Wall Street votes, and it isn't for Trump

Kia ora,

Welcome to Tuesday’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.

And today we lead with news Wall Street has taken sudden fright on the growing realisation of what Trump has wrought for them. It's risk-off in a big way with equities falling sharply and bond yields retreating. Normally on a risk-off phase the USD rises, but this time it's actually softer. Putin's puppet isn't good for business.

Probably not helping is that one-year US inflation expectations are rising, the first rise in four months, and to its highest since May 2024. The broader survey reported rising pessimism. Fear of job loss jumped sharply. The worries about missing a debt payment over the next three months jumped to 14.6%, the highest level since April 2020. The increase was driven by those without a college degree and largest for those under age 40, the demographic that drove the election result.

And its not just consumers. American farmers are recoiling at the impact on them and their markets. It is likely that farm spending and investment decisions will take a long holiday until most USDA and USAID programs are restored. Reports and data from those agencies are likely to become very unreliable now that DOGE-aligned managers are now in charge. Farmers are voting with their checkbooks and it is going to be tough for the wider agribusiness sector.

And it is probably worth noting the the Tesla share price is down another -13% so far today. That is a now a -53% drop since the US election.

Across the Pacific, there were a set of indicators out for Japan overnight. Their leading economic indicators index, which gauges the economic outlook for the coming months based on data such as job offers and consumer sentiment, edged up to its highest reading since October. However, that was slightly less than expected. On the other hand, annual household spending rose for the first time in five months, its fastest growth since August 2022. However consumer sentiment slipped.

China said it will impose a 100% tariff on imports of certain Canadian agricultural products, along with a 25% levy on seafood and pork. They will come into effect in ten days in response to Ottawa's trade measures. Canada had previously imposed a 100% tariff on Chinese-made electric vehicles starting October 1 last year, aligning with similar actions by the US and EU over concerns of unfair competition. Additionally, Canada implemented a 25% tariff on Chinese steel and aluminium imports, effective since October 15 last year. They are trying not to be gamed in the manoeuvring between the US and China.

And you may be interested to know that Beijing authorities have launched a trial of street patrols by robot dogs. Given their pervasive 'social security' system tied into the extensive facial recognition systems, this seems a particularly dystopian development.

In Europe, German industrial production rose in January from December and by more than expected. That has helped them eat into their year-on-year decline, taking it to its smallest level since mid-2023.

The UST 10yr yield is now at 4.23%, down -7 bps from yesterday at this time. 

The price of gold will start today at just over US$2898/oz and down -US$12 from yesterday.

Oil prices are down -50 USc at just on US$66.50/bbl in the US and the international Brent price is down -US$1 at just over US$69.50/bbl. 

The Kiwi dollar is now at 57.2 USc and up +10 bps from yesterday. Against the Aussie however we are up +30 bps at 90.8 AUc. Against the euro we are up +10 bps at 52.8 euro cents. That all means our TWI-5 starts today just over 66.5, and up +10 bps from yesterday.

The bitcoin price started today at US$78,624 and down another large net -4.8% from this time yesterday. That means it is given up all its gains after the US election in November, and more. Trump seems to have 'lost' the crypto tech-bros too. Volatility over the past 24 hours has been high at +/- 3.4%.

You can find links to the articles mentioned today in our show notes.

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

Kia ora. I'm David Chaston. And we will do this again tomorrow.