Here's our summary of key economic events overnight that affect New Zealand with news repricing for American risk is underway, evidenced by rising UST yields, a falling US dollar, and commodity price spikes.
First up today, American durable goods orders rose in November by more than expected to be +10.5% higher than year ago levels, a gain that has impressed markets, and came as a complete surprise. Non-defense capital goods orders, excluding aircraft, were up +4.3%, also a good gain.
But there are a number of factors we should take into account when assessing this data. It is 'nominal' and not inflation adjusted and tariff-taxes will be a part of the increase. Second, we looked back at the ISM and S&P Global factory PMIs for November and they did not pick up this type of gain. The ISM one actually reported contraction, the S&P Global and unchanged expansion. And then there is the 'new management' at the US data agency that releases this data. All three factors mean we should wait a bit to see if this is an outlier result. Risks abound.
Meanwhile, the Chicago Fed's National Activity Index came in below trend in November, although not as negative as it was in October. This is the ninth below-trend reading in the past twelve months.
It was a similar story for the Dallas Fed factory survey, which also recorded a pullback, for January, although not as steeply as it did in December. Output and new orders rose, but the overall index was held back by a sharp jump in prices paid for inputs. Only about half that was recovered by prices received even though that rose sharply too.
There was a US Treasury bond auction today and while it was well supported, it did bring a notable rise in the yield achieved. The 2 year bond delivered a yield of 3.55% at todays event, up from 3.45% at the prior equivalent event a month ago. This is the largest shift in yields we have observed at these events in more than a year. The US's ballooning deficit can't really afford rising interest rates, but then again it couldn't afford the tax cuts for the rich either.
Singapore's industrial production dipped rather sharply in December to end up +8.3% from the same month a year ago. But the December pullback was less than observers had expected.
In addition to Auckland, and Australia, Monday was also a public holiday in India, Republic Day. And the two top EU officials were in New Delhi to seal a key trade deal between the two economic powers. In fact, it has been called "the mother of all deals" and is set to be signed later today. Both sides are making major concessions to get it done and it is likely to boost trade in a globally significant way. The EU will get major access to India's car market. India will get the EU's preferential tariff MFN treatment.
The UST 10yr yield is now just on 4.21%, down -3 bps from this time yesterday. The key 2-10 yield curve is now at +62 bps (down -1 bp). Their 1-5 curve is now at +30 bps (down -1 bp) and the 3 mth-10yr curve is now at +52 bps (up +1 bp). The China 10 year bond rate is little-changed at 1.82%. The Japanese 10 year bond yield is down -2 bps at 2.24%. The Australian 10 year bond yield starts today at 4.81%, unchanged because it didn't trade yesterday. The NZ Government 10 year bond rate starts today at 4.62%, also unchanged from yesterday.
Wall Street has started its week positively with the S&P500 up +0.6%. Overnight, European markets were mixed between Paris's -0.1% dip and Frankfurt's +0.2% firming. Yesterday Tokyo ended its Monday session down -1.8%. Hong Kong was up +0.1% and Shanghai was down -0.1%. Singapore ended down -0.6%. The ASX200 was on holiday. But the NZX50 did trade, up only +0.1% however.
The price of gold will start today at US$5087/oz, up +US$104 from yesterday and a new record again. Silver is up proportionately more, up +US$12/oz at US$115/oz and also a record high. Platinum has risen to US$2857/oz, up +US$116/oz.
Tin prices are up +9.5% today, and copper is up +1.5%. Both build on recent surges to record highs. A falling greenback accentuates these rises, but all commodities are still priced in USD.
American oil prices are holding at yesterday's at just under US$61/bbl, while the international Brent price is softish, now just under US$65.50/bbl and down -50 USc.
The Kiwi dollar is up +30 bps from yesterday, now at 59.7 USc. Against the Aussie we are up +10 bps at 86.4 AUc. Against the euro we are also up +10 bps at just on 50.4 euro cents. That all means our TWI-5 starts today just under 63.5, and up +40 bps from yesterday, its highest since late September.
The bitcoin price starts today at US$87,677 and down just -0.3% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.4%.
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33 Comments
Well well well boys and girls,
The slow moving car crash is picking up speed. I thought the old system had 2-3 more kicks of the can, maybe 30-40 years. I radically over estimated our ability to remember and learn the past.
Looks like Orange Man is wanting to speed up the program. Ironically his administration's attempts to front run changing global fortunes will actually speed up that process. His successors, regardless of political party, will not reverse most of what he has put into motion, we are on a way one trip. Our leaders, and most of us, will take so long to adjust to the new paradigms, effective responses will be learned the long hard way. But, likely learned eventually.
Over the next 5-10 years, all the things people have been complaining about, wokeness, inequality, "productivity", will seem quaint and trivial (if they're not already). What we take as normal will be flipped on its head, and COVID style supply side inflation will seem like a pony ride. If this won't see the end of consumerism, it'll certainly chop it off at the knees for the majority.
Most people won't have stacked anywhere near enough gold to make a difference. Many other stores of wealth will become worthless. The focus now should be on determining what things people with gold (or any money) will need or want to buy. The method of production of these goods and services is preferable, but stockpiling efficient and reliable technology will likely go some way. A productive patch of dirt might not go astray either.
Personal relationships will be a new gold, as will having a good spiritual and moral grounding. So make hay while the sun shines, work on your in-person social groups, and try to not get yourself so lost in the woods in the small stuff.
Oh, and happy 2026 everyone!
A new year, a new you??
The only global certainty nowadays is the uncertainty Trump’s administration has created. But that is nothing compared to the uncertainty that will abound when he departs. The man is unique in terms of a power grip. So too was for instance Stalin. The problem is that plenty of the underlings are wannabes of the same ilk. The process to succeed Trump will not be a serene event.
Painter nails it.
Remove Trump and nothing changes, except perhaps the rate of change.
The pressures were there, and his appraisal is spot-on - as is his suggestion as to what to cultivate...
Remains to be seen. We share a premonition that the test of it may yet arrive within this term. The GOP emblem is an elephant. To paraphrase the old quote - when those elephants fight there is little concern as to what gets trampled.
At the moment though, there's virtual silence from other Republicans in opposition to the administrations' actions and words. There's been a revolution inside the party making it quite the different beast.
Very difficult to say how bad things could get in only for years, partially because:
- Trump's behaviour will only worsen the more he gets away with
- Someone may eventually stand up to him in a more significant way than just a speech, and his response could be fairly dramatic.
After Trump things may carry on as before.
Friends were with relatives in North Dakota. Interesting factoid: The americans had all the tough Republican views in intensive discussion. But Trump was not mentioned.
Perhaps here in NZ the TDS prevails as we and media seek simplicity. But maybe the reality is that he is just the speaker for a very wide movement.
So Trump finishes. The movement continues?
Many of Trumps actions and policies are very different to what the Republican party stood for before he took over. Maybe the party base have moved with him, or perhaps they roll back to a more conservative, traditional set of policies afterwards? Strength through alliances and soft power as well as military projection, border control at the border rather than deep in American cities deemed to be enemies of the regime, fiscal conservatism, and following the rule of law and norms of government. Fighting culture wars as a battle of ideas and morals rather than demonizing opponents as radical domestic terrorists.
I wouldn't necessarily agree with such policies, but I would respect them. It's hard to respect the policy set that Trump and the rest of his regime have pushed.
After Trump things may carry on as before
They may, but they highly likely won't. Just as Biden didn't reverse much of Trump's changes of his first administration.
But maybe the reality is that he is just the speaker for a very wide movement.
He's appealing to a wide range of interests in order to garnish support. But his approach and execution is fairly haphazard, and lacking in any clear strategy. There will likely be a much more competent and calculated version arise in the coming years, ironically legitimized by voters' displeasure at the consequences of current actions. A self fulfilling prophecy effectively.
The new age and style of the Republican Party emerged with President Bush junior. The campaigning got downright down and dirty. For example, the degradation and insulting of the fine military service of firstly John McCain for the nomination, and secondly John Kerry for the following election. As well that presidency got off the ground only by a highly questionable vote count in Florida orchestrated by the Bush brother as Governor and Secretary of State elect Baker. Trump has somehow both corralled and controlled that background and culture, but it certainly still remains. In fact my view is that it is suppressed and pent up and, once the king is no longer on the throne, all those ambitions and feuds will burst forth.
“After Trump things may carry on as before.”
Let us not be naïve and think that it is solely Trump on his own driving events in the USA and once he goes all will revert to normal. Trump on his own has not planned the strategies and wide range of events in this authoritarian shift.
Two groups exerting significant influence on the Republican Party are the Federalist Society and Project 2025. It seems that to be less of Trump’s cabinet and more that these two groups through Stephen Miller - who seems a frontperson for these groups - that has the greater control are determining current policies and events.
The signs are that the 2028 elections are not going to go well. Despite the Constitution Trump may still be there, and if not, it will another front person closely aligned to these two groups. Even Vance may be closely aligned enough.
Welcome back.
‘Personal relationships will be a new gold, as will having a good spiritual and moral grounding’
They always were gold Painter! Nothing new about them at all unless they were being disregarded by those you know recently?
But then housing bubbles turned people away from moral and spiritual grounding as they focused on greed and self interest (the theme of most of my comments here). Ie the opposite of good morals and spiritual grounding.
Funny how hard times cause people to say ‘oh we better focus on being good humans again!’ but when it’s going good it’s ‘who cares about morals and principles - I can screw others over by buying another rental for my portfolio and making them my rent slaves - and who cares about the financial and social stability of the nation as a whole..? My personal wealth and gain comes before any of that!!’ Ie many NZers these past 10-15years.
They always were gold Painter! Nothing new about them at all unless they were being disregarded by those you know recently?
Since about the 50s, but that's accelerated greatly over the past decade or so.
But then housing bubbles turned people away from moral and spiritual grounding
That's not the prime mover away from spirituality over the past century. We used scientific materialism to dismantle many of religions' claims, and then followed it up with a raft of social and cultural changes.
But good to see you clinging to old chestnuts.
Funny how hard times cause people to say ‘oh we better focus on being good humans again!’
That's my de facto position, I just don't feel the need to evangelize it (you live it instead). Part of the point of raising it here is as a precursor that many status quos will upend, and we're going to need to call on each other more than is the current norm.
"I can screw others over by buying another rental for my portfolio and making them my rent slaves."
You know, people appreciate being able to rent a property. Everyone seems very silly in the comments today.
The appreciation is just the superficial, in the moment response Zac. Then they learn they are being screwed, fleeced and denied the opportunity to escape the rent trap by parasitic landlords and an apathetic government.
I am yet to hear of a landlord charging 'affordable' rents, instead it's 'market rents' dontcha know?
There are plenty of affordable rentals. You are pushing an ideology rather than being sensible.
What do you call 'affordable' Zac? If it is anything more than 25 - 30% of the median take home pay, then it is not affordable. That's not ideology. your 'market rents' are. An ideology created and promoted by Milton Friedman and the US called 'free market economics'. But it has been proven to be a false economy.
Please enlighten us with your correct ideology to support "affordable rents" & how best to achieve this
There's nothing new here: in the mid/late1970s I earned approx the median wage & paid close to half my net pay in rent. Income tax took 50% in each $1 over $100/week to support the multiple protection rackets that eventually broke the NZ economy a few years later
The only centres I can think of where rents are "affordable", are also places most people won't want to live. I'm thinking Invercargill, parts of the rust belt, and depopulating European or Asian towns.
It's almost like large economic centres aren't there to be affordable for average income earners.
A quick google delivers this;
- The 30% Rule: A household is considered to have affordable rent if they spend 30% or less of their gross income on rent and utilities.
- "Comfortable" Range: For better financial stability, a range of 20%-25% of gross income is often considered more ideal.
- Affordable vs. Social Housing: "Affordable" often refers to renting in the private market at or below average market rates, whereas "social housing" is subsidised and typically capped at a lower percentage of income (e.g., 25% or up to 30-35% in some NZ programs).
It's really a simple policy and one I followed when I had rental properties. Over the years I have seen research reports that support the above figures. I tended to use the upper range; 25 - 30%. It's not ideology.
Pa1nter, you haven't really made any real predictions in your comment or stated anything concrete. Can you be more specific so we can check back in the future to see if you are right? Your comment seems a tad hysterical.
If you're after "expect x price or action at y date", I can't really be of much help. All I can really attest to is likely future trends and tendencies on the trajectory we are on. Including, but not limited to:
- increased domestic violence
- increased international violence
- unrestricted global trade becoming restricted
- movements into war economies and subsequent impacts on other facets of the economy
- worsening fortunes of most of the planets' human inhabitants
So expect increased scarcity, volatility, and some of the promises on paper we take as a given to vanish. I'm not saying run round with your hair on fire, just expect status quos to fundamentally alter.
"expect status quos to fundamentally alter"
Aren't status quos constantly changing? Off the top of my head I can think of quite a few over recent decades. Women's rights, Gay rights, indigenous rights, Western demographics, migration, human fertility, shifting manufacturing centres, travel, incandescent lightbulbs, photography, telephony, audio visual entertainment, working from home, drone warfare, publishing, artificial intelligence ...the list goes on.
We have been pretty much in a state of constant status quo change for my entire life.
Those are incremental changes. I said fundamental.
Maybe think the first year or two of COVID, except it doesn't just pass through temporarily, and conditions just get worse and worse.
Yet the examples you gave above were "incremental". You are just scaremongering with vague statements and little substance.
I guess if you can't distinguish the difference between upgrading from sending a letter to sending a telegram, and the fundamental nature of the system that sustains much of your daily life being upended, this will indeed sound fairly strange to you.
I'm still waiting for you to provide a coherent example of a fundamental change.
I would have thought you would be quite keen to flesh it out a bit more. I enjoy reading science fiction.
Mayi suggest that we bask in the uncertainty and lack of definiteness... It's much less stressful than white knuckliing through life in fear.
That's not to be laissez-faire, just to acknowledge what's knowable and what's not
China Daily says that the Spring Festival holiday will run from February 15 to 23, 9 consecutive days. The extended break will be longer than in previous years. This potentially will impact travel and spending plans, but also amplify the effects of policies designed to unlock consumption potential, particularly in services, travel and experience-driven spending.
This boils down to whether to boost total consumption Chinese households need more time to spend or more money to spend.
https://www.chinadaily.com.cn/a/202601/26/WS6976a32da310d6866eb35a26.ht…
Don't hold your breath on Chinese consumer spending...
https://www.abc.net.au/news/2026-01-27/chinas-aging-population-is-savin…
Pvte credit is a dead swamp globally. Talk to anyone at the water cooler and they may say 'Yeah nah. Aotearoa has low exposure to pvte credit mkts.' Probably correct, but it has been booming in Aussie. Hard to understand exactly how big it is, but the hospitality industry relies on it.
https://au.finance.yahoo.com/news/pub-owner-huge-call-over-011611021.ht…
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