Here's our summary of key economic events overnight that affect New Zealand with news of a rather surprising counterattack underway in Ukraine, with Ukrainian forces also said to be bombing targets inside Russia (a Russian claim, disputed by Ukraine - so who did it?). Russia is now left 'defending' its recent gains in the south.
Russia's poor performance in its war has left China exposed diplomatically, especially in its overnight 'summit' with the EU. What is interesting however are India's equivocal positions. New Delhi seems attracted to the authoritarian side of all this.
Elsewhere, US non-farm payrolls grew less than expected, up +431,000 in March from February on a seasonally adjusted basis. Markets had expected a +490,000 gain. But on an actual basis, +794,000 more people were employed in the month and it is the extra earnings of these 'actual' people that will drive consumption.
Their jobless rate fell, their participation rate inched up again, its sixth consecutive rise. Average weekly earnings rose +5.8% from a year ago, but average hourly earnings rose an impressive +6.7%, suggesting that workers on average are holding their position against fast-rising inflation. It will be fuel prices that will be the main pressure point and there might be some easing on that front soon.
Meanwhile, surveys of factory conditions in the US are uniformly positive. The two main ones report good expansions. The widely-watched ISM one shows overall growth marginally less in March than February, but with new orders, production and employment growing, new export orders growing, the order backlog growing, and the deterioration on supplier performance easing. The main negative issue is that all this demand is pushing up prices faster. The internationally-benchmarked Markit one was equally positive, noting production and new orders rising steeply, and cost pressures gaining renewed momentum.
These are the best American factory conditions in decades - and maybe the de-globalisation shift because of supply-chain issues are driving it.
Despite the US pull, globally factories are expanding at an unchanged rate.
March factory PMIs in the Asian region shows most expanding at moderate levels. That includes Taiwan, South Korea and Japan.
But the private sector factory PMI for China came in lower than the official version (49.5), contracting at an index vale of 48.1 when a steady-state 50 was expected. It was their biggest fall in more than two years. It will only get worse for China as they stumble over their new pandemic spread that is high risk because they have key demographics with very low vaccination rates - and they have a second-class vaccine that is barely 50% effective. A widely locked-down China will have broad trade implications.
More stories are emerging of retrenchments in China. And buyers are not emerging to re-invigorate their housing markets.
In Europe, their PMIs slid to a 14-month low in March amid rising inflation and geopolitical tensions. But they are still expanding and at a moderate-to-good clip.
But like China, not everyone is expanding, and some contractions are rather steep.
EU inflation remains high with the March level up to 7.5% pa, driven of course by energy costs. That is similar to, but less than American CPI inflation. We get New Zealand inflation data on Thursday, April 21, and that is sure to be elevated too. What is interesting about global inflation is that the effects haven't hit some countries yet. And up to now that has included Australia and many East Asian countries. What that should be, given their equal exposure to energy costs, is unclear, but the March outcomes when they are released should shed some light on these differences. It may just be a timing issue.
Globally, hiring is strong, especially in the West. But American bond markets are toying with inverted yield curves, even if it is with little conviction at this stage. Inverted yield curves suggest recession is ahead. But few but perma-bears really believe that, and the IMF doesn't. Expanding factories and strong demand for labour aren't usual signals for recession. Perhaps the supply chain realignments are helping here and that effect won't be temporary.
The UST 10yr yield opens today at 2.38% and up +6 bps from this time yesterday in volatile trading. It hit 2.45% earlier and closer to the 2.49% level it was at a week ago. The UST 2-10 rate curve starts today inverted by -5 bps. Their 1-5 curve is however a little steeper at +86 bps. Their 30 day-10yr curve is marginally steeper at +220 bps. The Australian ten year bond is up +4 bps at 2.79%. The China Govt ten year bond is unchanged at 2.83%. And the New Zealand Govt ten year is up +5 bps at just on 3.30%. A week ago it was at 3.31%, so little net change.
On Wall Street, the S&P500 is heading for a flat result in their Friday trade, and a -0.3% fall for the week after a very up-and-down five trading days. Overnight, Frankfurt ended up +0.2% for a +0.5% gain over the week. For Paris it was a weekly gain of +1.6%, and for London a weekly rise of +0.7%. Tokyo ended its week down -1.5% but Hong Kong booked a weekly gain of +2.9% and Shanghai a weekly gain of +3.1%. The ASX200 ended flat on the day and up +1.2% for the week. The NZX50 ended Friday down -0.2% but up a minor +0.3% for the week.
The price of gold starts today at US$1924/oz and down -US$20/oz from this time yesterday, and down -US$32 from this time last week.
And oil prices are down another -US$3.50 to just on US$99/bbl in the US. And the international Brent price is now just over US$104/bbl. These falls are because the US has ordered its largest-ever release of strategic reserves. And other nations are following suit.
The Kiwi dollar will open little-changed than at this time yesterday at 69.2 USc. Against the Australian dollar we are down a bit at 92.2 AUc. Against the euro we are unchanged at 62.6 euro cents. That all means our TWI-5 starts today at just on 74.4 and -50 bps lower in a week.
The bitcoin price is firmer today, up +1.5% from this time yesterday to US$46,477. From this time last week, it is up +4.9%. Volatility over the past 24 hours has been moderate at +/- 2.8%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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