Here's our summary of key economic events overnight that affect New Zealand with news the IMF has downgraded its global forecasts and said the world's economy is drifting into unpalatable conditions. A third recession since 2000 is possible, they say. The Strait of Hormuz remains closed by the actions of both combatants. "Talks" are supposedly going on which is exciting equity markets. But bond and currency markets are bracing for stagflation.
But first up today, the overnight dairy Pulse auction brought the expected lower prices, with WMP down -1.8% from the prior week's full auction event, SMP down -1.9%, and butter down -3.7%. These shifts are in USD, and with the rising NZD they will be deeper. Butter in fact is now at its lowest level since January 2024, a 27 month low.
In the US, their labour market does not appear to be cracking according to the high-frequency weekly data from the ADP Pulse tracking. US private employers added +39,250 jobs per week in March. This is a sharp increase from the +26,000 weekly jobs created in the prior period and is the fourth consecutive week of improvement in hiring.
The March NFIB Small Business Optimism Index fell to its lowest since April 2025 and this new level is lower than the lower level expected. They said "the dramatic spike in oil prices has spooked consumers and owners alike. Small business owners are having to absorb those higher input costs and pass them along to their customers”. Their uncertainty measure spiked.
Meanwhile US producer prices rose less than the expected +4.6% jump in March, 'only' rising +4.0% according to official data. Still, that is the fastest rise since February 2023.
A good indicator of how far and how fast the US economy is retreating can se seen in the Atlanta Fed's GDPNow tracking of high-frequency data. The latest data has their expansion below the latest IMF assumptions.
China's March exports rose only a modest +2.5% from a year earlier, whereas their imports rose a startling +27.8%. Despite that, they has so much headroom they still managed to record a trade surplus of +¥355 bln / US$51 bln in March, although about half of what was anticipated.
Yesterday, Singapore tightened their monetary policy in a new effort to ensure inflation does not ruin their economy.
In Australia, consumer sentiment has dived lower. The Westpac-Melbourne Institute Consumer Sentiment Index fell heavily in April, falling by a level only exceeded in the depth of the pandemic.
Australian business confidence has plunged dramatically as well. It fell -29 index points, the second largest monthly fall in the survey’s history – with falls of this magnitude previously only seen in the GFC and the onset of the pandemic. Current conditions changed little, but the sentiment outlook has crashed pretty much in the same way consumer sentiment has. Forward orders fell. Costs rose +3.0% in the quarter, more than twice as fast as prices charged (+1.1%).
So it will be little surprise to know that the RBA is worried, really worried. Australia faces a difficult macro backdrop. In a fireside chat, RBA Deputy Governor Andrew Hauser warned of the “nightmare” scenario where inflation accelerates even as growth weakens, complicating policy choices. He was speaking at a New York event.
We all understand that the US abandoning its strategic role in the global economy means new alliances and connections will grow to replace them. But not all of those will be welcome. We should note that the Indonesian President is in Moscow, seeking a realignment with them. It is a balance from recent 'deals' with the US. The US Administration looks just like the Putin Administration to Jakarta.
The IMF now says global inflation is expected to average 4.4% in 2026, up from their projected 3.8% in their January review. They also downgraded their global growth outlook, unsurprising given the mess we are all working through.
The UST 10yr yield is now just on 4.25%, down -5 bps from this time yesterday. The key 2-10 yield curve is flatter at +50 bps (-2 bps). Their 1-5 curve is also flatter at +18 bps (-5 bps) and the 3 mth-10yr curve is flatter at +58 bps (-7 bps). The China 10 year bond rate is now at 1.78%, down -3 bps. The Japanese 10 year bond yield is down -5 bps at 2.42%. The Australian 10 year bond yield starts today at 4.92%, down -7 bps from yesterday. The NZ Government 10 year bond rate down -9 bps at 4.70%.
Wall Street is firmer with the S&P500 up +1.0% in another relief rally. European markets rose similarly or more, except London which was up +0.2%. Tokyo rose the most, up +2.4% in its Tuesday trade. Hong Kong was up +0.8%, and Shanghai was up +1.0%. Singapore was rose +0.5%. The ASX200 also rose +0.5%. But the NZX50 ended pretty much unchanged and the weakest of the markets we follow.
The price of gold will start today up +US$98 at US$4836/oz. Silver is up +US$4 at US$77.50/oz.
American oil prices are down -US$7.50 at just on US$91.50/bbl, while the international Brent price is down -US$4.50, and now at US$94.50/bbl.
The Kiwi dollar is up +50 bps from yesterday at this time at 59.1 USc. Against the Aussie we are up +10 bps at 82.8 AUc. Against the euro we are up +10 bps at just on 50.1 euro cents. That all means our TWI-5 starts today up +40 bps from yesterday at just on 62.5.
The bitcoin price starts today at US$74,709 and up +3.4% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.8%.
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7 Comments
'The US Administration looks just like the Putin Administration to Jakarta.'
It's 90% Islamic - so at the moment, the US looks far more thuggy to them than Russia.
'We all understand that the US abandoning its strategic role in the global economy means new alliances and connections will grow to replace them'
Yes. Belt and Road instead of the Monroe Doctrine (which inevitably became global). The biggest hegemony is failing and Trump is both a symptom and an accelerant of that. Smaller nations have had enough; Spain is heading for the exit, Italy too and France won't be far behind - Turkey is gone already.
Xi Calls for Tighter Ties to Spain in Face of Global ‘Chaos’
Indonesia has an interesting history. Dutch colonialism intertwined with it's Asian heritages and then thrown in religion. Interestingly the Dutch colonial period seems to be viewed quite fondly by most, although they fought for independence following WW2.
More open minded that a lot would expect, I'd suggest.
I do wonder about China's hidden hand though. Trump on the other hand is handing them a golden opportunity to reshape the world peacefully and hobbling the US's diplomatic influence. what price will the small and middle nations pay though?
So far, so agreed.
What amazes me, is the silence as to what the implications for NZ are.
Think of all the 'investments' made in this country, which are dependent on the USD maintaining its level of respect? Kiwisaver obviously, but the likes of ACC, and who knows how much corporate/private?
The small and middle are next in line to get s----ed after the Third World. Hegemony works like that.
All of this is sitting atop something else nobody is addressing; modernity (in whatever form, US or China dominated) cannot afford the non-ME remaining energy options. Put another way: who gets ME oil, wins (fracking being quite short-term, remember).
Losing the Iran War May Be the Best Outcome for the WorldOur Finite World
'In physics terms, an economy is a dissipative structure. In order to stay away from a dead state (collapse), it needs to “dissipate” energy of the right kinds. A human is also a dissipative structure. We dissipate food to stay away from a dead state.'
I had to laugh, reading the latter and thinking of the objurgate comments of the last few days hereabouts :) But that piece is one of the best all-in appraisals I've seen so far.
Energy is being converted everywhere all the time PDK. It is after all a natural process. Even the crude oil bubbling to the surface to form lakes in the ME evaporates under the heat of the sun. In itself it is not the end of the world, although ultimately the sun will use up all it's fuel and reach out to grab this planet.
The political silence is more politicians picking their battles with an eye to effects and future relationships than condoning or condemning another country's actions. Without alternatives for us China may not be all that friendly, no matter their apparent attitude today.
The Indonesian National Revolution 1945 - 1949 was quite remarkeable.
The Dutch lost approximately 5,500 killed and British forces lost 660 soldiers, mostly British Indians
It was particularly interesting as Japanese forces were used on the Allied side with a loss of around 1,000 killed. The British awarded some with medals for bravery.
It must have been quite disappointing for the Indonesians to have to endure this right after the end of WW2.
The British lured Japan into WW1 with the promise of the German enclave Tsingtao on the Chinese mainland. The German defenders put up stout resistance and the British used the Japanese to do most of the dirty work. So much so that during the victory parade the German prisoners turned their backs when the British troops marched past. Out of that Japan attained the foothold in China from which they launched their subsequent invasion and a whole string of Pacific Islands which they fortified to the great cost of the Allies in subduing them in WW2.
Lucky country might be about to get indigestion. 1% lending rates rise with an unemployment spike?
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