Here's our summary of key economic events over the weekend that affect New Zealand with news financial market sentiment deteriorated sharply at the end of trading last week as war-driven inflation is being priced in more aggressively, because it will persist longer than earlier assumptions. Markets are shifting to a much more sceptical position on Trump policies & actions given the extended track record of failures.
Higher long rates tend to feed on themselves when stress (like the Iran War) is elevated. And the US Fed is in no position to cut rates; in fact markets are guessing the chances of a hike are rising. These two pressures are pushing rates up.
But first in the week ahead, locally we will be following updated population data this week, producer prices, credit card data, household and business expectations survey results, and retail sales, all for March.
In Australia, the key data coming is for their April labour market, along with a key consumer sentiment survey and a key inflation expectations survey.
Globally, apart from watching what is or isn't going on in the Persian Gulf, we will be tracking how bond markets are reacting to the Trump turmoil, US regional surveys and PMIs, and the UofM sentiment survey update.
From China, there will be a raft of key data updates this coming week. There will be key industrial data out in Japan. And there will be PMI data out for India too. Indonesia’s central bank will announce its latest monetary policy decision late Wednesday night.
Over the weekend, analysts have been able to assess the results from the China-US summit. Those haven't been very positive. And it says a lot that Russian president Putin is in Beijing this week.
Essentially the takeaways from the Beijing summit meetings between Xi and Trump have been underwhelming. It is notable that the Chinese have made no mention of the trade claims by the US, although there will be some. And they will be hoping Trump throws Taiwan under the bus after they stroked his ego.
Meanwhile, the 'negotiations' between the US and Iran seem to have stalled completely. So no resolution to the Strait of Hormuz blockades. Oil prices are settling in, even rising, on fears of a much broader energy crisis. It has now been two months since Trump said the US would provide transit insurance for the Strait of Hormuz crossing. So far it has done no deals; zero.
In the US, April industrial production jumped +0.7% from March to be +1.4% higher than year ago levels, and much more than expected. But it is all "business equipment" (read: AI data centers). This will be 'good' if it generates lasting increased productivity, but the rest of their factory sector is going backwards, even with 'tariff protections'. Consumer goods manufacturing shrank in April (-0.2%) from a year ago, construction stalled in April.
In the New York region, there is a scramble to stockpile ahead for fast-rising cost increases. Business activity grew strongly there in May. US stockpiling may end up giving their Q2-2026 economic activity data an unexpected boost for the quarter.
In Canada, housing starts jumped an impressive +17% in April from March to an annualised 279,300 units in April from the previous month, well above market forecasts of 240,000 units. But it is just back to year-ago levels (281,800).
In Japan, machine tool orders surged +45% in April from a year ago, far exceeding market expectations. It maintains the much higher level it reached in March which was an all-time record, and by quite a margin. Both domestic and foreign orders leapt the at the same pace.
Japan’s producer prices rose +4.9% in April from a year ago, a surge from an upwardly revised +2.9% increase in March. That is an all-time high in a record that stretches back to 1960. Markets had expected a +3% rise. The usual suspects were the cause.
Indian exports rose sharply in April, and were near their record high levels in March 2025. They had very good increases in both goods and service exports. Imports rose fast too, probably related to the rising cost of oil. Overall, their trade deficit shrank slightly in the month.
The Russian economy is contracting, again. It is giving all the signs it is exhausted by its war on Ukraine, and this is despite its higher oil revenues. Manpower is a serious and probably unsolvable issue now that they have suffered excessive battlefield deaths.
The UST 10yr yield is now just on 4.60%, unchanged from this time Saturday. For the week this is a +24 bps jump, after one of the largest one-day jumps for quite some time on Friday. It is back to early 2024 levels. The key 2-10 yield curve is now at +51 bps (-1 bp). Their 1-5 curve is now at +44 bps (unchanged) and the 3 mth-10yr curve is at +93 bps (-1 bp). The China 10 year bond rate is now at 1.77%, up +2 bps from Saturday and for the week. The Japanese 10 year bond yield is down -1 bp at 2.71% and still a 30 year high. The Australian 10 year bond yield starts today at 5.08%, down -3 bps from Saturday, up +11 bps for the week. The NZ Government 10 year bond rate is unchanged at 4.78%, up +6 bps for the week.
The price of gold will start today down -US$15 at US$4539/oz and down -US$184 for the week. Silver is down -US$1.50 at just over US$75.50/oz, down -US$5 for the week.
American oil prices have stayed up at just over US$105.50/bbl, while the international Brent price is down -50 USc at just over US$109/bbl. A week ago these prices were US$99.50/bbl and US$101/bbl respectively.
The Kiwi dollar is little-changed from Saturday at this time at 58.4 USc, down -120 bps for the week. Against the Aussie we are also unchanged at 81.7 AUc. Against the euro we are down -10 bps at just under 50.2 euro cents. That all means our TWI-5 starts today at just under 61.9 which is unchanged from yesterday, down -90 bps for the week to its lowest since early April.
The bitcoin price starts today at US$78,024 and down -1.5% from this time Saturday, down -4.2% from a week ago. Volatility over the past 24 hours has been low at just under +/- 0.6%.
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36 Comments
US30Y. 5.122%
Thats all the morning briefing you need
The big takeaway from Trump/Xi was the mention of Thucydides Trap. From an astute operator to a bumbling fool.
Also: The “global Goliath” and risk of worldwide societal collapse - YouTube
Great journalism. A rare thing.
The biggest concern there is the US's generals have already warned their forces don't have the depth or capacity to defeat China in a sustained war. The perspective within the US military seems to be that China is at least matching the US technologically, and beyond that, out numbers the US significantly.
i would also suggest the US administration is shooting itself in the foot by forcing competent leaders out of their jobs, because that competence also lead them to challenge the narrative coming from the White House. Promoting sycophants into the significant leadership positions of the military has never lead to good outcomes.
Ukraine and Iran as large territories are now well demonstrating that the traditional overturn of a regime by invasion is now pretty much unviable. Certainly the big three, USA, Russia & China are not going to be overrun by any invading army even without the nuke deterrent. Therefore if there is going to be a an actual slugging match it is going to be over or in a third party region.
Against China it'll be in the western Pacific and South China Sea. It'll be a naval war if it doesn't escalate to ICBMs. And we'll all be lucky if it doesn't escalate to nukes to eliminate carrier task groups.
If naval, it will be dominated by submarine dones, not carriers. This is an area the US is miles ahead. Carriers will be utilized for airborne stand off missile deployment and defense of land troops (if they are deployed).
If quality semiconductor manufacturering existed elsewhere the US wouldn't care about Taiwan.
Fab is being setup state side be a few years At that point Taiwan may well revert to Chinese hands like HK did… or more violently
Key U.S. Fabrication Facilities:
- TSMC Arizona (Phoenix, AZ): TSMC is investing $165 billion to build six fabs. The first operational fab successfully mass-produces advanced 4-nanometer chips (often used by major clients like Apple). Subsequent fabs are targeting 3nm, 2nm, and A16 processes.
- Intel Ocotillo Campus (Chandler, AZ): Intel is investing over $32 billion to modernize and build two new leading-edge chip factories, reinforcing its position as a domestic developer and foundry provider.
- Other Notable Players: Companies like Micron (Boise, Idaho), Texas Instruments (Texas), and GlobalFoundries (Malta, New York) are actively expanding
They do have depth and capacity. What they don't have is a culture of using that depth and capacity to in anything other than full automatic rate of fire. Tends to deplete resources rather fast but has always been their way.
“We’re quite good at cooperating, the default condition is democracy”
The problem with assuming democracy is our default state is that it ignores how easily democratic institutions can be hijacked from the top down.
Countries like Australia and the UK have essentially become testing grounds for the technocratic policies aligned with the WEF globalist agenda. Digital IDs, CBDCs, vaccine mandates, phase out of physical cash, financial de-banking all implemented through bureaucratic decree rather than explicit voter mandates.
When the public never actually gets a vote on the most consequential changes to their civil liberties, democracy isn’t functioning, but rather it’s being managed.
Good post. Even in NZ democracy is being insidiously stolen from the top down. Four year term is the latest attack.
Absolutely agree - I was on about the journalism rather than the hopium in the last chapter. Survival outflanks democracy every time.
But after the (inevitable) collapse/reduction from this over-shot rate of consumption, there will need to be societal formats which maintain the life-supporting parameters (water-quality, soil health, biodiversity) as a priority. Elitism and neoliberalism and libertarianism and indeed capitalism, have proven they cannot do that job.
Which leaves egalitarian formats of some kind - or extinction via failure to adapt.
Growthism is always guaranteed to result in poorer and ultimately totalitarian living conditions for the proletariat. As resources and space dwindle, and piles of trash mount, everything becomes top down management.
The UK provides an example, in modern times of you like, of the great reduction of an empire, without actually having been defeated in war or invaded.
It grew to be the biggest, on coal. Then progressively ran out of grunt.
The US took over "floating to victory on a sea of oil". Now it's down to fracking a few sweet-spots.
China, in grunt terms, faces a different paradigm; a global depletion of energy, not much at home, and therefore a 'relativity/continuance' issue rather than an 'even bigger than' one. She still imports energy in all forms, as insatiably as possible - and 'renewable' is being added, not used to substitute.
Asymmetric war just requires too much energy, to parry too little. The last scenes of Captain Phillips sun it all up. I suspect we will see no major hegemonies by 2050-ish; nobody will have the grunt to dominate at that scale.
The UK kind of has been invaded. Sort of a quiet "reverse colonisation". Fair enough you might say, seeing as they colonised and asset stripped half the planet at their peak. The result? A nation that can't feed itself, power itself and uses it's rivers as open sewers. In other words, what our dear leader's plan for us.
The last 'doubling-time' beats them all.
It ends with humans standing shoulder-to-shoulder coast-to-coast, nothing left of anything else either over or under ground - and a pile of waste (if you could see for all the legs, what they're standing in.
One doubling before that, there were alternate spaces... the one before that, we are attempting now.
Madness
It's like you're stuck in the fifties. You don't understand how "exponential growth" works in the real world.
Enlighten us Zach? How does ""exponential growth" work in the real world"?
And which "real world" are we in cause some seem to inhabit an entirely different one.
You mean, the difference between the less-than-3 billion alive when I was born, all consuming less per head
versus the 8.2 billion here today, consuming and discarding tat like there's no tomorrow?
On a finite planet?
Oh, yes I do.
Based on your post, and historical posts,I doubt you understand the meaning of exponential given your lens seems to be limited to solely the foreseeable lifespan of yourself, and not any consequences beyond this given you would not have to live them through.
Don't know if Jack Tame qualifies as a "great journalist". I remember when he was Mike the Oracle Hoskings protege on Seven Sharp years ago (or whatever it was named at the time) and he randomly blerted out "there is no climate change". After that brief expose of the inner workings of his psyche, I regard him as just another soulless ego creation of the insignificant NZ media fishbowl. His guest OTOH was excellent.
If he had wished, he could have shut it down, or ridiculed. He did neither.
We have to allow folk to change - or what's a heaven for (to mangle Browning).
Edit - I think it is important to differentiate between the effort and the persona. I posited that this was great journalism - it drew out the subject and allowed/facilitated the information-flow. I have no knowledge of the person, his attitudes past or present, but wasn't commenting on those.
Not denying it was a good interview. When the issue of wealth capping arose, young Jack was pretty quick with his "the wealthy are the innovators and provide the jobs". I get the impression he was speaking from the heart there.
When you're on half a million a year, perspective can be distorted a little. It's easy to develop a superiority entitlement complex. Seen it with the likes of Sean Plunket, Peter Williams etc. Becoming a public persona doesn't automatically make anyone an expert in anything, except delivery. And that's dangerous, exempli gratia, the US.
I’m with you Palmtree. We see this pattern over and over - the young innocent journalist capturing the public only to slowly but eventually merge with the establishment they once seemed to objectively cover.
It’s almost like they are joining some club…
This is the classic institutional capture loop we see across the globe, through history, over and over again. The trick works because human psychology is wired to look for champions.
As a journalist he is still in short pants. Someone up there must like him though. He scored a junket in the USA, galavanted round like a jet setter, and his reportage was appallingly naive. The dock warehouse owner in Hawaii that evicted him and his camera crew was the best feature he managed to produce.
They all make mistakes, all learn. Hersh got trapped in his time, others have gotten it right but for the wrong reasons. Few put it all together; Drew Pearson is a useful study of one who did but then stepped into 'agenda' a notch too far. Rachel Donald looked like bucking the trend for a while (Planet Critical) but seems to have gotten sidetracked;
What's your criticism of Rachel Donald PDK? Personally I find some interviews very good, some of the best I've listened to, and some not interesting. The "matriarchy is the answer" ones I usually skip. She's been going a while, perhaps she's just running out of material?
I'm completely with you - but noticed it is sliding into the matriarchy corner, with time.
Rates rising...everywhere. Over use of specu leverage (debt without supporting income) is about reach crush depth. Private specu equity globally is already showing this. Going by the size of unpaid IRD bills, its happening for many in little ol NZ as well.
The music has stopped. Those standing holding the debt without a next bag holder to flip to are indeed... the last sucker.
IRD should publish the defaulters, so the rest of us can avoid exposure to them.
🍿
I have a slightly different view. I agree that worldwide, higher inflation and higher interest rates are on their way. Here's where I took a different view: I recently sold a business, the proceeds of which would have allowed me to fully repay the only loan I have. After careful consideration, I decided NOT to repay that loan, because I expect real inflation to eat away at my loan at a rate of at least 5-10% per annum, which is lower than the interest rate I'm paying for it (4.49%).
I'm happy to hear counter points.
You will be paying your loan out of after tax income so add on your marginal tax rate for a more accurate comparison. Repaying the loan is also a guaranteed "return", unlike inflation & investments.
It could still be a worthwhile call however would require constant monitoring vs soundly sleeping.
Guess it depends on the nature of that inflation? Whether it's avocados, or property? If the inflation is on consumables rather than assets, are you really gaining anything? Real inflation is also going to eat your nest egg.
It also depends on how you plan to invest the proceeds. Will your after-tax return beat the 4.49% (plus marginal tax) of the loan?
Agree, inflation has no real effect as it eats away at both the loan and the investment. The investment needs to make 4.49% or more to come out better off. With almost every investment looking frothy at the moment IMO, I think there is a pretty big risk. Although fortune tends to follow the brave.
Thanks for all the replies, much appreciated!
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