Here's our summary of key economic events overnight that affect New Zealand with news US Treasury yields have jumped, and to their highest level in nine months. Investors are coming to realise that Trump doesn't know what he is doing, and the inflation impacts from these mistakes will likely deliver a much more hawkish US Federal Reserve. We may all be in for rising benchmark interest rates.
And it won't help us that credit rating agencies are looking at these impacts and starting to consider downgrades. Risk premium rises will be on top of the benchmark rises.
Meanwhile, the IEA says the market disruptions from the US/Israeli "conflict has triggered the largest supply disruption in the history of the global oil market". They say we should all work from home, and if we drive, drive slowly.
American petrol prices are up a third in just four weeks. That signal from the world's largest economy will be sharply inflationary. By a different means, Trump is effectively imposing a giant carbon tax on everyone.
And what will flow from from that? Sharply higher inflation, and sharply lower global economic activity. That is the definition of stagflation. Everyone suffers because monetary policy needs higher interest rates to restrain the inflation side of the coin. And that undermines the global banking system because stagflation is the worst scenario for bank lending.
Meanwhile, Canadian retail sales rose in February by +0.9% from January to be +1.8% higher than year-ago levels.
But Canada's producer prices rose much less than expected in February. They were up +0.4% from January when a +1.1% rise was expected. For the tear they are up +5.4% however.
Taiwanese export orders are still growing fast but the February rise was only +24% and by the standards of the +60% January rise, this seems a let-down. Analysts has expected another very large rise and so were disappointed. But anyone else would have been over the moon with a +24% rise.
In China, foreign direct investment inflows fell -5.7% to ¥161 bln in February from a year ago, -22% lower than the same period in 2025, and its lowest for this period since 2020. There were some positive sectors in high-tech, but mostly this is a weakness Beijing won't appreciate.
And Chinese customs data shows why the silver price jumped earlier in the year. China bought up 700 tonnes of the metal in January and February to shore up its strategic reserves. But the buying seems to have eased or stopped, and we are seeing the price dive now.
And staying in China, despite the huge surge in car sales there, over half their car dealers say they are missed sales targets and many are now operating at a loss.
We should probably note that with the Australia-New Zealand "Closer Defence Relations" statement, there is growing expectations that the two countries will buy its replacement frigates from Japan.
The UST 10yr yield is now just on 4.39%, up +11 bps from yesterday at this time, up the same for the week. The key 2-10 yield curve is much steeper at +49 bps (+8 bps). Their 1-5 curve is slightly steeper at +17 bps (+1 bp) and the 3 mth-10yr curve is now at +69 bps (+9 bps). The China 10 year bond rate is up +1 bp at just under 1.83%. The Japanese 10 year bond yield is down -1 bp at 2.26%. The Australian 10 year bond yield starts today at 5.07%, up +5 bps from yesterday and its highest since 2011. It is up +8 bps for the week. And the NZ Government 10 year bond rate starts today up +5 bps at 4.76%, up +7 bps for the week. The Fitch downgrade probably won't help on Monday.
Wall Street has started Friday trade with the S&P500 down another -1.7%, down -2.7% for the week. Overnight, European markets were sharply lower again, between London's -1.4% and Frankfurt's -2.0%. Yesterday, Tokyo closed down -3.4% for a weekly dip of just -0.4%. Hong Kong ended its Friday session down -0.9%, and Shanghai fell -1.2%. Singapore ended down -0.4%. The ASX200 closed down -0.8% for a weekly retreat of -1.7%. The NZX50 closed on Friday down -0.5% to cap a weekly decline of -1.6%..
The Fear & Greed index has now moved further into the 'extreme fear' zone today.
The price of gold will start today down -US$14 from yesterday at US$4573/oz. That is down -$453 or almost -10% in a week. And that its its largest fall on more than 40 years. Silver is down another-US$1 at US$69.50/oz, a -14% weekly retreat.
American oil prices are up +US$3/bbl at just on US$98/bbl, while the international Brent price is now just over US$110.50/bbl. The Straits of Hormuz remain no-go areas for most with the situation still extremely unstable. The ships transiting are those approved by Iran, which holds all the cards at present.
The Kiwi dollar is little-changed against the USD from yesterday, still just on 58.4 USc. A week ago it was 58.1 USc. Against the Aussie we are up +10 bps at 83 AUc. We are up +60 bps against the yen. Against the euro we are down -20 bps at 50.5 euro cents. That all means our TWI-5 starts today essentially little-changed at just on 62.1 but up +30 bps for the week.
The bitcoin price starts today at US$69,626 and up +0.2% from this time yesterday but down -3.3% from a week ago. Volatility over the past 24 hours has been modest at just on +/- 1.4%.
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15 Comments
"Iran holds all the cards"? I thought team Trump had a monopoly on card holding?
Everyone's got cards
Trump's playing snap
Irans playing Magic The Gathering
“Trump doesn’t know what he’s doing.” That rang a distant bell and after a bit of thinking I located it. One of the world’s greatest cynics H. L. Mencken passed in 1956 but also obviously displayed quite some precognizance when he said “ On some great and glorious day the plain folks of the land will reach their heart’s desire at last, and the White House will be adorned by a downright moron.”
What use are cards when Trump is playing four dimensional chess?
His gameboard looks a lot more like Hungry Hungry Hippos.
These wars are making me feel a lot safer in a way:
- The US can’t beat Iran
- Russia can’t beat Ukraine
- Neither Russia nor Iran have managed to attack a western country
- The world has learnt (again) that there are no winners from wars.
Does that make you feel like it's the end?
Our other lesson is that the nature of war is changing as it always does. Particularly the economics. It's now becoming less about who's got the flashest toys, to who can produce cheap guided munitions in enough quantities to overwhelm defenses.
annual gold exports from New Zealand have now passed NZ$2B, up from just $470m four years ago.
It's surprising how little NZ receives in royalties though.
No real surprise. We get it in tax instead, haha, nah just kidding.
It's called "foreign investment " some people actually believe it's a good thing.
The people employed probably think it’s a good thing.
From what I can discern it looks like royalties come to about 10% of company profits. So, if the company makes 200M profit NZ gets 20M. Could be around about the figure for 2025. Mining is quite an expensive enterprise so there will be earnings from various taxes and employment in these places. The gold exports help with trade balances.
A link discussing those Chinese silver purchases.
The following is from yesterdays article by Alasdair Macleod. As always dyodd.
Clearly, the current markdown in silver is paper vapour, meaningless in terms of its physical value. The same can be said of gold despite its increased marketability compared with silver. While bullion banks in the West play their paper games, such is the demand for physical gold in China that their banks are rationing customers, with daily allocations reportedly sold out within minutes. This is sucking gold out of other centres.
Chinese and Asian savers have a better grasp of the implications of the war on Iran than their western counterparts, since they are more reliant on energy from the Persian Gulf. Nowhere is this more economically destructive than for Japan which depends on the Gulf for 70% of her oil and 90% from the whole region. This explains why the Nikkie index has been the worst casualty of the war so far. But this is only the start of Japan’s problems, and therefore of all credit markets.
Lau Vegys of Doug Casey’s Crisis Investing (dougcasey@substack.com) points out that as a consequence of the 1973 oil crisis, Japan’s inflation rate rose 20% and panic buying emptied store shelves. He goes on to point out that the problem today is compounded by the dire state of Japan’s finances with debt to GDP of 255%.
Clearly, inflation of prices will be a major problem for Japan in the coming months. Not only will the Bank of Japan be forced to raise interest rates sharply if it is to prevent the yen collapsing. Equities will crash and bond yields soar. As the chart below illustrates, these bond yields are already the highest they have been for decades:
Current JGB yields are nowhere near discounting an inflation surge and they should be on their way to 10% or even more. Not only would that collapse the entire Japanese financial system and its currency, but Japan’s institutions are the world’s largest exporters of investment capital, and the yen is the basis of the carry trade into dollar debt — both of which are bound to cease and reverse.
Today, this is the obvious source of future global credit instability. And along with Japan, other G7 nations seeing their 10-year bond yields challenging new high ground are the UK, Germany, and France. We are entering falling-dominoes territory, where the only safety is to get out of all forms of credit including currencies and equity markets.
In conclusion, a global financial credit crises in being brought forward in time. Today’s markdowns in gold and silver are simply sucker-plays designed to deceive amateur investors who will come to regret being hoodwinked into selling by professional traders.
It's surprising that the Gulf Arab States and Iraq have about 300 naval vessels combined yet only about 30 that are actually useful for escorting ships through the Strait of Hormuz. You would think, with their fairly large military budgets and the importance of the waterway, that this would have been a priority.
Not when you're ceeding much of your defense responsibilities to a third party. Because your resources help underwrite their currency.
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