres...
I don't know a lot about data centres. I understand they are high energy consumption and there is interest (and action) in establishing them here.
Foreing interests have raped and pillaged our productive farmland to plant in pines for zero sum benefit in ghg reduction. Will our energy sector be next on the block?
Will the future look like AI doing everything for us but we can't afford the electricity to boil the billy and have a cuppa.
Yes
Prior to helen Clark coming along, forests were required to be replanted within a specified time frame, or a change of purpose applied for. Her government got rid of that which opened the door to what is happening now. No accountability.
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