American inflation rises as rate cut hopes fade; Canada holds but sees lower inflation coming; Taiwan exports surge; Fitch downgrades China's credit rating; UST 10yr 4.42%; gold slips but oil firms; NZ$1 = 59.8 USc; TWI-5 = 69.3

Here's our summary of key economic events overnight that affect New Zealand, with news it is all about American inflation today, and the consequences of missing expectations.

The American annual inflation rate picked up slightly for a second straight month, to 3.5% in March, its highest rate in six months, and well above the 3.2% rate in February. And also higher than the analyst forecasts of a 3.4% rate. Of some concern is that the month-on-month rate stayed up at +0.4% (and almost a 5% annualised rate). Their core rate (sans food and energy) however, stayed down at 3.8% and unchanged, but a dip was expected here.

All up, this shows American inflation is far from beaten. Perhaps the Fed was expecting this because the minutes of its March meeting released today shows them wanting to see progress on the inflation front before they reduce their 5.25% policy rate. They are clearly not there yet as they suspected.

The USD rose sharply on the news, as did benchmark bond yields. The S&P500 fell as rate cut hopes for 2024 fade.

It may be all about the inflation miss today but there were other indicators out as well.

US mortgage applications were barely changed last week from the week prior, holding low to be -23% lower than the year-ago level. No rebound in the American housing markets. Their benchmark fixed 30 year home loan rate moved back up over 7% plus points, a one month high.

There was a rise in American wholesale inventories in February, but to be fair these overall levels in relation to sales activity are entirely 'normal' from an historic perspective.

Meanwhile the latest UST 10yr bond auction was well supported although perhaps marginally less than last time. Today's median yield was 4.47% compared to 4.10% at the equivalent prior event a month ago. Investors may be happy to buy this debt but they are seeking higher yields for it.

As expected, the Bank of Canada rate left its policy rate unchanged at 5% in its overnight review. It says it is confident inflation's trend is easing there.

Japanese producer prices rose +0.8% in the year to March, in line with forecasts and marginally higher than in February.

Taiwanese exports surged in March, more than making up for the February hesitation. In fact they delivered their best month since July 2022 and their second best March month ever.

In the South Korean parliamentary elections, the conservative alliance is suffering a big defeat with the Democratic Party alliance heading for a parliamentary majority.

In China, ratings agency Fitch has affirmed their sovereign credit rating as A+, but has shifted its Outlook from Stable to Negative. It cited the growing risks of China's public finance situation as fiscal buffers have eroded, especially from overstretched Local Government Financing Vehicles while Beijing deals with its stuttering property development sector. (Fitch rates New Zealand AA+, Stable. You can see how the various ratings agency codes compare here.)

And staying in China, vehicle sales rose a very impressive +9.9% in March from year-ago levels to almost 2.7 mln units in the month, following a -19.9% slump the month before. Consumption recovered following the Lunar New Year holidays and many carmakers slashed prices which has been effective from a sales perspective. China's EV exports, particularly to Europe, continue apace, but there are growing questions about whether these shipments will find buyers. The flood to there is overwhelming local manufacturers and they are not happy.

In Hong Kong, they have started deporting journalists, using their new "national security" laws recently imposed by Beijing.

The UST 10yr yield is now at 4.56% and up a sharp +19 bps from yesterday on the US CPI result. The key 2-10 yield curve inversion is deeper at -43 bps. But their 1-5 curve inversion is quite a bit shallower at -60 bps. As is their 3 mth-10yr curve inversion which is now at -86 bps and -16 bps less. The Australian 10 year bond yield is now at 4.25% and up +10 bps. The China 10 year bond rate is holding at just on 2.31%. The NZ Government 10 year bond rate is now at 4.75% and -8 bps lower since this time yesterday after the OCR review.

The S&P500 is down -1.2% on Wall Street in its Wednesday session, following the US CPI data release. Overnight, European markets closed marginally higher. Yesterday Tokyo ended its Wednesday session down -0.5%. Hong Kong was up +1.9% in its daily trade. But Shanghai was down -0.7%. Singapore was closed for a public holiday. The ASX200 ended its Wednesday session up +0.4%. The NZX50 ended up +0.5%.

The price of gold will start today lower by -US$13 from this time yesterday at US$2335/oz and off its all-time high.

Oil prices have risen +US$1 to just on US$85.50/bbl in the US while the international Brent price is up a bit less to just on US$89.50/bbl.

The Kiwi dollar starts today at just under 59.8 USc and down -¾c from yesterday all on the USD moves. Against the Aussie we are +½c firmer at 91.9 AUc. Against the euro we are little-changed at 55.6 euro cents. That all means our TWI-5 starts today just on 69.3 and down -20 bps.

The bitcoin price starts today firmer at US$69,348 and up almost +1% from this time yesterday. Volatility over the past 24 hours has been modest however at just on +/- 1.8%.

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