Dairy prices top out; US retail sales up; US PPI dips; Canada housing still frothy; China data positive; eyes on the Fed; UST 10yr 2.13%; gold and oil drop sharply; NZ$1 = 67.6 USc; TWI-5 = 73.2

Here's our summary of key economic events overnight with news that in an act of considerable bravery, the leaders of Poland, Czechia and Slovenia have gone to Kyiv for talks with the Ukrainian leader even as Russia is shelling the city.

Separately, this morning's dairy auction has brought a hesitation, albeit one at the top of the range. Overall prices fell -0.9% but stayed within touching distance of its record highs. The dominant WMP volumes fell the most, down -2.1%, but SMP rose +1.6%. This time the exchange rate provided little difference to these results. But these were results lower than market expectations where a further but smallish rise was anticipated.

However, this result is no different to commodity prices generally which made some reversals overnight. 

Last week US retail sales gains eased further on a year-on-year basis, but still with an outsized swelling even if it is on a weak year-ago base. The eating into those gains is now quite noticeable, but the rises are still well above inflation.

Also easing is the producer price pressure. US PPI not only came in lower than expected, the February growth levels were lower than January.

But producer price pressure is still very evident in regional factory surveys. The New York one still records high costs, but it also recorded a sharp decline in overall activity - and this was despite a rise in new orders. They may be finding it tougher now, but these firms are also quite optimistic about the immediate (6-month ahead) future.

And staying in the US, their peak securities regulator has launched a probe into how the Big Four accounting firms manage conflicts of interest caused by their consulting services.

In Canada, their housing market is still in full froth mode. Canadian home prices hit a new record in February as a dearth of properties for sale continued to fuel buyer competition.

China released some February data yesterday, and it was all much more positive than some (me included) were expecting - even if it is benchmarked against a weakish base. Retail sales were up +6.7% year-on-year when +3% was expected. Industrial production was up +7.5% on the same basis when +3.9% was expected. Electricity production was up +4.0%, so the activity they are reporting is probably 'real'. But they did report a rise in their jobless rate to 5.5%, a sharpish rise from 5.1% in January.

Of course, the widening pandemic lockdowns in March will take all the gloss off these February results. Equity markets are certain of that. The falls in Hong Kong and Shanghai equity markets are pretty significant now. 'Bloodbath' is a word being used as investors bail out.

And China’s central bank unexpectedly kept all of its policy rates unchanged late yesterday, though many believe the authorities will resume monetary easing soon to support the slowing economy.

In fact, the yuan has devalued sharply overnight. And that is mirrored by a sharpish fall for the Japanese yen as well.

Before the Ukraine war blew up in their faces, EU industrial production was stable in January.

But German firms have reported a massive mood change since. The war in Ukraine and the sanctions against Russia are significantly dampening the economic outlook for Germany. The collapsing economic expectations are accompanied by an extreme rise in inflation expectations. They are expecting stagflation in the coming months.

Later today, Russia is due to make a relatively modest interest payment on some bond debt. But that is the start of a high-risk period where default prospects on Russian debt will grow. There is some contagion risk involved, and although most expect it to be contained, there is a noticeable shift in bond market sentiment to holding cash at present.

Back in the US, the Federal Reserve is meeting and widely expected to raise interest rates to lean in against global inflation. But the return to normal they had hoped to see remains elusive as the global security situation goes bad.

The UST 10yr yield opens today at 2.13% and up +2 bps from this time yesterday. The UST 2-10 rate curve starts today steeper at +31 bps. Their 1-5 curve is steeper too at +87 bps and their 30 day-10yr curve is steeper as well at +191 bps. The Australian ten year bond is unchanged at its higher level of 2.48%. The China Govt ten year bond is +5 bps higher at 2.84%. And the New Zealand Govt ten year is up +10 bps at just on 3.14%.

Wall Street is +1.2% on the S&P500 in Monday afternoon trade. The Nasdaq is recovering yesterday's big drop. Overnight, European all fell an average of -0.2%. Yesterday, Tokyo gained a modest +0.2, but Hong Kong crashed another -5.7% on concerns over Beijing’s close relationship with Russia and renewed regulatory risks that sparked panic selling. And Shanghai also had another bad day, down -5.0%. The ASX200 fell -0.7% while the NZX50 was essentially flat.

The price of gold starts today at US$1929/oz and down another sharp -US$32/oz from this time yesterday.

And oil prices are again very much lower today, down -US$5/bbl. In the US they are now just under US$95.50/bbl. The international price is just under US$99.50/bbl.

The Kiwi dollar will open today marginally softer again, now at just over 67.6 USc. But against the Australian dollar we are now at 94.1 AUc which is another +¼c firming since this time yesterday and our highest in two months. Against the euro we are holding at 61.7 euro cents. That all means our TWI-5 starts today at just on 73.2 and -20 bps lower.

The bitcoin price is little-changed today, up +0.7% from this time yesterday to US$39,196. Volatility over the past 24 hours has been moderate at +/- 2.3%.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».