Here's our summary of key economic events overnight with news all eyes are on the political situation, but the global economic indications are mostly positive.
On the global stage, it has been announced that there will be a face-to-face summit meeting between US President Biden and Russian President Putin, brokered by the French, to try for a Ukrainian resolution. It's an 'in principle' agreement. Russia seems lukewarm because it delays plans, and is signaling it will recognise Russian-speaking breakaway regions as independent countries. Both regions suffer from declining populations and economic stagnation.
A spillover consequence of these tensions is that a state-owned Belarusian potash miner that accounts for about 20% of global supply has declared force majeure because it is hit by sanctions, shaking up a market that’s already contending with soaring fertiliser prices.
To start, just a quick reminder that Wall Street is closed as the US is on a long weekend holiday.
Markit reported their preliminary PMIs for Japan for February yesterday. Both dipped. The factory one is still expanding however, but the services one took a large tumble as the country battles Omicron, and is now contracting. Still, companies remained optimistic that activity would improve in the year ahead.
Westpac says that with the Covid-affected New Year festival, and the sanitised Winter Olympics behind it, they expect "China's economic promise to shine bright in 2022". China kept its prime loan rates unchanged today after review.
China's house prices slipped in January. This was true for both sales of new units, and resales. The official data shows the declines widespread but small, except in Beijing and Shanghai where they held. But what the official data doesn't show is the volume of transactions and that seems to have fallen rather more widely.
And in Guangzhou, China's four big state-owned banks cut mortgage rates aimed at lending support to a property sector reeling from a severe cash crunch there.
Taiwanese export orders came in right at about the level expected, up +12% in January from a year ago, which was also the gain in December.
The acceleration rate of German producer prices fell back from the extreme levels in December, but they didn't fall back as much as was expected. They are up +2.2% from the prior month, and up +25% from January 2021. It is cost pressure driven by energy prices mainly.
But German, indeed all EU factory PMIs are expanding at an unusually solid clip. The EU factory PMIs retained their fast expansion and their services PMIs rose to a good expansion even if it isn't as fast as the factory sector. At these rates, business is expanding much faster than pre-pandemic levels. Much of these gains are on the back of new order growth, and the rebound is most in France and Germany, the EU's core economies. The British PMIs rose too.
The takeover offer of AGL we noted yesterday has gone from 'friendly' to 'hostile', with the bidders taking their campaign wider after the formal rejection. The Federal government is threatening to veto it if it succeeds to save the local coal industry.
Separately, a rail lockout in NSW is underway. Both this and the AGL saga are now part of the upcoming Federal election campaign as issues harden because the governing parties look like they are heading for a loss.
In Australia, Markit also issued their preliminary February PMIs. The factory one posted a good further expansion and its best level since mid 2021, and the services one jumped from a contraction to a solid expansion. Overall business sentiment in the Australian private sector is positive with the level of confidence rising to a two month high.
In NSW, there has been 4,916 new community cases reported yesterday, a big drop, now with 103,850 active locally-acquired cases, and another 7 daily deaths. There are now 1,288 in hospital there and continuing to fall away. In Victoria they reported 5,611 more new infections yesterday. There are now 44,278 active cases in that state - but there were only 3 deaths there. Queensland is reporting 4,144 new cases and 6 more deaths. In South Australia, new cases have fallen to 1118 yesterday and 3 more deaths. The ACT has 458 new cases and one death, and Tasmania 569 new cases and no deaths. Overall in Australia, more than 16,000 new cases have been reported so far although not all counts are in yet.
The UST 10yr yield opens today still at 1.93% as Wall Street remains closed. The UST 2-10 rate curve starts today unchanged at +46 bps. Their 1-5 curve is unchanged at +82 bps and their 30 day-10yr curve is also unchanged at +190 bps. The Australian ten year bond is up +2 bps at 2.20%. The China Govt ten year bond is up +3 bps at 2.85%. But the New Zealand Govt ten year is lower, down -5 bps at 2.76%.
With Wall Street closed, the equity indications come from other markets. But the S&P500 futures are down a sharp -1.2%.Overnight European markets fell by varying degrees. London was down -0.4%, Frankfurt by -2.1% and Paris by -2.2% on political risk aversion. But none of this was as sharp as the Moscow stock exchange which dived -9.5% yesterday, with a further dip afterhours to be -14% lower. Yesterday, Tokyo fell -0.8%, Hong Kong by -0.7%, and Shanghai was down similarly until the last minute when the home team came to the rescue and it closed unchanged. The ASX200 ended its Monday session up +0.2%, and the NZX50 ended up +0.1%.
The price of gold starts today at US$1896/oz and down -US$3 from this time yesterday. Gold is getting a boost in Japan on stagflation fears.
And oil prices are up another +50 USc at just under US$91/bbl in the US, while the international Brent price is just under US$93/bbl.
The Kiwi dollar will open today up +¼c at 67.2 USc. Against the Australian dollar we are down slightly at 93.2 AUc. Against the euro we are marginally firmer at 59.3 euro cents. That means our TWI-5 starts today at just on 71.6 with a marginal daily gain.
The bitcoin price has recovered +1.3% since this time yesterday and now at US$38,943. Volatility over the past 24 hours has high at +/- 3.0%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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