Here's our summary of key economic events overnight that affect New Zealand with news markets now expect an Australian rate rise next week.
But first today, the US Fed held its policy rate unchanged at 3.5%. This is what markets expected from them, despite the Trump pressure to cut sharply. The vote was 10-2 with the dissenters working to curry favour with Trump to get the nod as the next Fed chairman. The FOMC indicated that rates at this level could hold for some time while household inflation stress remains elevated. Inflation with no growth (other than AI) is a hard position to extract yourself from.
They also have their eye on the labour market, with some large layoff announcements in the past few days. Both UPS (-30,000) and Amazon (-16,000) have announced big cuts, less about seasonal changes, more about 'efficiency'. They aren't the only ones pulling back.
American mortgage applications fell last week as mortgage interest rates rose. Refinance activity fell more than -16%, while new home purchase mortgages were little-changed. This may not be a trend change, rather just a breather, because the prior three weeks rose notably. However, this metric is in a clear yoyo pattern.
Canada's central bank also held its policy rate at 2.25% in its overnight decision. New bully threats from the US are keeping their growth outlook quite uncertain but they still see inflation holding at about 2% (currently 2.4%), and they still see an economic expansion at about +1.5%.
India's industrial production accelerated in December, up +7.9% from the same month a year ago to end its full year up +4.1% from 2024. Factory production was up +8.1%, with the weak sector being mining. The December expansion was its sharpest since October 2023.
In Australia, inflation was reported rising 3.8%, far above the November 3.4% and also above the expected 3.6% level. After the strong December labour market data released earlier in the month, this will put heavy pressure on the RBA to act to prevent inflation impulses and inflation expectations from requiring even tougher medicine in the future. Growth hotspots Brisbane and Perth both reported even higher inflation rates. Even Sydney reported 3.7% December inflation. The RBNZ will be looking at this evolving situation with some alarm, given that we too have above-target inflation, even without the growth pressures.
Separately, the Chinese ambassador to Australia has said that Beijing will step in if Australian moves to regain control of the Darwin port that was leased to Chinese interests in 2015 on a 99-year lease basis. He said China “has the obligation to take measures” to protect their rights over the port. That may include trade retaliation, and more Chinese navy circumnavigations including live-fire exercises in the Tasman.
The UST 10yr yield is now just on 4.26%, up +3 bps from this time yesterday. The key 2-10 yield curve is now at +68 bps (up +4 bps). Their 1-5 curve is now at +33 bps (up +3 bps) and the 3 mth-10yr curve is now at +57 bps (up +5 bps). The China 10 year bond rate is up +2 bps at 1.82%. The Japanese 10 year bond yield is down -5 bps at 2.24%. The Australian 10 year bond yield starts today at 4.76%, down -9 bps from yesterday. The NZ Government 10 year bond rate starts today at 4.66%, up +3 bps from yesterday.
Wall Street is softish with the S&P500 down -0.1% in Wednesday trade. It opened above the index level of 7000 for its first time ever but has fallen since. Overnight, European markets were lower between Frankfurt's -0.2% dip and Paris's -0.9%. Yesterday Tokyo ended its Wednesday session little-changed. Hong Kong was up a sharp +2.6% and Shanghai was up +0.3%. Singapore ended down -0.3% after Tuesday's jump. The ASX200 dipped -0.1% yesterday. The NZX50 fell -0.7% in its Wednesday trade.
The price of gold will start today at US$5289/oz, up a sharp +US$202 from yesterday and a new record high. Silver is up +US$7 to US$114/oz, also a record. Platinum has recovered and now at US$2645, but not back to Monday's spectacular record.
We should also note that the aluminium price has risen sharply overnight - again. It is now back approaching its pandemic-frenzy levels.
American oil prices are up another +US$1 at just under US$63/bbl, while the international Brent price is also higher, now just under US$68/bbl. These are four month highs.
The Kiwi dollar is up +10 bps from yesterday, now at 60.3 USc. Against the Aussie we are down -10 bps at 86.2 AUc. Against the euro we are up +30 bps at just on 50.5 euro cents. That all means our TWI-5 starts today just under 63.8, and up +10 bps from yesterday, its highest since late September.
The bitcoin price starts today at US$89,425 and up +0.9% from this time yesterday. Volatility over the past 24 hours has again been low at just under +/- 0.9%.
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12 Comments
"Separately, the Chinese ambassador to Australia has said that Beijing will step in if Australian moves to regain control of the Darwin port that was leased to Chinese interests in 2015 on a 99-year lease basis. He said China “has the obligation to take measures” to protect their rights over the port. That may include trade retaliation, and more Chinese navy circumnavigations including live-fire exercises in the Tasman."
No DC you miss the point. At the upper end China is doing a Trump and threatening Australia with invasion. For The entire Asia Pacific region this is of extreme concern, because once ashore in Aussie China will not be able to afford to stop. Worse with the lease giving them control of the port the invasion may happen through stealth and indeed may already be occurring.
The last time China invaded an overseas country (as distinct from their Asian land mass neighbors) was in the 13th century.
The Chinese know war is chaotic and they prefer predictability. They also have a large Navy, but it's not designed for long range operations.
Russia can barely fight a single front war, right next door
So there's really only one nation capable and demonstratively willing to project significant kinetic power long distance. It's in their interests to make you wary of others.
This is the nitty-gritty stage of what DC has steadfastly circumvented. Daily we get - not just from him, all media are guilty - laudings of GROWTH.
But appraisal of what it is based on? Not so much.
We are an overshot species, just in food/energy/ecological terms. Our extract/consume/discard system is atop that, or perhaps better described as intertwined with it.
We are now down to the gloves-off who-gets-what's-left stage. We were on the 'right' side of that equation for the last 200 years but there are no sureties that we will continue thus. Some - perhaps the majority - will choose to avoid/ignore, as per Britain in the 1930s.
about half-way through - milk to China (re Darwin)
China is not going to invade us with military. It's just as worrying that they will own us and control us. A process already well underway.
Big trouble for us if we do "wrong thinking"
Scomo and Andrew Robb were directly involved around the time the Darwin Port lease to Landbridge was finalised in October 2015. Andrew Robb was given a lucrative post‑politics job with Landbridge. Robb left Parliament in mid‑2016, and almost immediately started as a “high‑level economic consultant” to Landbridge on about A$880,000 per year, after having publicly backed the Darwin Port lease while Trade and Investment Minister. Robb was negotiating with Landbridge while still serving as a minister.
In many countries, Robb would be in prison for treason. He suffers from depression (hardly any surprise) and has been involved in psychedelics as therapy.
[https://www.abc.net.au/news/2021-03-11/andrew-robb-advocates-for-psyche…].
Hard to fathom the daftness of some bureaucrats. Darwin Australia’s most strategic port geographically, leased out to Chinese interests . Now it’s hardly rare for leases to be broken and damages and compensation settled in due course, often too by court action. That China is likely to kick up a very large ruckus just goes to prove what a great strategic asset they have secured and the next question obviously what is the plan that they have in mind for it.
Sort of rings a bell as to when soon to be defeated PM Fraser foretold that a Labour government would force people to stash their cash under the bed to which incoming PM Hawke retorted that they couldn’t cause it’s full of reds. In politics mooring lines can go back far and deep can’t they. If I remember correctly our PM Ardern was very excited about incoming Australian PM Albanese stating that their shared politics went way back.
"Who to invade next...?"
https://www.rnz.co.nz/news/world/585284/donald-trump-threatens-iran-wit…
The price of gold will start today at US$5289/oz, up a sharp +US$202 from yesterday and a new record high.
Largest daily gain since the momentous March 2020 - the time of the last great rat poison buying opportunity.
Gold mining proxy GDX now up 200% in P12M. Fortunes potentially being made in mining portfolios. Many would probably laugh at the recos / gossip of Kalgoorlie taxi drivers and barflies. I wouldn't.
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