US data positive but outlook cloudy; German sentiment dives; World Bank sees EM debt stress; China starts local stimulus; big election-bribe budget in Australia; UST 10yr 2.39%; gold and oil down; NZ$1 = 69.2 USc; TWI-5 = 74.4

Here's our summary of key economic events overnight that affect New Zealand with news that the US Treasury 2-10 bond yield curve has inverted (just - and has now gone positive again), and that usually is an early warning that the US faces recession - in bond investors' minds anyway. But equity investors are shrugging the risk off, with gains on most markets around the world.

The widely watched Conference Board survey of American consumer sentiment reported mixed signals, although perhaps supporting the bond signal. The 'Present Situation' view brightened in March, but the look-forward 'Expectations' view went the other way.

The uptick in the 'Present Situation' is bolstered by a firming of retail sales in the report for last week.

And in a further sign they are feeling confident at the moment, Americans continued to switch jobs at near-record rates in February, with 4.4 mln workers leaving their positions in a historically tight labour market. Employers hired 6.7 mln people that month while reporting 11.3 mln job openings.

And the Dallas Fed services survey was also relatively upbeat, even if it did suggest that retail sales there may have peaked.

There was another US Treasury bond auction this morning, for their 7yr Note, and this one brought a sharp rise in yield to 2.43%, up from 1.84% at the prior event a month ago. It was well supported again.

The war in Ukraine has collapsed German consumer sentiment. The GfK Consumer Climate Indicator fell to -15.5, the lowest since February 2021 and compared to market expectations of -14. These are post GFC lows, where war and inflation corrode German sentiment with a significant downturn.

The World Bank is warning that emerging markets, which account for 40% of global GDP, are under real debt stress and an outsized set of them are likely to be in distress soon.

In China, they are rolling out direct stimulus and business support at a local level to hold their stuttering economy on an even keel.

And China is not happy that Australia is kicking out Chinese students who have spent time in the Chinese military - even though that is a compulsory requirement for young Chinese. It is the lack of honest declaration on immigration documentation that seems to be the key issue.

Australia delivered another impressive retail sales result, beating forecasts that assumed storms and the pandemic would hold them back. They didn't and spending surged to its second-best month - ever. These sales were up +1.8% from the prior month, and an impressive +9.1% higher than a year ago. Because the January activity was strong as well, it is likely that Q1-2022 will end very well.

The 2022/23 Australian Budget delivered overnight was a traditional election budget, delivering AU$40 bln of new spending and tax cuts over the next five years, most of which will be in the immediate year or two. This will juice up their local demand further even though they are in a strong position at present. And in turn that probably brings forward RBA rate hikes, and ensures they will be larger than otherwise.

It is a Budget with upfront cash payments: AU$250 per taxpayer as a cost-of-living adjustment, plus some households will get another AU$3000 for further cost-of-living support. Petrol taxes have been cut for 6 months, and subsidies for medicines increased. There are a vast range of other benefits designed to appeal to voters, and "support business". But through all of this, deficits will run on out to 2026 and on current projections will total -$261 bln over the period - and the economic projections on which everything is based are very optimistic. This is a real election budget with a short-term objective in mind.

The UST 10yr yield opens today at 2.39% and down a further -8 bps from this time yesterday. The UST 2-10 rate curve starts today flat at just +1 bp and heading toward inversion. Their 1-5 curve is however unchanged at +85 bps. Their 30 day-10yr curve is flatter at +220 bps. The Australian ten year bond is up +2 bps at 2.85%. The China Govt ten year bond is unchanged at 2.82%. And the New Zealand Govt ten year is down by -2 bps at just on 3.35%.

On Wall Street, the S&P500has opened up[ +0.5% in Tuesday afternoon trade. In Europe, their equity markets were sharply higher, led by Paris's +3.1% and trailed by London's +0.9% gain. Yesterday Tokyo ended up +1.1% and Hong Kong was also up +1.1% but Shanghai fell -0.3%. The ASX200 ended its Tuesday session up +0.7% but the NZX50 only managed a gain of +0.1%.

The price of gold starts today at US$1915/oz and down another -US$24/oz from this time yesterday.

And oil prices are down another sharpish -US$4.50 to just over US$102/bbl in the US. And the international Brent price is now down to US$106.50/bbl.

The Kiwi dollar will open a little firmer from this time yesterday at 69.2 USc. Against the Australian dollar we are similarly firmer at 92.3 AUc. Against the euro we are softer at 62.4 euro cents. That all means our TWI-5 starts today still just at 74.4.

The bitcoin price is virtually unchanged from this time yesterday at US$47,487. Volatility over the past 24 hours has been modest at +/- 1.3%.

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