Bond investors nursing heavy losses; China profits fall; money rushes out of China; US looks at billionaires tax; Hart eyes sell-down; UST 10yr 2.49%; gold up and oil holds; NZ$1 = 69.6 USc; TWI-5 = 74.9

Here's our summary of key economic events over the weekend with news there is a global bond selloff underway which we will be watching in the run-up to the end of the month. Bond investors are nursing huge losses as the bond market enters a bear phase, the scale of which we haven't seen in nearly 40 years.

But first up, China reported that in the first two months of 2022, profits at private businesses fell almost -2% compared to the same period last year. Profits of foreign companies fell more than -7%. But their state-owned enterprises reported a more than +16% rise, most of which came from "mining" (read coal). The net result over all this is a +5% rise.

Bigger sales and higher prices are producing a bonanza for coal miners there. The coal price has more than doubled in 2022 so far, and they more than tripled in 2021. China is planning more coal output and more coal-fired power stations, at least through 2025. Beijing seems to be the green-washing capital of the world when it claims it is tackling climate change.

Future industrial profits outside the coal industry might be a challenge in the face of the growing spread pandemic. Shanghai has now ordered a lockdown and mass testing in a key industrial powerhouse part of the vast city. This will have global shipping and supply-chain consequences

Since the invasion of Ukraine by Russia, China has been experiencing huge flows of money out of the country. They are leaking funding from both stocks and bonds, according to monitoring a high-frequency data. And it is China-specific, not a general emerging-market trend. The volume has been enough to shift the yuan down by almost -0.5%. It is as though both American and European wealth managers are rethinking their structural commitment to China. There will be loud echoes if such a shift is underway.

Separately, it looks like the Chinese are pulling the plug on some large oil-sector investments with Russia.

And the Americans have agreed to supply the EU with significant gas supplies in an attempt to reduce Europe's reliance on Russian energy. Canada has chipped in too, now. Russia currently supplies about 40% of the EU's gas needs and this deal will cut that to 30%. Internal reductions will get priority to minimise much of that. Germany says it is making real progress on that.

In the US, the Administration is proposing a 'billionaire minimum income tax' of 20%. Most billionaires pay little or no tax now. It would require that American households with a net worth of more than US$100 mln pay a rate of at least 20% on their income, as well as on unrealised gains in the value of their liquid assets, such as stocks and bonds, which can accumulate value for years but are currently taxed only when they are sold.

Economic data from the US on Friday was nothing to get excited about. Sentiment slipped, as measured by the respected University of Michigan survey, but is was a smaller slip than expected even though the overall level remains low.

The number of signed contracts to buy existing homes in the US declined by -4.1% in February, near a 2 year low, and surprising analysts who had expected it to rise by +1%.

Data from the Canadian economy continues to impress. They had an unexpectedly good manufacturing sales level in February, and it seemed broad-based.

Mexico raised its policy rate by +50 bps at the end of last week, now up at 6.50%. What makes this news is that the Mexican president talked about it hours before the official announcement, confirming there is little central bank independence there.

In Germany, business sentiment has taken a dive, but in the circumstances not a huge surprise. The fall is from a moderate level but as a one-month event it was bigger than at the start of the pandemic. Interestingly, 'current conditions' assessments didn't actually fall much, but companies in Germany are expecting tougher times ahead. However that is in the perspective of an earlier +3.7% growth expectation; now it could be as low as +2.2% - so still an expansion.

More broadly, the global bond market repricing got more momentum at the end of last week in anticipation of a looming policy tightening cycle with major central banks seeking to tame inflation running at multi-year highs. The yield on US 10-year note hit 2.5%, the highest since May 2019, Germany's 10-year Bund yield, a benchmark for Europe, rose to as high as 0.56%, the highest since May 2018, while the French 10-year yield held above 1%. Here is a primer on what the bond market might be indicating.

Among commodities, the rise and rise of the lithium price is now so extreme that it is expected to weigh on demand for electric vehicles. Analysts now say that just to stay still cost-wise, EV car makers will have to raise prices by at least +15%, maybe as much as +25%.

For wheat supply, Russia is saying that contracted flows of supplies are running ok, but that new orders have virtually dried up on money transfer difficulties. The wheat price is staying very high, but not rising further.

In a useful review, ANZ has been reviewing how inflation is impacting Asian economies. Rising crude oil and food prices are taking a toll on these economies, most of whom have yet to fully recover from the pandemic. Price pressures are rising and current account positions will come under pressure. Asian economies will also need to navigate through potentially more aggressive tightening by the US Fed. Those that are commodity exporters are expected to handle the stresses better than commodity importers.

Finally we should note that local billionaire Graeme Hart is apparently looking at a public listing of his Carters and related wood products holdings. The talk is that he will realise about $1 bln in the transaction. But we should also note that Hart has dabbled with sell-downs in the past of parts of his empire on a number of occasions and nothing really came of them.

The UST 10yr yield opens today at 2.49% and unchanged over the weekend. The UST 2-10 rate curve starts today a little steeper at +20 bps. Their 1-5 curve is however little-changed at +89 bps. Their 30 day-10yr curve is also little-changed at +231 bps. The Australian ten year bond is down -1 bps at 2.87%. The China Govt ten year bond is unchanged at 2.83%. And the New Zealand Govt ten year is also up by +2 bps at just on 3.33%. And recall, a week ago the NZ Govt 10yr was at 3.19%, so there has been a big shift higher over this past week.

The price of gold starts today at US$1958/oz and up +US$2/oz from this time Saturday. A week ago gold was at US$1929/oz, so almost a +US$30 gain since then.

And oil prices are little-changed US$112/bbl in the US. And the international Brent price is still about US$116.50/bbl. These prices are about +US$10/bbl higher than a week ago.

The Kiwi dollar will open today essentially unchanged at 69.6 USc. Against the Australian dollar we are firmish at 92.7 AUc. Against the euro we are little-changed at 63.4 euro cents. That all means our TWI-5 starts today at just at 74.9 where it has been since Thursday.

The bitcoin price is up +0.9% from this time yesterday at US$44,939. Volatility over the past 24 hours has been modest at +/- 1.6%.

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