Here's our summary of key economic events over the weekend that affect New Zealand with news the US President has made ever more threats against Iran, now saying the US will blockade the Straits of Hormuz against friend and foe. The main losers will be the Gulf States that supported him. Iran probably foresees another TACO playing out. It is all very juvenile. But it does mean disruption will continue. And that inflation will stay higher for longer.
But first, here in New Zealand in the week ahead, we will get updated data about migration, retail (electronic cards) and CPI data about food and other selected items. We will also get the PSI (today), and the March REINZ data later in the week.
In Australia, the week will be about business confidence (NAB survey) and consumer confidence (Westpac survey) as well as the March labour market results, with their economy expected to have added around 20,000 jobs in March, while the jobless rate is seen holding steady at 4.3%.
The developments in the Middle East will remain the driver of global financial market movements, with current agreements proving fragile and energy exports from the region not yet restarted. The impacts on producer prices in the US are expected to show up in their PPI data.
In China, a heavy data calendar will provide investors with fresh insight into their economy’s performance. GDP growth for Q1 is expected to accelerate to 5.0% from 4.5% in Q4 2025. The country’s trade surplus is also projected to widen slightly to US$112 bln in March, up from US$102 bln a year earlier. Meanwhile, industrial production and retail sales are likely to have slowed in March. New yuan loans are expected to rise to ¥3.4 tln.
In Japan, it will be about machinery orders. In India, about a rising inflation rate.
On Friday in the US, their CPI inflation rate jumped to 3.3% in March, about the expected rise. This was all due to fuel prices, especially petrol and diesel. Core inflation, which excludes this and food also moved up but more modestly, to a 2.7% rate. The Fed will be watching to see if this is transitory, or building in.
Still, US oil rig counts are not rising in response to these higher prices. Actually, they fell slightly. With US crude prices higher than Middle East prices, those producers have decided the best strategy is 'do nothing' and milk the benefits.
So it will be no surprise to know that the University of Michigan sentiment index plummeted in their latest survey to an historic low in early April, far below both market expectations and last year’s low level. Sentiment declined across all demographics, as well as every index component, emphasising the broad-based drop. (But it is also worth noting that this survey was taken before the 'ceasefire' claims.)
Also, there was no growth in US factory orders in February from January, also well before the Iran conflict. From a year ago they were up +4.0%, most of that coming earlier in the year.
Take a look at this: it is the share price history for FirstCash, an American pawn shop operator. Set the chart to 'MAX'. They have more than 3,000 pawn stores in 29 US states, and business is booming.
In Canada, their March labour market report showed little-change, with overall employment rising a minor +14,000 holding at just over 21 mln. There were also few changes in either full-time or part-time employment, and the jobless rate stayed unchanged at 6.7%
In Korea, their central bank kept its policy interest rate unchanged at 2.25%. They have an inflation rate of 2.2% but expect this to rise in the current environment.
China said its CPI inflation rate was +1.0% in March from a year ago, a smaller rise than expected and lower than the February +1.3% rate (which was a three year high). Food prices only rose +0.3% year-on-year, restrained by pork and fresh vegetables. Beef prices were up +7.8% from a year ago, lamb prices up +6.8%. Dairy product prices fell -0.7% on the same basis.
China also released its producer price data today which shows them suddenly out of deflation, with PPI up +0.5% from a year ago in March, the first time since September 2022, and prior to the pandemic distortion, the first time since early 2019.
There was a sharp drop in vehicle sales in China in March (down -8.8%) after Beijing cut subsidies. That has turned their automakers to chasing export orders, and their appetite is desperate, and a threat to most of the world's other carmakers.
In Taiwan, their export machine delivered another spectacular result in March, after the easing in February. Their exports were up to yet another record high of US$80 bln, a gain of +62% from the same month a year ago. Imports were up +59% on that same basis.
German inflation was confirmed at 2.7% in March, the same as their preliminary estimate, and back up to levels last seen in January 2024.
In Hungary, early results seem to favour the Tisza opposition and against Victor Orban's Fidesz. But Orban controls much of the election apparatus so it will need to be an overwhelming result to defeat him. Turnout was reported to be high. With about a third of the votes counted so far, it seems to be 2:1 against Orban. Update: Orban has conceded after a landslide defeat. The Trump/Vance endorsement likely killed off any of his chances.
In Australia, the recent Albanese trip to Singapore to source fuel, especially diesel, caps an effective open-chequebook campaign to acquire what they need, with a virtual armada of ships to arrive in Australia over the next few weeks. The list here is interesting. We count 56 ships in that wave, some even from the US.
It is also probably worth noting that China said it will ban exports of sulphuric acid, a move that will handicap copper mining, among other industries including the fertiliser industries. The copper price rose. And of course the sulphur price was already at a record high before that move. The urea price rose, back to the pandemic extremes. To be clear, there is no formal Chinese announcement of this latest curb, only producers there telling clients that they have had instructions from Beijing to block suppling them from May.
And the IMF said the war on Iran will mean slower growth this year because of the destruction of energy infrastructure and supply chain disruptions. Not really 'news' but their analysis is compelling, and 2026 could be a write-off for any 'recovery'.
The UST 10yr yield is now just on 4.32%, up +1 bp from this time Saturday but down -3 bps from this time last week. The key 2-10 yield curve is marginally steeper at +52 bps (+1 bp). Their 1-5 curve is unchanged at +24 bps and the 3 mth-10yr curve is also stable at +67 bps. The China 10 year bond rate is still at 1.82%, unchanged from last week. The Japanese 10 year bond yield is down -1 bp at 2.44%, little-changed for the week. The Australian 10 year bond yield starts today at 4.97%, down -3 bps from Saturday, down -4 bps from a week ago. The NZ Government 10 year bond rate unchanged at 4.73% but down -3 bps for the week.
The price of gold will start today down -US$21 at US$4747/oz, but up +US$71 for the week. Silver is down -US$1 at US$75.50/oz.
American oil prices are holding at just on US$96.50/bbl, while the international Brent price is still at just on US$95/bbl. A week ago these prices were US$110.50 and US$109/bbl respectively.
The Kiwi dollar is down -10 bps from Saturday at this time at 58.4 USc. But that is a +150 bps appreciation (+2.8%) from this time last week. Against the Aussie we are up +10 bps to 82.7 AUc. Against the euro we are little-changed at just on 49.8 euro cents. That all means our TWI-5 starts today down -10 bps from Saturday at just on 61.9, or up +110 bps (+2.0%) for the week
The bitcoin price starts today at US$71,192 and down -2.4% from this time Saturday. Volatility over the past 24 hours has been moderate at just on +/- 2.3%.
[There will be no video version today.]
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17 Comments
Juvenile in a way, but inevitable too.
I was thinking about thinking over the weekend - how confirmation bias stops folk peeling back all the layers, all that. Critical thinking, Systems thinking, lateral thinking and logic are all useful skills.
Applied to the Hormuz onion, too many people are chasing the remnant half of a one-off global stock of high-quality energy. They are doing so with a flawed appreciation of time - if we burn it all we wouldn't survive the climate. But in the frenzy to get it, nations are behaving like individuals queued at a petrol station, using more while they're idling/warring respectively. Another layer is the politics; the Brits were the first into Persia after oil, the locals kicked them out, the CIA organised a coup (their trademark - think Maidan) the locals kicked them out, the US needs to replace fracking near-term...
Atop that, is the yin/yang problem; modernity was built using and made of, fossil energy. Non-fossil sources and systems exist and are being scaled, but they are being added, they aren't displacing FF. And we'd have to replace the whole collection, within the last doubling-time, using a flawed accounting system (fiat money). And they simply don't do as much. Simply put, the continuance of economic growth FROM THIS LEVEL is impossible ex fossil energy. Which is leaving us. Which means we will end up on 'renewables'. Which means a (very) different societal construct.
Those attempting growth, cannot do it on 'renewables', which is why a vote for growth produces a great leap backwards - as here and as around the First World. So we were always going to see competition over 'what's left'. That brings in hegemonies, and we are witnessing the do-or-die inevitability from the biggest of them all - as I've often said, Trump is a symptom, not a cause.
Regardless of who 'wins' in terms of oil, petro-currency and hegemony, we are about to see supply-reduction, price increases and more stress on our country. My pick is that this is the inflection - the big one - if not it's Act One.
Yes, you will recall that I suggested militarily blocking Iranian favoured ships made sense.
The thing is Trump, and therefore America, especially the military, are making the same error they made in Viet Nam. They think their 'enemy' thinks, rationalises and acts the same way they do. Not the way it works. Sun Tzu foretells the outcome here;“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” Trump, and perhaps the sycophants he's installed in the military command, are in significant denial about themselves, let alone the Iranians. This is going to get very ugly.
Echoes of Kissinger viz, “The guerrilla wins if he does not lose. The conventional army loses if it does not win.” A priority was stated as removing Iran’s nuclear weapon ability and that depended on a regime change. Instead there has been a change to the regime in the form of much greater power being assumed by the Republican Guard. As it stands Iran can rebuild and Iran can resume where it left off regardless of whatever they may or not end up signing.
Echoes without saying?
Sun Tzu is so last epoch. We now live in the age of Don Tzu.
So the USA now want to help the Iranians to completely stopper the strait.
Better than a Monty Python script. That is, if wasn't killing people.
(but perhaps by lunchtime they will have changed their minds.)
The Hormuz disruption is a short‑run logistics shock, not evidence that this is going to turn into the "big one" . At this point in history It's more likely energy supplies will be made more resilient because of this shock.
how confirmation bias stops folk peeling back all the layers
You have a fairly one eyed belief yourself
PDK keeps returning to a single, all‑encompassing narrative, on every thread it seems, that isn’t actually supported by data or even logic. If his thesis was submitted to a scientific journal it would be rejected. That's okay and interesting, we need outliers, but constant repetition wont make it so. It reminds me of end times religious nonsense where every major geo-political event is presented as evidence of biblical prophecy.
There are something like 140–175 empty crude tankers currently inbound to the United States. This is 60% more than in normal times. US refineries are in for a bonanza but this is also good test for the global system of oil supply. It's almost like the fuel version of a Berlin airlift.
Other regions are increasing exports as well although nowhere near as much as the US. This does highlight the continuing and persistent industrial might of the US. A lesson for countries to let the oil companies, the experts, manage things and keep their profits rather than meddle with production for socialist/political reasons.
This also means NZ is unlikely to run out of fuel, however we will face sharply increased prices.
Good point. And also I'm sure the order books of the American military industrial complex are full for many years to come. All the countries in the Gulf and elsewhere will be frantically purchasing the best weapons they can.
"...This also means NZ is unlikely to run out of fuel,"
Have we done a deal to get some of those US oil exports (that havnt been increased)? Nicola will be making an announcement any minute now.
I wouldn't be surprised although the system works as a market.
There are something like 140–175 empty crude tankers currently inbound to the United States. This is 60% more than in normal times. US refineries are in for a bonanza but this is also good test for the global system of oil supply. It's almost like the fuel version of a Berlin airlift.
Any financial gain for the Whitehouse occupiers in this? Probably.
the US President has made ever more threats against Iran, now saying the US will blockade the Straits of Hormuz against friend and foe.
$5/litre anyone?
The mad dog Israelis have made themselves into the real problem.
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