Bond yields stepped lower and Brent crude fell after US President Donald Trump made clear he wants lower interest rates and cheaper oil.
The new US president outlined his message in a virtual presentation to the World Economic Forum in Davos, saying he wants Saudi Arabia and OPEC to intervene to bring out the price of oil and that he would demand interest rates to drop.
“Trump showed off his credentials as a low interest rates guy saying ‘I’ll demand that interest rates drop immediately. And likewise, they should be dropping all over the world. Interest rates should follow us all over’,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “His comments saw Treasury yields nudge down, a weaker US dollar and lower oil prices.”
The kiwi dollar rose to 56.84 US cents at 7am in Auckland from 56.65 cents yesterday, while Brent crude oil futures slipped 0.5% to US$76.61 a barrel.
The New Zealand dollar traded at 88.61 yen from 88.65 yen yesterday as investors prepare for the Bank of Japan’s policy review, which is expected to see the monetary authority hike its key rate a quarter-point to 0.5%, its highest level in 17 years.
BNZ’s Wong said that won’t do much to change the fact that “real interest rates remain deeply negative” for the world’s fourth-biggest economy.
Norway’s Norges Bank kept its key rate at 4.5%, signalling another cut is likely in March, while Turkey’s central bank cut its one-week repo rate to 45% from 47.5%, following on from a reduction last month from 50%.
America First
Trump also renewed his message on tariffs, saying the only way to avoid them is for companies to make their products in the US.
Aluminium maker Alcoa slipped 3% after warning prospective tariffs will hit its competitiveness, while reporting a return to profit in the December quarter.
Stock markets were broadly stronger on both sides of the Atlantic, with the S&P 500 nudging up 0.2% in afternoon trading, and near an all-time high, while benchmark indices were also stronger in the UK, Germany and France.
American Airlines dropped 7.3% after forecasting a softer profit for 2025, following a weaker outlook from UK airline Easyjet yesterday, although GE Aerospace gained after beating analysts’ expectations, and United Airlines and Delta Air Lines both predicted profits for the start of the year with strong demand for winter travel to Europe, recovering business travel and firmer domestic fares.
Swedish private equity firm EQT – which took Metlifecare private in 2020 – reported a surge in fund exits in 2024, and said private markets were returning to their long-term trajectory.
Australian futures are pointing to a 0.2% gain for the S&P/ASX 200, while New Zealand’s S&P/NZX 50 index rose yesterday, snapping a three-day decline.
Reporting by Paul McBeth. Image from Damian Markutt on Unsplash.