The Americans & Russians disrupt trade

Kia ora,

Welcome to Wednesday’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 the US is doubling its tariffs on Canadian steel and aluminium to 50% in a tantrum over Canadians asserting their independence. Wall Street reacted badly, dropping another -1% and taking the losses to -10% over the past four week, a drop in the market capitalisation of the S&P500 of about -US$2.5 tln. That is just the start of course because there are thousands of other companies on a range of other indexes like the Dow (down -1.4% today) and the Nasdaq (down -0.6% today). Bad public policy is expensive. There will be echoes in KiwiSaver accounts, some loud.

Financial markets are signaling a US recession. Apparently Warren Buffett expected a Trump recession and has adjusted his holdings for that.

Meanwhile, the US Redbook retail index was +5.7% higher last week than the same week a year ago, an easing from th +6.6% rate the prior week.

January job openings is the US rose on strong demand in the retail sector. They rose by +232,000 to 7.74 mln, up from a revised 7.51 mln in December and above the market expectation of 7.63 mln. Quits rose too in January. January layoff levels in the government sector were particularly low, but this is expected to change over the next few months.

There was a still well-supported US Treasury 3 year bond action earlier today which ended with a median yield of 3.85%. But this was sharply lower than the prior equivalent event a month ago of 4.26%.

In Japan, the January household spending survey released yesterday delivered a large shock, with spending falling the most in one month since 2021. That dragged their year-on-year gain down to just +0.8% from +2.7% in December. No-one saw this coming, although it has to be said there have been other December/January shocks in the past and all followed by a recovery in February. All the same, perhaps Japanese households are suddenly turning fearful about what lies ahead, with reason this time.

In China, there is massive confusion over its trade rail link to Europe, and alternative to sea freight. The Russians are seizing the cargoes as they enter their territory. This is no minor trade disruption.

The Australian consumer sentiment survey by Westpac/Melbourne Institute reported a solid improvement in March, and taking it to its highest level since May 2022.

Meanwhile the NAB business sentiment survey for Australia reversed in February in their report released today. They said business conditions rose marginally in February, with small lifts in both trading conditions and profitability. However, there was a notable fall in business confidence which fell -6 points, largely offsetting the improvement seen in January.

The total value of housing in Australia owned by households reached AU$10.6 tln as at December 2024, up +4.4% from a year ago. That is a AU$448 bln rise in a year, but far less than the +8.1% rise in the year to December 2023, or +AU$760 bln. If we included the dwelling stock owned by others, the rise to December 2024 was also up +4.4%, and that adds another AU$440 bln, taking the total value of Aussie housing stock to AU$11 tln. Interestingly, all the 2024 rise happened in Q1-2024 - total values were flat for the rest of the year even after their new builds were added.

According to a global air quality review of 2024, only 7 countries met WHO air quality standards. That included New Zealand, Australia, Iceland and Estonia, plus three Caribbean islands. Globally, this is as bad as its ever been. And now that the US has pulled funding for this monitoring, we will only get results in future for first world countries that fund their own. (The US funding for its own monitoring has been cancelled too.)

And finally, we should probably note that 56,000 Greenland voters are voting in a national MMP election. Results will be known tomorrow.

The UST 10yr yield is now at 4.26%, up +3 bps from yesterday at this time.

The price of gold will start today at just over US$2916/oz and up +US$17 from yesterday.

Oil prices are holding unchanged 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 57.1 USc and down -10 bps from yesterday. Against the Aussie however we are unchanged at 90.8 AUc. Against the euro we are down -50 bps at 52.3 euro cents. That all means our TWI-5 starts today just over 66.3, and down -30 bps from yesterday.

The bitcoin price started today at US$81,309 and recovering +3.4% from this time yesterday. Volatility over the past 24 hours has stayed 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.