Here's our summary of key economic events overnight that affect New Zealand with news the Powell resistance to Trump has garnered unexpectedly wide support, nationally and internationally, reinvigorating "central bank independence" positions. It also has many Trump supporters worried, if the 'right-wing press' is any indication.
First up today, the overnight Pulse dairy auction of milk powders extended last week's full auction gains for both SMP and WMP. And they were good gains, with SMP +2.1% higher than a week ago, and WMP +1.2% higher on the same basis.
In the US, the December CPI data released overnight recorded no-change from their November levels, at 2.7% or 2.6% on a 'core' basis. Both are still above the US Fed target. Food prices are up +3.1% and rents up +3.2% within this survey.
The ADP weekly jobs data shows a similar +11,000 jobs gain last week, a rate that would confirm January's net hiring as slower than the slow December.
US new home sales held at the higher 737,000 annual rate in October, a good result in the circumstances, but now quite dated data.
This data will get more 'interesting' in 2026 with news that more migrants left the US than entered. While the net outflow wasn't large (for the US) at possibly about -300,000, the expectation is that it will be similar in 2026. This is the first time in 50 years they have shed people. It has certainly lost its 'welcoming' reputation - for both potential migrants, and for travelers.
We got more recent sentiment surveys overnight, The RCM/TIPP survey was more downbeat in January than December and more so than expected - although to be fair the shifts weren't large - they just went the 'wrong' way.
But the NFIB survey was little-changed - negative yes (below 100 still), but marginally less so.
In Japan, their official "economy watchers survey" was also little-changed, although the forward looking section became marginally more optimistic.
Meanwhile, bank lending in Japan rose 4.4% in December from a year ago. That growth was well above what was anticipated. If you ignore than pandemic distortion, that was at least a 25 year high, and probably very much longer.
And Japan is on watch, with many expecting Prime Minister Takaichi to call a snap election very soon to bolster her conservative clout in the Diet. That saw the yen tumble and equities soar yesterday. Benchmark bond yields rise sharply too.
In India, they released their December vehicle sales data overnight, reporting a very strong +20.6% gain from the same month a year ago, capping a year of +5.0% growth. Apparently their GST rate reduction for other products improved the overall affordability situation for many buyers.
In Australia, consumer sentiment as measured in the Westpac survey has shifted lower and is more pessimistic in January. While confidence is still well above the extreme lows recorded during the protracted ‘cost of living’ crisis in 2022–2024, consumers are becoming more concerned about what 2026 may bring for family finances and the wider economy. The main catalyst continues to be a sharp turn in interest rate expectations. Nearly two thirds of consumers with a view now expect mortgage rates to move higher over the next 12 months, more than double the level back in September.
The UST 10yr yield is now just on 4.17%, down -1 bp from this time yesterday. The key 2-10 yield curve is still at +64 bps. Their 1-5 curve is now at +24 bps and the 3 mth-10yr curve is also little-changed, now by +54 bps. The China 10 year bond rate is down another -2 bps at 1.85%. The Japanese 10 year bond yield is up a sharp +8 bps at 2.16%. The Australian 10 year bond yield starts today at 4.71%, up +4 bps from yesterday. The NZ Government 10 year bond rate starts today at 4.46%, up +3 bps from yesterday.
Wall Street has opened its Tuesday with the S&P500 very little-changed again. Overnight, European markets were also little-changed. Yesterday Tokyo closed up a very strong +3.1% however, Hong Kong was up another +0.9% but Shanghai ended its Tuesday down -0.6%. Singapore closed up +0.8%. The ASX200 also closed up +0.6%. But the NZX50 fell -0.2% in its Tuesday session.
The price of gold will start today at US$4610/oz, and down -US$7 from yesterday, essentially holding yesterday's big run-up on the risks from the unsettled US Fed. Silver is still rising, now almost US$87/oz.
American oil prices are up US$2.50 from yesterday at just under US$61.50/bbl, while the international Brent price is still at just under US$65.50/bbl.
The Kiwi dollar is down -20 bps from yesterday, now at just over 57.4 USc. Against the Aussie we are up +20 bps at 86 AUc. Against the euro we are down -10 bps at just on 49.3 euro cents. That all means our TWI-5 starts today just under 61.6, and down -20 bps from yesterday.
The bitcoin price starts today at US$93,492 and up +1.5% from this time yesterday. Volatility over the past 24 hours has again been modest, also at just on +/- 1.5%.
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21 Comments
Re consumer - indeed all - sentiment 'surveys'.
If you studiously, fiercely, deny that the Titanic is sinking, then survey B Deck passengers...
Cognitive dissonance.
How cheap is crude oil ? About USD 60ish/barrel you say. Well, if priced in Gold, which has recently surpassed the USD Treasuries, one once of Gold, buys 78 barrels, or 3,276 gallon, or 12,400 litres of crude oil !!!
Picture this, a man with a one ounce Gold coin in the palm of his hand, about the size of a NZ 2$ coin, and a man with 78 big barrels of oil lined up behind him, and both going: "let's exchange our commodities, it looks like a fair deal".
I have long used Jack's swapping of the family cow for 5 magic beans, as the analogy.
Gold is worthless; without energy so is everything else...
And we don't value oil scarcity, at all.
Gold is worthless; without energy so is everything else
That may be so, but historically it has always been the fallback across many an empire, and while people do value it subjectively, it will be useful to many.
You should try pricing NZ houses in gold back in 2020 to see how crazy expensive they were and why we were at huge risk of devaluation in real terms (ie price in real money (gold) - or funny money that was getting printed into oblivion) - while people abuse you and say 'viewing house prices in real terms is crazy as people don't view the world that way and use money that way'.
There have been huge fluctuations over the past 100+ years of house prices vs gold - and if you switched between the two at the right times, the wealth creation would is huge. e.g if you sold your house in 2020 and switch to gold and then in the next 5 years or so switch the money back to houses - the returns are through the roof (excuse the pun). eg take your $1,000,000 equity back in 2020/2021 and put it into gold (or even half of that equity) and then gold goes up 3-4 times because house price to gold valuation was so distorted, then sell the gold holdings and re-enter the housing market. Returns are astronomical - but this isn't the first time this has happened - it has happened many times of the past century (similar in the 1920's to 1930's and then again in the 1970's).
Have a good look at this chart Yvil - its the Shiller HPI vs gold for past 100+ years.
https://www.longtermtrends.com/real-estate-gold-ratio/
The chart is saying that in the next 5-10 years it could be a good time to buy houses - if viewed over a very long term time frame (but most people don't think that way).
And the more I look at what is happening to the gold price at the moment when viewed over a long term scale (ie past 100 years) the more I think something very bad is currently happening.
Eg CPI is saying inflation is only 2-4% (across developed nations) but gold is going up in a logorithmic fashion (vertical) saying we have been or are going to a period of extremely high inflation.
The two stories don't align which is very bad. One is telling the truth and the other is not.
if you switched between the two at the right times, the wealth creation would is huge. e.g if you sold your house in 2020 and switch to gold"
That's the best investment advice you have ever given.
After round 1, Trump v Powell, seems a clean sweep to Powell. Does this say anything about the limits of Trump’s policy? Can we define his freedom to act as long as it doesn’t challenge economic orthodoxy? But then how do I fit the erosion of the rules based order into this? Perhaps Powell just got lucky? And the implications for US and world economies? So will the FBI investigation just wilt on the vine now?
Believe in the USA there still exists generally, a reasonable idea of what crossing the Rubicon amounts to. As Trump continues to dominate his administration ever more outlandishly so too does the backwash build. Consequently the looming mid term elections are becoming more and more concerning for a good number of his henchmen in Congress and the Senate.Would suggest “me first” is a front runner in most American politicians’ psyche and some may now be having a quite few second thoughts.
Powell is getting a lot of screen time and he isn't some screeching, hallucinating idiot. He's measured, calm and competent, talking about integrity and economic competency. I think suddenly a large portion of America has listened and woken up suddenly realising that's the kind of leadership they actually need, instead of the absolute clown show that they have had for a year.
The USA, like NZ, Australia, UK and Canada, is having a housing boom and cost of living challenges. It's amazing how it takes this for people to see the real issues, but humans are tangible creatures. NZ is further along from ours than Australia, and Canada was relatively on par with NZ, and UK is coming off of theirs also now.
People only trust the system if it works when they need it. The USA is seeing the ultrawealthy pilfering from the middle class which is steadily shrinking, and the systems they otherwise relied on being cut, new services such as ICE causing mayhem, and with this loss of trust in the establishment comes greater tensions, violence, isolationism. The USA has been brainwashed to be told they are the greatest country ever, to the point they have intergenerational egotism which they cannot get past in the face of adversity. After all, how could someone who has been told they are special their whole life accept the reality which contradicts this.
the Powell resistance to Trump has garnered unexpectedly wide support, nationally and internationally, reinvigorating "central bank independence" positions. It also has many Trump supporters worried, if the 'right-wing press' is any indication.
"I have not seen Washington and global policymakers unified behind a US policymaker like this since Anthony Fauci"
- Luke Gromen
Such unanimous support makes you wonder why. And what the plot is. We know they're all committed to endless money printing and broad money inflation.
Maybe they've just seen the ample historical and worldwide evidence that politically-driven interest rate policies are a terrible idea? You think inflation has been bad under the current systems, but things could be so much worse.
You think inflation has been bad under the current systems, but things could be so much worse.
Oh, their actions have been great for asset-rich boomers and 1%ers in the Western hemisphere. Less so for younger people like the Gen Z demographic who have a more bleak outlook.
Exactly - its been about making the rich richer and the poor poorer. And these policies are seen as 'integrity and independence'.
Try a country like Turkey for a current example of a strong-man leader influencing interest rate policy - try the 10 year view:
https://tradingeconomics.com/turkey/inflation-cpi
Inflation is just coming down to the 30% level after a few years between ~40 and 80% - this Western inflation is pretty tame by comparison.
There are plenty of other examples, this should be common knowledge. I'm not saying the current system is great, but heading down this path would so clearly be worse.
Everyone should 'trust the science' of endless money printing just as they did with Fauci and his claims during COVID, and in the same light believe in the 'integrity' of modern central banking that Powell is claiming is good and that he is in control of (that makes the rich richer, the poor poorer and creates financial instability instead of preventing it - and increases wealth and power of the central and retailer bankers - all whom swap between positions in retail banks that make money based upon central bank policy, then move into roles in central banks that set the policy to make the retail bankers wealthy).
Central bankers aren't trying to protect their independence, they are trying to protect their position of untouchable power, control and wealth creation for themselves. Trump is challenging that and the central bankers obviously don't like it.
Fair enough - nobody likes it if somebody challenges their gravy train. And then you tell the public your gravy train is 'integrity and independence' and many people believe the narrative simply because they hate Trump and willing to stand with anyone opposed to him. Its a bit 1984 ish...the central bankers saying 'hey everyone we are the good guys here to look after you and your best interests while we act with integrity enriching ourselves and other wealthy asset owners, bankers and finance players'.
The big question is, would you like the central banks to slowly erode the purchasing power of your money, or have trump cause a great shock which, arguably, would cause greater global instability and a greater rate of said erosion.
Like I was saying on a post the other days, we have two ego's going head to head. Trump vs Powell. They both think they can control the world. One politically, one via monetary policy. Neither willing to back down.
For younger people the Fed has been and disaster. Its been enriching older people, asset owners and people taking excessive risk (and risk holders never being punish for their risk ie all risk all return). Young people are left doing the labour, while older people just sit on assets and collect capital gains from excessively loose monetary policy for decades (ie 'lower interests rates are the solution to all our problems!!').
That doesn't work forever - eventually economies must find equilibrium and balance and the Fed in my view has created extreme imbalance via their policies.
And the funny thing is is that Trump wants lower rates which isn't the solution either!! So in my opinion neither man has the answers because they are both in their 70's and 80's and both have spent their adult lives in a system that has enriched them greatly but both just want to be 'the man'. Neither has the humility to step aside.
I think many of our problems go away when that generation of males leave key policy making positions - just as is suggested in the book 'the 4th turning'.
So in this discussion between 'bad' and 'worse', you seem to be favouring 'worse'? Or do you think Trump lowering interest rates for political reasons would be better than the current situation?
And Japan is on watch, with many expecting Prime Minister Takaichi to call a snap election very soon to bolster her conservative clout in the Diet. That saw the yen tumble and equities soar yesterday. Benchmark bond yields rise sharply too.
I'm confused by this, can anyone please explain the logic to me? Thanks
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