Here's our summary of key economic events overnight that affect New Zealand, with news that President Trump and his advisers have been raging about the role of the Fed boss. If he tries to remove him, expect a major market reaction, especially from the bond market. But so far it is all bluster.
It seems pretty clear that the US in now in a tariff-tax recession. Not only is the Atlanta Fed's GDPNow signaling a -2.2% economic contraction, the blue chip 'consensus' forecasts are now showing up with contraction forecasts too. And the spread into investors funds is happening rather quickly now. 90 of the top 100 best-performing exchange-traded funds of last year are down in 2025, with an average loss of -13%, according to Bloomberg Intelligence.
American new housing starts unexpectedly dropped -11.4% in March from February to an annualised rate of 1.324 mln, the lowest level in four months and virtually the same as the same month a year ago. But the expectation is that these will fall from here as new-builds get much more expensive from the tariff-tax effect.
US initial jobless claims came in at 220,000 last week, an increase although less of an increase than seasonal factors would have anticipated. But that puts them +5.1% higher than year-ago levels.
Diving even more is the Philly Fed's factory survey in the heartland Pennsylvania manufacturing rust belt. This is the icon region the tariff-taxes are supposed to save. But they aren't feeling any benefit - although hardly surprising to everyone but MAGA zealots. New orders dropped to pandemic levels, and apart from the pandemic, the overall sentiment has seen its fastest and steepest drop since these survey records started in the 1970s.
In Canada, they are a week away from their federal election (Monday, April 28, 2025 Canadian time). The polls are tightening but the incumbent Liberal Party still holds a comfortable lead over the Conservatives. Likewise in Australia, their federal election is in the week after that. Polls there also show a comfortable lead for the incumbent Labor Party. In both cases, the conservative forces are completely undermined by the toxic Trump effect.
Across the Pacific, Japanese CPI inflation stayed high in March although it did slip to 3.6%, and the second consecutive decrease and the lowest of 2025.
In China, foreign direct investment into the country is struggling again. In January it was down -14% from a year ago to ¥13.4 bln in the month. It rose to ¥16.6 bln in February. a +16% year-on-year gain. But it March it was only ¥6.9 bln, a -45% from from the same month a year ago. China prefers to look at this data "year-to-date" but that masks the current weakness.
Attention now turns to China's loan prime rates which get reviewed over the weekend. They haven't been changed since October and currently sit at record low levels. But this is one monetary policy level they are expected to pull at some point to bolster their 'growth'. They certainly don't have inflation pressures. And they are already ramping up government spending in a fiscal stimulus push.
In Europe, they are in a better position to cut interest rates because they also don't have the inflation pressures the US has. And they have. The European Central Bank cut its policy interest rates by -25 bps on Thursday, as expected, marking the sixth consecutive cut since June and bringing the key deposit rate down to 2.25%. They say their disinflation process is progressing well and they have now dropped previous references to a "restrictive" policy stance. They also say that their growth outlook has worsened from the escalating trade tensions.
When inflation is embedded, it is hard to stamp out. It certainly can't be done without pain (as all older readers will recall from the 1970-80 period). Turkey is relearning that lesson. It has tried arbitrarily cutting rates at the behest of their autocratic president, and that was a calamity. They raised them sharply in a reversal, then lost their nerve. And that didn't work out. Now they are raising them sharply again, newly resolved to fight a long-standing problem that is eating them from the inside. They have just hiked its benchmark rate by +350 bps to 46%. Given that inflation is running at 2.5% for each month, 38% for the year and rising, they probably have more rate hikes ahead.
On Thursday, Australia released its March labour market data and there was a good +33,000 rise in new jobs, bouncing back from the February drop. The March data saw the increase evenly split from an increase in full-time jobs and part-time jobs. Their jobless rate unchanged stayed at 4.2%. There are +308,000 more people employed in Australia over the past year, a rise of +2.2%. (New Zealand will release its March labour market data on May 7, 2025 and no-one really expects ours to be flash.)
Container freight rates slipped -3% last week to be -23% lower than year ago levels although still +54% higher than pre-pandemic levels five years ago. Bulk cargo rates are unchanged for the week at a fairly low level, and are -20% lower than this time last year.
The UST 10yr yield is now at 4.33%, up +6 bps from this time Thursday. The key 2-10 yield curve is little-changed at +53 bps. Their 1-5 curve is now inverted -5 bps. And their 3 mth-10yr curve is a positive +3 bps. The Australian 10 year bond yield starts today at 4.26% and down -5 bps from Thursday. The China 10 year bond rate is now at 1.65% and up +1 bp. The NZ Government 10 year bond rate is down -6 bps at 4.53%.
Wall Street ended its Thursday session up +0.1% on the S&P500. So far earnings results for Q1-2025 are not adversely affected even if prices have dropped -5.9% in the past month. European markets mostly -0.5% lower in theri Thursday trade. Tokyo ended Friday trade up +1.0%. Hong Kong was up +1.6%. Shanghai was down -0.1%. And Singapore gained +1.6%. The ASX200 ended its Thursday session up +0.8, and the NZX50 rose +0.4%.
The price of gold will start today at US$3327/oz, and down -US$10 from Thursday.
Oil prices have risen (in USD), up +US$2.50 from Thursday to be now just over US$64.50/bbl in the US and the international Brent price is now just on US$68/bbl.
The Aussie dollar is now at 65.4 USc, up +10 bps from Thursday at this time and still the highest since mid-December. Against the euro we down -30 bps from Thursday at just on 52.1 euro cents. Against the Yen we are up +10 bps at 145 JPY. Against the Kiwi we are down -20 bps at 107.2 NZc.
The bitcoin price starts today at US$84,605 and up +0.9% from this time Thursday. Volatility over the past 24 hours has again been low at +/- 0.5%.
[chart:daily exchange rates]