Here's our summary of key economic events overnight with news that all bets are off following Russian military attacks on a large Ukrainian nuclear power station which they captured. No excessive damage resulted, but no economic news is remotely as important as the building disaster there.
But there is economic news, and it is our job to report it, so here goes. (And it is not as though it is minor.)
Global food prices rose sharply in February, up almost +4% in one month, up +24% in a year. This represents a new all-time high, exceeding the previous top of February 2011 by 3.1 points. The February rise was led by large increases in vegetable oils (+37%) and dairy prices (+25%). Cereals (+15%) and meat prices (+15%) were also up. And of course, the global stresses in March means this is just the start of extreme food price stress. Rising post-pandemic demand in the recovering first world, stable supply everywhere, plus new growing security and supply-chain uncertainties are all conspiring to drive food stress. These tensions will bring new 'security' stresses between nations.
The American economy added +678,000 jobs in February (seasonally adjusted), the most in seven months and way above market forecasts of +400,000. Job growth was widespread. (The actual rise was almost +1.5 mln from the prior month, but January is always seasonally low.) Their jobless rate fell to 3.8%, lower than expected. Their participation rate rose again, marginally. Average weekly earnings rose at +5.4%, and the fastest pace since March 2021. But markets glossed over this news in the face of the security issues in Europe. Still, this labour data will likely keep the Fed on track for a rate hike in two weeks.
US vehicle sales came in at just over 14 mln in February (annualised rate) and down sharply from the 15 mln rate in January. But supply issues are holding this back.
Brazil's economic growth was +1.6% in Q4-2021 and while expectations were low for this data, it is far lower than the +4.0% rise in Q3-2021.
Venezuela has all but given up fighting hyperinflation. But yesterday it increased the minimum wage by almost 300%, moving it from from NZ$0.93 to about NZ$3.50. That is not per hour, as you have probably assumed. That is per month! And in local currency the new monthly minimum wage is now 7 mln bolivars. Yes, 7 million of their currency is now worth NZ$3.50. That's hyperinflation.
In Japan, a major truck manufacturer says it has been faking emissions data for its products for years.
There are major policy meetings in China, but they are all overshadowed by the Russian invasion. At home they are about to set a growth target low, in fact the lowest one they have ever set, probably below 5%. This is recognition that their economy is floundering. They need it to improve because they have tens of millions of young people joining their jobs market all with high income hopes that will be difficult to accommodate. New aggressive stimulus is probably not far away. Certainly interest rate cuts are close now. The iron ore price is on the move higher again.
Hong Kong retail sales are languishing. December trade was revised lower, and the January year-on-year fain was weak, and on a weak base. January 2022 sales were a massive -30% lower than in January 2019.
Russia's currency is at a new record low, weakening again very sharply overnight. Until now, key Western policy makers have exempted oil from their sanctions. But this morning, we learn that Washington is moving to include Russian oil in the blockade. That won't help the ruble.
S&P cut Russia's rating to "CCC-" from "BB+", as default risk rose sharply again. Both Moody's and Fitch cut their ratings further. Explanation of ratings grade is here.
The Russian Parliament rushed through a new law punishing the spreading of “false information” about Russia’s armed forces with as much as 15 years in prison. Calling the Ukraine action a 'war' or an 'invasion' are now crimes.
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In most of the world, Russia is losing the information war over Ukraine. In China, though, it’s winning big. Beijing has thrown its hat in the ring on the Russian side.
For the World Bank, the Ukraine invasion is a global economic catastrophe. It is now no longer possible to get insurance for cargoes to or from Russia.
Meanwhile EU retail sales didn't bounce back as strongly in January as was expected, a worrying under-performance given what has come after this.
We have been highlighting sharp rises in many commodity prices recently, and coal hit another record high yesterday, as did aluminium. This seems to be a daily achievement recently and we are inured to these rises, even if we know that they are building to cause serious long-term global inflation. But missing from the list has been Dr Copper. Copper demand has for the past few years depended on Chinese infrastructure demand, and China's economy is off the boil so copper hasn't participated in the current commodity price frenzy - which has been good, because it is already expensive and used widely. But today that all changed. Copper prices zoomed higher overnight to hit a new record high of US$10,820/tonne. Supply concerns rather than demand pressures are behind this jump.
Readers of our rural pages will have noted that local carbon prices have been retreating recently. They ended the week down at NZ$78.50, a -10% drop in a week. In China, their carbon market barely functions. The EU carbon price has fallen even more sharply, down -30% in a week to €66/tonne (NZ$105/tonne). The whole thing seems weird, given the record demand and prices for fossil fuels, and it calls into question whether these carbon market prices are giving useful climate signals. Given the dive in the EU price, holders of the NZUs may be facing steep losses next week. Carbon market prices are responding to 'normal' financial market signals, and not IPCC data.
The UST 10yr yield opens today at 1.72% and down -13 bps from this time yesterday. A week ago it was at 1.99% but risk aversion has taken hold since. (But recall, at the start of 2022 it was at just 1.52%.) The UST 2-10 rate curve starts today even flatter at +26 bps. Their 1-5 curve is flatter at +62 bps and their 30 day-10yr curve is also much flatter at +156 bps. The Australian ten year bond is down -2 bps at 2.14%. The China Govt ten year bond is down -1 bp at 2.85%. And the New Zealand Govt ten year is unchanged at 2.79%. We should also note that while New Zealand benchmark Government bond yields are flat or soft, wholesale swap rates are still rising, and key ones are back up to 2016 levels now.
Wall Street's Friday trade is now down -0.6% on the S&P500 index, in ongoing afternoon trade, and heading for a relatively minor -0.4% dip for the week. Overnight European markets all crashed between -3.5% and -5%. For the week, London is down -6.7%, Paris is down -8.4% and Frankfurt is down -8.2%. Yesterday, Tokyo ended its Friday session down -2.2% and taking its weekly retreat to -1.8%. Hong Kong was down -2.5% yesterday and ended its week down -4.0%. Shanghai was down a full -1.0% yesterday but ended its week with only a minor -0.1% loss. The ASX200 ended up -0.6% lower yesterday but that capped a +1.6% weekly gain. The NZX50 also fell -0.6% on the day but ended its week with a stellar +1.8% rise. (The Moscow exchange is still closed, for a sixth day.)
The price of gold starts today at US$1962 and up +US$33/oz from this time yesterday. That is a weekly rise of +US$78/oz or +4.2%. At the start of 2022 this price was US$1814/oz, so it is up +8.2%. (It is beating bitcoin handily at present for its 2022 price performance.)
And oil prices are higher again today and by +US$2/bbl level. In the US they are now just over US$110/bbl. The international price is just over US$113.50/bbl. A week ago the international price was US$93.50/bbl and that seemed high. At the start of the year is was just under US$80/bbl. The climb since has been +40%.
The Kiwi dollar will open today sharply higher at 68.6 USc and a +¾c rise. Against the Australian dollar we are at 93 AUc and firming. Against the euro we at 62.8 euro cents and almost a +1½c rise. That means our TWI-5 starts today at just on 73.6 and its highest since late November. If sustained, this will mitigate some of the imported tradables inflationary pressure. Not a lot, but some.
The bitcoin price is lower today, down another -3.7% from this time yesterday to US$40,871. For the week it is up +4.2%; Year to date it is down -13%. Volatility over the past 24 hours has been moderate at +/- 2.8%. China’s central bank said the country’s share of global bitcoin trading has been slashed to 10% from the peak of more than 90% before Beijing's crackdown.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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