Trump's Epstein-distraction projects unnerve markets

Kia ora,

Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the international edition from Interest.co.nz.

Today we lead with news it is now clear that China has been the big winner in Trump's trade war. Geopolitical risks are front of mind in financial markets today.

But first in the US, eyes were on a possible decision on the Trump tariff-taxes by the US Supreme Court today. But it did not come. Trump himself has been exerting maximum pressure on the justices, most of who he appointed. His problem is that he appointed strict legal constructionists and they were very unfriendly to his position during the argument stage. However, he expects 'loyalty' over "the law" and with the pressure he may get it. Today's deferral of a decision is a 'win' for him.

US mortgage applications leaped +28% last week from the prior week, sharply rebounding from three consecutive periods of declines. The trigger seems to be a fall in benchmark home loan rates, although to be fair they only shifted from 6.25% to 6.18%. But that seems to have been enough to have motivated borrowers.

American producer prices were up +3.0% in November from a year ago with core PPI up +3.5%. These changes are very little different to what was recorded for them one year ago.

US retail sales were up +1.9% in November from a year ago (from US$723 bln in November 2024 to US$737 bln in this latest data). But for some reason the official stats agency is claiming it is up +3.3%. Hard to fathom - their 'seasonal adjustment' seems to have gone wonky.

Meanwhile, American existing home sales recovered in December, and that left them +1.4% higher than year-ago levels. Their high levels of unsold inventory is starting to clear now.

Across the Pacific, China’s exports rose by +6.6% in December from a year ago to a record US$358 bln and much better than the expected +3% rise. These were up +5.9% in November and the December gain was the strongest growth since September, driven by a surge in exports to non-US markets. That surge capped their year with a trade surplus of much more than expected, a massive +US$1.19 tln. Clearly US tariffs haven't hurt China, although Americans are paying these taxes.

China’s vehicle sales grew +9.4% in 2025 from 2024 to a record high of 34.4 mln units with new energy vehicle (NEV) sales surging 28%. Although this was a faster pace of overall expansion, their December monthly sales actually fell -7.2% from 2024 levels. In fact, this industry is looking at 2026 with trepidation. The 2025 records may be the high water mark.

In Japan, machine tool orders rose +10.6% in December their best level since the pandemic, and to levels they had back in the heady pre-pandemic levels. Strong foreign demand is a feature

In South Korea, some surprisingly negative jobs data was released yesterday. Their jobless rate jumped to 4.1% in December from 2.7% in November to its highest level in nearly five years - in fact back to pre-pandemic levels. The number of unemployed people rose to 1.22 mln, up +103,000 or up +9.2% year-on-year. It is such an unusual and unexpected result, it may be a rogue survey.

In an updated review, the World Bank says global growth will come in at +2.7% in 2026, up marginally from +2.6% in its June forecast. It predicts US GDP growth will reach +2.2% in 2026, compared with +2.1% in 2025. For China, they see +4.9% and +4.4% for the same two years. For Japan it is +1.3% and 0.8%. For the EU, +1.4% and +0.9%. For India it is +7.2% and +6.5%. Neither Australia nor New Zealand feature in these reviews.

The UST 10yr yield is now just on 4.14%, down -3 bps from this time yesterday. 

The price of gold will start today at US$4613/oz, and up +US$3 from yesterday, essentially holding Tuesday's big run-up on the geopolitical risks. Silver is still rising quickly, now almost US$91.50/oz, up +US$4.50/oz. Copper has hit a new record high.

American oil prices are little-changed from yesterday at just over US$61.50/bbl, while the international Brent price is now at US$66/bbl.

The Kiwi dollar is up a bit less than +10 bps from yesterday, now at just under 57.5 USc. Against the Aussie we are up +10 bps at 86.1 AUc. Against the euro we are unchanged at just on 49.3 euro cents. That all means our TWI-5 starts today just under 61.6, and little-changed from yesterday.

The bitcoin price starts today at US$97,434 and up +4.2% from this time yesterday. Volatility over the past 24 hours has again been moderate, also at just on +/- 2.2%.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston and we’ll do this again tomorrow.