US trade deficit falls; US supply chain costs rise; US budget released; Shanghai in lockdown; Taiwan confidence slips; Aussie budget awaited; UST 10yr 2.46%; gold and oil down; NZ$1 = 69 USc; TWI-5 = 74.4

Here's our summary of key economic events overnight that affect New Zealand with news financial markets are showing increasing turbulence as war rages, the pandemic rolls on, and inflation rises. A risk-off mood is developing again.

But first, the American merchandise trade balance fell in February from January, down from -US$101 bln to -US$84 bln for each month, but given the seasonality of these months the improvement was minor. A year ago in February, the deficit was -US$69.8 bln, but this increase is really just a reflection of strong domestic demand from a booming economy.

The rise in both retail and wholesale inventories can also be attributed to the same demand strength, but also the growing pressures on supply chains is adding new bulk to these reserves. We are talking +10% to +20% bulking up here and more than just inflationary effects. The latest Shanghai lockdowns will accentuate that.

The Dallas Fed's factory survey shows their expansion is extending even if it is at a slightly lower pace. New orders growth softened, but costs and wages rose at their fastest pace ever for this survey.

Supply chain stress is a common conversation point, and the new Shanghai lockdown is getting most of the attention. But we should also note that a potential US West Coast dockworkers strike is a new immediate upcoming threat, possibly stranding ships until it is resolved and throwing shipping schedules into chaos.

There were two US Treasury bond auctions earlier today. The two year one was well supported but the median yield rose from 1.51% at their prior event a month ago, to 2.30% at this one. The five year one, also well supported, rose from 1.83% at the month-ago event, to 2.46% this time. The pull-away in Fed support is clear in both auctions.

The US Administration has proposed a US$5.8 tln annual budget, equivalent to less than 23% of US economic activity (GDP). (For comparison the 2022 New Zealand was at 44% of our GDP.) The US deficit is expected to be -US$1.15 tln in the budget year, down from -US$2.8 tln in the final Trump year. Spending is expected to be -15% lower on the same basis, but taxes collected are expected to be +15% higher, mainly on higher employment levels and better company profitability. But the ultra-wealthy will be expected to pay more (something).

In China, the Pudong area of Shanghai has gone into lockdown and mass-testing mode. And that includes their financial center.

Taiwanese consumer confidence slipped slightly in March, but this is now a longish trend and it has fallen to a nine-month low.

Hong Kong export growth vanished in February, barely matching year-ago levels.

In Australia, all eyes there are on the election budget to be released later today. It will undoubtedly be expansionary and inflationary - and that in turn may require the RBA to bring forward its rate hike plans. Already bond yields have jumped there on that expectation, self-fulfilling in many ways because higher interest rates will swell their budget deficits. Eyes will also be on the assumptions their Government will be using for this budget. "Too rosy" will undermine its credibility and cause rates to rise faster.

The UST 10yr yield opens today at 2.46% and down -3 bps from this time yesterday. The UST 2-10 rate curve starts today flatter at just +14 bps. Their 1-5 curve is also flatter at +85 bps. Their 30 day-10yr curve is flatter too at +228 bps. The Australian ten year bond is down -4 bps at 2.83%. The China Govt ten year bond is down -1 bp at 2.82%. But the New Zealand Govt ten year is also up by +4 bps at just on 3.37%.

On Wall Street, the S&P500has opened down -0.2% in Monday afternoon trade. In Europe, their equity markets were mostly higher, led by Frankfurt's +0.8% and trailed by London's -0.1% fall. Yesterday Tokyo ended down -0.7% but Hong Kong was up +1.3% and Shanghai was also positive but only just at +0.1%. The ASX200 ended its Monday session up a minor +0.1% but teh NZX50 fell away, down -1.2%.

The price of gold starts today at US$1939/oz and down -US$19/oz from this time yesterday.

And oil prices are down a sharpish -US$5.50 to US$106.50/bbl in the US. And the international Brent price is now about US$111/bbl.

The Kiwi dollar will open down more than -½c from this time yesterday at 69 USc. Against the Australian dollar we are down similarly at 92.1 AUc. Against the euro we are even more at 62.7 euro cents. That all means our TWI-5 starts today at just at 74.4 having given up all the gains of the past week.

The bitcoin price is up a sharp +5.7% from this time yesterday at US$47,482. Volatility over the past 24 hours has been high at +/- 3.4%.

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