Here's our summary of key economic events overnight that affect New Zealand with news we are now in week five of a completely preventable global crisis.
But first we should note that we are now touching up against the end of the month, and end of the first quarter. This is when fund managers and other large investors lock in their results for upcoming reporting. So there is a lot of position squaring activity at present, and that tends to skew financial market activity.
But the fundamental drivers - economic activity, inflation, geopolitical events - are not stopping, so there is still substantial market reaction to those. That is driving serious risk aversion. And markets watch key policymakers too.
Fed boss Powell was out speaking today to an economics class at Harvard. In answer to questions, he said distress in the private credit market looks more like a correction and not like a broader systemic event to them. He also said their would regard the inflation threats from the war on Iran as transitory, but that their patience was limited - given the fact that US inflation has been above 2% for five years now.
The New York Fed boss Williams was also talking, and he seemed now more concerned with the jobs market, saying a rate cut is a real possibility if it weakens further.
Meanwhile, the Dallas Fed's factory survey was a touch weaker in March than February on slowing new order growth. But their company outlook index dropped into negative territory and their outlook uncertainty index leapt.
In China, they reported an enormous current account surplus of almost +US$¼ tln in Q4-2025, almost US$¾ tln for the year, one that is globally destabilising. Also we should note that countries that signed up to the Chinese Belt & Road system are finding that they are on the short end of that deal. The two items are likely related.
India's factory production was up +6.0% in February from a year ago, better than expected.
In Europe, their Eurozone Economic Sentiment Indicator dropped in March on rising inflation expectations tied to the Middle East conflict.
So it will be no surprise to learn that German inflation jumped in March, driven by fast-rising fuel costs to its highest in over two years (January 2024) at 2.7%.
We should note that the aluminium price is on a sharp move higher again, approaching its mid-March post-pandemic record high. With Middle-East production damaged or out of service because they can't ship, China's dominance of the aluminium market seems likely now.
And air cargo demand surged in February, not only in response to Chinese New Year demand, but businesses seemed to rush the sector to get goods shifted fearing the Middle East situation. Sharply rising fuel costs, fuel scarcity in parts of the world, and the severe disruption to key cargo hubs in the Gulf are major shifts. February air cargo activity was up +11% from a year earlier with the Asia/Pacific region up +13.6%. But how this played out in March, and will play out in subsequent month, are likely to be a highly volatile mix of 'urgency' restrained by sharply rising costs.
It is worth noting too that concerns are rising that the oil and supply-chain problems are almost certainly going to provoke a global food crisis at some stage. Not only due to sharply higher costs, but sharply lower production at the same time. But that is yet to hit us all.
The UST 10yr yield is now just on 4.34%, down -10 bps from yesterday. The key 2-10 yield curve is marginally flatter at +51 bps (-1 bp). Their 1-5 curve is much flatter at +25 bps (-5 bps) and the 3 mth-10yr curve is now very much flatter at +63 bps (-12 bps). The China 10 year bond rate is little-changed at 1.81%. The Japanese 10 year bond yield is down -2 bps at 2.36%. The Australian 10 year bond yield starts today at 5.02%, down -9 bps from yesterday. But the NZ Government 10 year bond rate starts today at 4.81% and up +1 bps from yesterday.
Wall Street started its Monday with the S&P500 up +0.7% but has since weakened and is now in negative territory, down -0.2%. Trump's latest bluster isn't helping. Overnight European markets all rose between Paris's +0.9% and London's +1.6%. Yesterday Tokyo closed its Monday session down -2.8%. Hong Kong was down -0.8% but Shanghai was up +0.2%. Singapore was unchanged. The ASX200 ended its Monday session down -0.6%. And the NZX50 ended down -1.4%.
The price of gold will start today up +US$54 from yesterday, now at US$4547/oz. Silver is up +US$1 to US$70.50/oz.
American oil prices are up another +US$3 at just over US$102.50/bbl, while the international Brent price is -50 USc lower at just on US$112/bbl. Ship transit traffic in the Strait of Hormuz seem to be slowly returning, but on Iran's terms.
The Kiwi dollar is -30 bps lower against the USD from yesterday, now at 57.1 USc. Against the Aussie we are down -20 bps at 83.4 AUc. We are down -90 bps against the yen. Against the euro we are unchanged at just on 49.9 euro cents. That all means our TWI-5 starts today down -25 bps at just on 61.1.
The bitcoin price starts today at US$67,359 and up +1.4% from this time yesterday. Volatility over the past 24 hours has been moderate at just under +/- 2.5%.
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23 Comments
'week five of a completely preventable global crisis'
We need to understand that the fundamental drivers were - are - not 'preventable'. We are now in a permanent stoush over who gets what part of what's left.
It is all about energy - who gets it and who doesn't; we've just seen first-hand that 'our economy' wouldn't be a thing, if shipments cease. This is where economists get it wrong; energy - including food - is not fungible. Nordhaus - that celebrated economics genius - made that classic mistake (or was it?). Who cares if food doesn't happen; it's only 3% of our economy; the rest will make up for it.
Oh, wait...
The battle may have been preventable - may - but that war has been coming since William Knox D'Arcy.
The end game may have been inevitable, but how we got to it was not. So I'd suggest this 'stoush' was not just preventable, but entirely avoidable.
I do think we are still a long way from where the end game needed to be initiated. Trump's ego however is not a lot different from many other extremist 'strongmen' heading governments around the world. That he is the head of the planet's largest 'democracy', and no one in the country seems willing to constrain him is perhaps the biggest concern. The weight of Carney's words at Davos grows daily as Trump's extremism becomes even more apparent.
And the Aussies have dropped their fuel taxes to give their people some relief. I watched the news broadcast of Willis and Luxon discussing this and it was clear from their words and body language they have no intention of doing this for Kiwis.
It's gobsmacking really. I cannot fathom how they think the economy works. And then there is the silence from the other side of the aisle, so it looks like the problem is universal in Wellington.
Maybe Australia has the funds to be able to do that (I genuinely don't know) while we have been running deficits for years? It won't get them any more fuel, though.
I’d argue they should do the opposite. Use price to determine the most important uses of the fuel we have.
I'm starving but I only have $3 for food
Yeah, that'll work.
I'm calling BS.
Not sure I get your point.
I had to go to the mall in the weekend, the car park was full. So the price is not yet at the point where people have stopped doing unnecessary trips, it needs to go higher.
As someone that uses little fuel I don’t want to see a subsidy to people that choose to use lots.
No, you studiously avoid getting my point.
I've noticed...
Your anecdote is statistically flawed, and bases itself on assumptions plural. See if you can work out what they are?
It was stupid when Labour did it and it would be stupider to do it again. Fuel tax is already way below where it needs to be and hasn’t been increased for 3 years (gone down in real terms). When it gets backed out we get another spike of CPI, it just prolongs the inevitable.
And the excise duty included in the price of petrol is a fixed price per litre - a fuel consumption tax. So there is a benefit to the wallet for driving a petrol vehicle more fuel efficiently.
Of course there is a saving in the wallet for driving a diesel vehicle more fuel effiently too but there is no saving to be gained in road user charges - the diesel equivalent of the road user charge. That is distance irrespective of fuel consumption.
Therefore petrol vehicle users contribute less to NZTA as they drive more efficiently, shifting a greater burden on those vehicles driven under the RUC system even if they drive more fuel efficiently.
Treasury, I expect, are rubbing there hands together at the increased gst revenue collected from the increased price of fuel.
They - and DC here, to be honest - are products of the narrative of an echelon and an era. The echelon was the first-world winners of WW2. The era was then until say 2008. Since then it has been playing in injury-time, trying to make sense of what is happening, using an old manuscript. This is exactly christianity post-Darwin/Wallace/Lyell.
And it is unsurprising to see an over-representation of fundy believers, religious style, appearing at the top of the other belief (economics) as the tide goes out. I've been fascinated to hear the media talking about 'impacts on the economy'. Actually, this will impact people yet the talk is all about inflation. The blame is going to be all about Trump - studiously avoiding the fact that half of the US voted for him. Twice. Which tells us the hegemony is failing its citizenry, as they all do on the way down. Thus it's last, biggest, resouce-grab (Trump gave the clue yesterday 'we'll take their oil".
We need leaders who understand the need for physical resilience, long-term. As you say, neither 'side' has them; Edmonds sings from exactly the same songsheet.
Agreed. I've been arguing for some time now, essentially post COVID, that we needed a plan for national resilience. Essentially a way to become as self sufficient as possible and less reliant on the rest of the world. No closer now than when I started. Our 'leaders' will be standing at attention saluting some foreign power as our ship sinks, and they will still be telling us we just have to bear it all.
The thing is that high energy prices are exactly what we need to become self reliant. We all want to drive our two ton box around at a whim, and the only thing that will stop us is price. The government won’t fix it until we demand it, and we just voted for a government that campaigned on more unaffordable roads and canning the clean car discount, so we obviously didn’t want it then. At $4 a litre I suspect we’ll see some change.
Yes, you would. @ $4/litre, your whole 'economy' had tanked, well into recession. Which had lowered the $ figure. Which means it's no measure of anything at all.
Which is why rationing is the way to allocate. The fairer way too.
Then ratchet down, forcing people to live with less and less fossil energy.
But be well aware that is the end of Kiwisaver, pensions, indeed all forward bets of a proxy kind.
At $4 a litre we start investing into electrifying the main rail trunks and moving long distance freight to rail. We import electric trucks, buses and cars. We get between cities on new trains instead of flights. That investment helps the economy. But not if the blue team are still at the helm.
No we don't.
We're all taking each other to court for not paying. And we're 'spending' all of our 'income' on food. Without which we're all dead.
That is exactly the pathway we're on now - ex the ME stoush. Local Authorities are already reducing services and upping rates exponentially beyond income-increases- and will have to continue doing so. Nobody is going to 'invest' in that scenario. Nobody can take a capex proposal to a bank in that scenario.
It's a mindset thing - sorry, but you need to do some thinking.
Agree it would have made sense to do it much sooner, I have been arguing for that for a long time!
But at the moment we still have a very high credit rating and fairly low government debt, if we act quickly its all possible.
JJ. I recently discussed with a merchant the road freighting of heavy concrete products from the upper north island to the mid/lower SI, where for long stretches SH1 runs virtually parallel to the main trunk. His answer was that road is cheaper. To a simple soul like me this defies logic.
In C.S . Forester’s novel The General he describes a conference of WW1 generals arguing over how to break the deadlock of the carnage of the trench warfare as it was like a bunch of natives on a remote island, having found a large screw in a large log washed up, trying all manner to get it out but not realising to turn it even if they could find something to turn it with. Not PC context today but they would likely have resorted to burning it out which is a parable of sorts, of destroying a lot more to get what you get.
"We had to destroy the village to save it"
FG. Excellent quote. Von Falkenhayn's monstrous strategy that the slaughter was to continue until one side could endure it no more, defined the horrifying course of WW1 thereafter. In the aftermath western generals were criticised for their failure to achieve breakthrough until 1918 but recent more objective views acknowledge that while technology was advancing at an astonishing pace, mass infantry attacks were generally the only realistic option.
"...completely preventable global crisis" - had NZ et al not let virtue signalling ecotards run energy policy for the past 20 years.
"Had the world spent the past decade building the oil, gas, LNG, pipeline, and fertilizer infrastructure that engineers designed and companies proposed, the Hormuz crisis would still be a serious geopolitical event, but it would not threaten to cause a recession.
— The Atlantic Coast Pipeline, a 600-mile natural gas line from West Virginia to North Carolina, saw its cost double from $4.5 billion to $8 billion during years of environmental litigation before Duke Energy and Dominion Energy cancelled it in July 2020.
— The Constitution Pipeline from Pennsylvania to New York died the same year.
— The PennEast Pipeline won its case at the United States Supreme Court in 2021 and still could not get built because New Jersey refused to issue state permits.
— In Canada, TransCanada abandoned the $15.7 billion Energy East pipeline in 2017 after the National Energy Board required an unprecedented review of upstream and downstream emissions.
— In January 2024, the Biden administration paused all pending approvals for LNG export terminals shipping to non-free-trade-agreement countries, freezing projects representing tens of billions of cubic feet per day of potential capacity.
— Venture Global’s CP2 terminal in Louisiana, designed for 20 million tonnes per annum, sat in regulatory limbo for over a year.
— NextDecade’s Rio Grande LNG in Texas, with 48 MTPA of planned capacity, stalled alongside it.
— PTT Global Chemical’s proposed $10 billion ethane cracker in Belmont County, Ohio, first announced in 2015, remains on indefinite hold after failing to attract financing partners amid climate-driven investor sentiment.
— Across the US Gulf Coast, nearly 60% of planned plastic and petrochemical production projects sit on hold.
— LNG Canada, the Shell-led terminal at Kitimat, British Columbia, took over six years from construction start to first cargo, with its pipeline running 263% over budget. Environmental review, Indigenous disputes, and contractor cost escalation all contributed.
— Pieridae Energy’s Goldboro LNG project in Nova Scotia, a 10 MTPA facility first proposed in 2012, was abandoned in November 2023 after more than a decade of permitting and financing obstacles.
Australia
— Australia’s Santos’s Barossa gas project was halted midway through construction after a Federal Court ruling overturned its environmental approval.
— Woodside’s Scarborough project faces ongoing litigation from the Australian Conservation Foundation seeking to block it on climate grounds.
Africa
— Perhaps nowhere has the damage been more consequential than in Africa. At COP26 in 2021, wealthy nations pledged to halt overseas development finance for gas projects, a commitment that fell hardest on the continent least responsible for climate change and most in need of energy infrastructure.
— The World Bank stopped financing oil and gas extraction in 2019 and imposed restrictive conditions on downstream gas projects.
— The European Investment Bank announced a complete ban on unabated fossil fuel financing by the end of 2021, with its president declaring that “gas is over.”
— At least 21 other development finance institutions followed suit.
As a result:
— TotalEnergies’ Mozambique LNG project sat under force majeure for four and a half years after the UK Export Credit Agency and other backers withdrew climate-motivated financing.
— The East African Crude Oil Pipeline lost financing commitments from more than 30 major international banks under pressure from climatists.
Europe
— France prevented the completion of a third gas interconnector with Spain, citing climate neutrality goals.
— The United Kingdom imposed a moratorium on fracking in 2019 despite sitting atop one of Europe’s most promising shale gas formations.
— Germany, which shuttered its last three nuclear plants in April 2023, compounded its gas dependency by refusing to develop domestic shale resources.
— CF Industries permanently shut the UK’s largest ammonia plant at Billingham, a facility that also produced 60% of Britain’s food-grade CO2.
— Yara International curtailed output across plants in France, Italy, and Belgium before permanently closing its 400,000 tonne per year ammonia facility at Tertre, Belgium, in October 2024.
These closures occurred because European climate policy made gas too expensive for the domestic industry to survive."
Shellenberger eh?
Funny, I just mentioned Nordhaus this morning.
We'll be refencing Lomborg next...
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