Here's our summary of key economic events overnight that affect New Zealand with news political risks have moved higher overnight, but by less than you might have expected given the pressures.
First we should note that today is Martin Luther King Day in the US, celebrating a man of peace, a Federal holiday so financial markets are closed. But no one missed the irony of the day given the US President telling the Norwegian Prime Minister he no longer feels committed to peace.
The fallout has been a rise in long term interest rates (a rise in the risk premium), and a fall in the US dollar. Equities slipped it in non-US trading.
In Canada, their December inflation rate rose slightly to 2.4% from 2.2% in November, with the latest month rises relatively quickly. But there are base issues here with the ending of some GST relief measures. However, excluding petrol, their CPI rose 3.0% in December, following a 2.6% increase in November.
The Bank of Canada released two important sentiment surveys overnight. Results of the Q402025 survey of consumers show that concerns over high prices and economic uncertainty related to the trade conflict with the US continue to have a negative impact. And after a weak year, businesses expect domestic sales growth to improve slightly. Export sales are expected to be modest. Most businesses plan to maintain or decrease current staffing levels.
In Japan, they have called a snap election for February 8. A key issue will be GST relief. But financial markets are concerned that will make their fiscal imbalances worse.
In China, the property sector is acting like a curse on their economy. They reported that house prices fell by -2.7% in December from a year ago. That was a -1.7% fall for new-builds and a massive -7.0% fall for resales. The overall results is the 30th consecutive month of price decreases and their fastest pace since July. There are no capital gains in Chinese housing, anywhere.
That is crimping consumer attitudes is a significant way. China's retail sales rose just +0.9% year-on-year in December according to official data, slowing from a +1.3% increase and missing market expectations of a +1.2% gain. This is their weakest growth since December 2022.
But China also said its industrial production was +5.2% higher than a year ago, and rising. Coal output hit a new record high. However, China's electricity production was only +0.1% higher in December from the same month a year ago. It is hard to believe their industrial production data if this was the case.
All this data then results in a Q4-2025 4.5% rise in GDP, according to their official report, marginally better than the expected +4.4%. Booming exports squares the circle. So they are claiming a neat +5% 2025 annual growth, exactly as the Party had said at the start of the year.
Probably of more importance, China also released updated demographic data for 2025. The said 7.9 million babies were born in the year, down from 9.5 million in 2024. The number of people who died in 2025, 11.3 million, continued to climb. It is being widely accepted now that these trends cannot be reversed, and will lead to profound population changes.
In the EU they also released December CPI results for December. Their annual inflation was 2.3% in December, down from 2.4% in November. A year earlier, the rate was 2.7%. Germany, Italy and France had lower rates, Spain and most of Eastern Europe had higher rates, some a lot higher.
Globally, the IMF raised its growth forecast to 3.3% from 3.1% this year, but warned that major risks are building. The upgrade reflects resilient activity, strong labour markets and heavy investment in new technologies, especially artificial intelligence. However, they cautioned that these same forces could become sources of instability. Rapid AI-driven investment, particularly in North America and Asia, is supporting growth and equity markets, but if productivity gains fail to materialise, it could trigger sharp market corrections and weaken household wealth. New Zealand gets no mention or coverage in this report. Australian growth is forecast to be +2.1% this year and +2.2% in 2027. They noted Australia's inflation-control challenge. India is the star, but strong results are also expected from Indonesia, Malaysia and the Philippines. China's 5.0% growth in 2025 is expected to dip 4.5% in 2026, 4.0% in 2027.
Australia’s Monthly Inflation Gauge, as surveyed by the Melbourne Institute, surged +1.0% in December from November, the fastest pace since December 2023 and a sharp pickup from the prior two months. That puts it +3.5% ahead of year-ago levels. The recent surge may well get the RBAs attention. Don't forget the RBA next reviews its monetary policy two weeks from today on February 3. Next Thursday's labour market data, and the following Wednesday's December CPI data will be crucial decision aspects.
The UST 10yr yield is now just on 4.27%, up +4 bps from this time yesterday and its highest since September. The key 2-10 yield curve is now at +66 bps. Their 1-5 curve is now at +28 bps and the 3 mth-10yr curve is now at +61 bps. The China 10 year bond rate is down -2 bps at 1.83%. The Japanese 10 year bond yield is up a sharp +10 bps at 2.28% and we make that its highest in 27 years. The Australian 10 year bond yield starts today at 4.75%, up +5 bps from yesterday. The NZ Government 10 year bond rate starts today at 4.52%, also up +5 bps from yesterday.
Wall Street is closed today for MLKing Day. The futures market suggests it will open tomorrow down -0.4%. Overnight European markets were all lower between London's -0.4% and Paris's -1.9%. Yesterday Tokyo closed down -0.7%. Hong Kong was down -1.0%. Shanghai however rose +0.3%. Singapore fell -0.3%. The ASX200 also fell -0.3%. But the NZX50 fell a full -1.0%.
The price of gold will start today at US$4672/oz, and up +US$76 from yesterday and a new record. Silver is has pushed up to US$94.50/oz and also a new record high.
American oil prices are essentially unchanged from yesterday at just under US$59.50/bbl, while the international Brent price is still at US$64/bbl.
The Kiwi dollar is up +40 bps from yesterday, now at just over 57.9 USc. Against the Aussie we are up +20 bps at 86.3 AUc. Against the euro we are also up +20 bps at just on 49.8 euro cents. That all means our TWI-5 starts today just over 62, and up +30 bps from yesterday and its highest so far this year.
The bitcoin price starts today at US$93,206 and down -2.0% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.6%.
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7 Comments
The irony of the principal back stop for NATO since it's formation pivoting to be one of its biggest threats is not lost on the world, Macron, in France, has suggested removing US access to European markets as a response to Trump's threats over Greenland.
Both Russia and China will have been able to chart the inevitable outcomes of the political disfunction in the US. Indeed they may have been able to influence any of the more rational players elections to ensure they failed, and side-line them.
An obvious and understandable strategy undertaken by Putin to divide and then undermine NATO is now being aided and abetted by Trump’s America. The European nations, maybe not so much Hungary & Turkey, are now faced with the approaching reality that they are on their own. The galling reality though is that to rearm they would largely require to purchase USA armaments. Any history lesson will include how particularly Europe has been dependent on a so called balance of power. Trump now seems hell bent on unbalancing it.
The UK made its final WW2 Lend Lease payment in 2006.
Timing is everything. The US fleets are an answer to WW2; their aircraft old. Sure, they're biggest, but the out-pirates (per Buckminster Fuller) will go asymmetric and will win via attrition. But the post-conflict world will not look like the pre.
The implications are many: What happens to the internet? What happens to 'investment' expectations? (all those Ponzis). What happens to cities in the fact of compromised supply-chains?
On another note, I see that ChatGPT is going to introduce ads. More proof as to what does/doesn't constitute real wealth.
COVID gave a little insight to what happens when supply chains collapse. My experience was that there was a high level of complacency within logistics management, driven in part by the Just In Time concept, and how accountants counted their beans when looking at stock. I found they didn't like the flaws in their systems being pointed out, or the suggestion that 'Lean' also meant increased risk.in many cases.
I suggest investment will just shift to different means and forms. When the internet collapses, Bit Coin's value will go astronomical (#sarc) but hard cash would carry weight in most countries with stable (ish) governments. Green trade will hold more value, but many people would have little to offer.
In the meantime the US will be friendless and ordinary Americans will be wondering what happened while the politicians will be blaming everyone else!
China needs to build like it's 1738. Great for macrocarpa exports, not so great for baby milk formula.
Births last year were “roughly the same level as in 1738, when China’s population was only about 150 million,” said Yi Fuxian (易富賢), a demographer at the University of Wisconsin-Madison.
China’s death rate of 8.04 per 1,000 people last year was the highest since 1968.
https://www.taipeitimes.com/News/world/archives/2026/01/20/2003850912
"The bond market vigilantes are preparing for war. "
Donald Trump heading to Davos as bond market vigilantes plot against him - ABC News
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