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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35 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!
US could become good friends with Russia (again)
Wouldn’t surprise me if the future actually turned out to be a Russia/US military and economic alliance.
It seems like the European members of NATO have little interest in peace with Russia and yet they don’t have the economic and military power to dictate the terms of any peace or to take the fight to Putin. In which case they become protagonists instead of peace makers (ie the opposite of the whole purpose of NATO - maintaining peace in Europe). A bit like a short man with a big mouth - all talk but never willing or able to actually do anything to maintain order among men while relying on a bigger and stronger friend to fight off the enemies made along the way. What happens when the big strong protector of the short man gets tired of sorting out your messes because you are short and weak but talk a lot and antagonise your enemies? (Ie what has been unfolding).
The only way I can see peace playing out is if Russia and the US form a new military and economic agreement to establish peace with NATO. It would appease both Trump and Putin. Putin would take Ukraine and Trump would take Greenland and a new order would be established. And NATO would be too weak to do anything about it.
I don’t write this because I think it is morally good or the right course of action or what I want to see happen - just an opinion based upon reading some history and how military alliances change every 80-100 years or so. This could be another one of those times. Russia isn’t always the enemy of the west - in fact it has often been its key ally when other European nations lose their way or it becomes strategically beneficial for such a partnership.
Not sure about your priors here, framing NATO as the aggressors against Russia when we are several years into a brutal Russian invasion is an interesting choice. If we're talking the EU, Russia, and the US, it seems pretty clear to me that the EU are the force pushing for peace.
Not sure of yours either.
The CIA has a well-travelled modus operandi - and Maidan fits it to a t. Search Victoria Nuland, note her partner and do some reading. Ask why Biden Jr was there...
To address the discussion; Russia has one of the remaining significant energy reserves. Think in terms of that - who gets what of what's left. Not necessarily nation vs nation either...
Perhaps then time to take down and dust off Burdick & Lederer “The Ugly American.” What goes around, comes around.
The OP was specifically about the European members of NATO.
Either that or IO is confusing the idea of peace with being immobilised while crushed under a boot heel by the two fascist regimes.
Tell me about how we create peace with Putin?
Or are you just going say ‘Putin is bad and must be beaten into submission?’ And if so how and with what army and using who’s children? Yours? Do you desire more fighting against evil fascists?
The Ukrainian army has done a pretty good job of degrading Russia's military power, how about just keeping them in the fight and levelling the playing field? They are the ones whos independence and freedom are under imminent threat, but if they submit no doubt other nearby countries will follow.
Without the US intervention most of Ukraine would most likely have fallen to Russia. So how much longer do US taxpayers need to keep funding a war on the opposite side of the world so that European leaders can keep insulting and excluding Putin and making him enemy no.1?
Why should a farmer in Kentucky keep paying more taxes than he needs to fund weapons and intelligence information for NATO so that young Ukrainian and Russians keep dying by their thousands on a weekly basis in a pointless war?
Eventually it becomes completely politically insane - unless of course you are stuck in the ‘Putin is bad and must pay’ limited frame of mind. Putin won’t pay but young innocent Ukrainians and Russians will.
The middle paragraph is a fair point. In recent decades, America has made that investment in the Pax Americana and the world has been peaceful as a result, with many countries reaping a peace dividend that allows strong welfare states, well funded public healthcare etc. In return, America gets hegemony over world politics, oodles of soft and hard power, and an undisputed reserve currency. If America doesn't want that deal any more, they don't have to take it. The world will become more bloody as a result, and America's influence will wane. Maybe that's inevitable. Will America prosper as a result? I doubt it, but maybe if they reduce military spending they can provide a better standard of living for their people.
Again, the rest of your framing is bizarre to me. European leaders are responsible for making Putin enemy number 1? I would see his invasion of Ukraine as the primary cause for him being enemy number 1. That was a decision that turned Europe against him where previously thinking was much more nuanced and divided.
A pretty good job? The cost has been horrific. They should have ignored Boris and went for peace. Meanwhile the EU pumps materiel to Russia.
https://www.intellinews.com/ukraine-s-demographic-collapse-deepens-as-w…
Well when a military alliance expands its territory towards its agreed enemy (NATO towards Russia) then that is viewed as aggression (see history of warfare). When nations feel threatened by military alliances growing in size or strength near to their borders it often leads to war.
Eg if you’re in the sandpit and kids collectively group together and start creeping closer and closer towards your space, you feel rather threatened. You run or you fight.
It’s been a complete miscalculation by NATO.
NATO is meant to keep the peace in Europe, but it’s expansion while excluding Russia has been the cause of conflict. It’s effectively achieve the opposite of its purpose in the manner it’s been strategically managed.
NATO is meant to keep the peace in Europe, but it’s expansion while excluding Russia has been the cause of conflict.
Sweden and Finland joined NATO after the conflict started. This expansion of NATO in this sense didn't cause conflict, more so it was a decision or two in response, based on self-preservation from an unruly neighbour, who after too many vodkas over the years, has become temperamental in nature and aggravates easily.
Yes, if Russia ultimately succeed in Ukraine they will end up with a dramatically larger border with NATO than they had before.
Maybe that will provide a useful excuse for the next step in Putin's open plans to rebuild Russian prestige and territory.
What about NATOs prestige and territory - how big does it need to get, while excluding Russia, in order to achieve its aims of peace and stability in Europe? And does it’s size and prestige ever become a danger to those who are purposefully excluded from the military alliance?
Until Russia's recent aggression under Putin, it didn't need to grow. Understandably, countries near Russia have been joining or trying to join because they see the need for a defensive alliance.
And frankly no, there is no need for this to have been a threat to Russia. In the alternate world where Putin disarmed and pushed for development and trade and political arrangements with Europe, do you honestly think NATO would have invaded?
And this is the mindset that causes wars. Ignoring the threats of your adversaries. And in fact insulting them and them blaming them for the conflict. This only antagonises your opponent even more!
It takes two to tango as they say - but of course NATO and the west are completely morally perfect and it’s all Russias fault!!
‘He who’s ways please the Lord, make the even his enemies be at peace with him’ - Solomon.
How are NATO creating peace with their enemy? By expanding their military force and strengthening it on the border on their enemy?
Prior to 2020 all NATO needed to do was to clearly say to Putin ‘no matter what happens, Ukraine will not gain NATO membership’. Instead they wanted to keep expanding and getting bigger - which goes back to my point that growing military alliances in Europe, have historically cause conflicts in the region for centuries. NATO is over the longer term (when from over 100+ years) may be just the same as any other peace time alliance that gets too big for its own good and eventually causes a conflict and then crumbles to be replaced by something else.
The Soviet Union applied to join NATO in 1954 but was rejected. In 2001, despite all the reasons for rejection having been addressed, Russia was still rejected. https://theconservativetreehouse.com/blog/2025/12/29/memos-of-conversat…
Putin was the Russian President in 2001. Why do you think they were rejected?
The problem is Russia is a demonstrable threat to the stability of Europe. Why would they accept any peace deal that does not put Russia back behind it's own borders? Putin has clearly indicated that he is not interested in that.
Europe has woken up to Trump and a lot of work is going on across Europe to ramp up their MIC to provide their own munitions and equipment. That takes time and is not easy. The situation was how America had positioned itself for decades, and nations across the world willingly accepted the US as their protector and saviour, and subordinated themselves to US military doctrines and equipment. That cannot be changed overnight. What America will learn, beyond Trump, is that no one will ever trust them again. That will have a significant cost.
As I point out, what I’m saying isn’t going to be popular, but it wouldn’t surprise me if it turns out to be true.
In order to see this clearly you also need to view it from Russias perspective and not just the perspective of someone born just after the last the major global conflict and establishment of the current world order (and from the perspective of the winning side).
Unless you are willing to make peace with your enemies, you will be at war. (Eg how do we create peace with Putin?)
Europe is waking up to its own weaknesses and potentially miscalculating its position of power. As I say, like the short man who talks his mouth off but expects someone else to resolve its conflicts after they arise. (Eg they should have never been talking about NATO expansion into Ukraine).
This appears to be a case of idealism vs what is really happening/unfolding.
I accept you're observing events, rather than expressing an opinion. But how do you create peace with a man who has ignored previous security guarantees? Ukraine had at least two from Russia and one from the US it has been pointed out, before Russia invaded. What weight do you think any new ones would hold?
There is an old adage; "if you want peace - prepare for war" that has been forgotten. Instead politicians talk about the 'peace dividend'.
I suggest peace with Russia is spelt "SURRENDER", which is not an uncommon defence strategy. It appears to be Helen Clark's one for NZ. Conflicts are inevitable. They are driven by politicians who cannot and will not compromise. It is unclear who first said by Westmoreland is the closest connection when he said "Politicians start wars, soldiers finish them". Decisions to do nothing is still a decision and politicians who decide to neglect a nation's military have surrender as the central component of their defence strategy.
Yes and to go back to my original point…and going full circle….is that peace is created when a military and economic alliance is formed between US and Russia.
The US leaves NATO and an agreement is formed where NATO agrees to not expand any further east with backing from the US to protect Russia from NATOs military expansion that threatened Russia and provoked it into war.
This creates peace. It means the old post WW2 order that we have lived our lives under is gone, and a whole new world order emerges.
Until Russia feels safe from NATO expansion, war will continue. It’s hard to fathom because it is the opposite of our life experience (spread of communism/Soviet Union/Cold War starting 1950s Korea) but it is right now the only way I see that Russia stops fighting.
Then when the US are no longer NATO they may take Greenland using their military and economic strength to which NATO do not have the strength to prevent.
It isn’t ‘right’ but it wouldn’t surprise me if it happens.
You're ignoring history IO, at you peril. NATO was formed to protect Europe from the Soviet/Russian threat. NATO doesn't actively recruit members. Countries have to apply to join and then pass stringent requirements. Any eastward expansion would be due to nations perceiving Russia as a threat to their security. So that requirement would never pass.
Personally I think that for all intents, the US has already left NATO. Once the European MIC is up and running, the US will no longer have the level of influence it used to have.
If Trump stays around long enough, he'll likely position enough sycophants in the military to agree to his demand to invade Greenland, and that will be America shifting to what has traditionally been identified as the axis of evil. What will happen when the American people wake up and realise what is happening?
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
Another case of when the middle class rises, and women have opportunities outside child rearing, the birth rate drops. Perhaps a catastrophic drop in Chinas case.
"The bond market vigilantes are preparing for war. "
Donald Trump heading to Davos as bond market vigilantes plot against him - ABC News
The hollowing out of Aotearoa.
https://www.reddit.com/r/newzealand/s/gOaazQpzdo
"Auckland’s Accord Precision ran into financial trouble after more than 50 years manufacturing products for some of the world’s biggest firms"
Purely coincidence that this happens a few years after the sale to Singapore based private equity. Tax payers left with the debt via ird and Kiwibank.
If it isn't the AI bubble, it will be the PE and private credit collapse causing the next downturn. The term 'enshittification' is a term I learned recently that epitomises this.
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