Here's our summary of key economic events overnight with news that despite challenges from every direction, the giant American economy is proving quite resilient. Sensible leadership is certainly helping.
As we had indicated previously in other measures, American retail sales came in strong, and better than anticipated in January. There were up +12.3% from the same month a year ago, far higher than inflation. The month-on-month gain was +3.8% when a +2% rise was expected. This is strong in anyone's language, led by online retailing, furniture, and cars.
Some of this is due to inventory building, itself a response to the supply-chain problems. In fact, the rise in business inventories in December was the largest since 1992, up +2.1% in one month, up +10% in a year. However, it should also be noted that the inventory-to-sales ratio isn't rising. And that suggests the rising inventories are not a building economic problem.
American mortgage applications fell again and by quite a bit, and the third weekly fall in the past four weeks. Probably that is because mortgage interest rates rose sharply again, now over 4% plus points and taking them back to pre-pandemic levels.
The US has reported a capital and financial account deficit of -US$52 bln in December following a downwardly revised +US$217 bln surplus in November. It was their largest capital outflow in 15 months, since September 2020.
At 8am today (NZT) we get the Fed minutes of their last meeting, and there is usually some interesting insights there. We will update this item if there are any this time too. Eyes will be clues about the size of the anticipated March rate hike.
Canada's inflation rate rose to 5.1% in January, above estimates of 4.8%. It is the first time it has been above 5% in 31 years.
However, Chinese inflation is retreating as their economy slows. Their CPI was up just +0.9% in the year to January, and well below the December rate of +1.5%. Perhaps deflation threatens them? Their producer prices are rising but also not as fast. They were up +9.1% in January, a retreat from the +10.2% in December. Month-on-month they fell, and that is two consecutive months of month-on-month falls. Expect a Chinese rate cut soon.
Chinese official media can't hide the growing economic slowdown there. Chinese Premier Li Keqiang has "urged efforts to gather wisdom from all sides to improve the government's work, and specified measures to bolster China's industrial economy and service sectors". They are stepping up support for sectors who are doing it hard. And some local governments have lost their land sales gravy train, resulting in sharp pay cuts for some staff, certainly layoffs. Its bad when local governments are doing that. And all this comes at a time when 10+ mln people are about to join their jobs market. The last thing they need is a restless unemployed and disillusioned population.
And another large Chinese property developer is attempting to renegotiate repayment on about US$1 bln in bonds. That crisis goes on and on.
Separately, China has discovered a very large lithium resource in their Himalaya mountain region.
EU industrial production for December was more data that surprised on the positive side. But it was the small developed countries that drove this, outperforming Germany, France and Spain. Italy was the large economy that contributed.
After holding the line that rates won't rise in Australia for a long time yet, most observers now expect the RBA to crumble soon. Even their Treasury Secretary, who sits in the RBA board, now thinks that. Aussie home owners could face higher mortgage repayments as early as June. Financial markets and economists are warning a rapid run-up in inflation will force their central bank to lift official rates above 2% within a year.
In NSW, there has been another big rise to 10,463 new community cases reported yesterday, now with 49,578 active locally-acquired cases, and another 27 daily deaths. There are now 1,478 in hospital there, now well off their high. In Victoria they reported 8,149 more new infections yesterday, little-changed. There are now 49,936 active cases in that state - but there were 18 deaths there. Queensland is reporting 6,596 new cases and 12 deaths. In South Australia, new cases have risen to 1138 yesterday and 2 more deaths. The ACT has 494 new cases and no deaths, and Tasmania 625 new cases and no deaths. Overall in Australia, more than 27,000 new cases have been reported so far although not all counts are in yet.
The UST 10yr yield opens today at 2.04% and unchanged since this time yesterday. The UST 2-10 rate curve starts today steeper again at +49 bps. Their 1-5 curve is unchanged at +86 bps and their 30 day-10yr curve is out to +200 bps. The Australian ten year bond is unchanged 2.24%. The China Govt ten year bond is -1 bp softer at 2.81%. And the New Zealand Govt ten year is higher by +1 bp at 2.83%.
On Wall Street, the S&P500 is down -0.5% in their Wednesday afternoon trade. Overnight, European markets all closed down by a mere -0.1%. Yesterday, Tokyo ended up a very strong +2.2%, Hong Kong was also up and by +1.5% but Shanghai was up only +0.6% in their case. The ASX200 ended its Wednesday session up +1.1% and the NZX50 rose a stronger +1.5%.
The price of gold starts today at US$1865/oz and up +US$13 from this time yesterday.
And oil prices are up +US$2 to just under US$93/bbl in the US, while the international Brent price is just over US$94/bbl.
The Kiwi dollar will open today marginally firmer at 66.7 USc. Against the Australian dollar we unchanged at 92.8 AUc. Against the euro we are marginally firmer at 58.6 euro cents. That means our TWI-5 starts today at just on 71.1 and +30 bps firmer.
The bitcoin price is down -1.2% since this time yesterday and now at US$43,587. Volatility over the past 24 hours has modest at +/- 1.6%. And we should note there is a tussle going on in Russia between the central bank who are resisting a loose policy on cryptos due to the financial stability risks, and the Kremlin who want to go down that route.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».