Food prices jump to record levels; US inventories rise; Japanese confidence falls; China fades; India worried about tectonic shifts; UST 10yr 2.73%; gold and oil higher; NZ$1 = 68.5 USc; TWI-5 = 74.2

Here's our summary of key economic events overnight that affect New Zealand with news there has been another sharp rise in benchmark bond yields overnight, taking the key one to a three year high and closing in on a ten year high.

But first up today, food prices rose very sharply in March, pushing on up to all-time records. In fact the rise from February was the largest one-month jump ever, and the rise from early 2020 has been relentless and fast. All categories of food rose fast, but it was most noticeable for cereals which jumped +17% in one month alone. We have a looming global food crisis, one that will hit developing and emerging markets hard and return billions to poverty. An ex-UN food boss is urging calm, but that is necessary because a sense of panic is developing over this situation. It is worth noting that meat prices are not rising as fast as grain prices, not yet at least.

The USDA World Agricultural Supply and Demand Estimates (WASDE) released overnight back that up. American supplies are stable, but the international situation has created raging uncertainty and sharply higher prices. Global stocks of wheat are at a 5-year low.

In the US, re-worked supply chains are inducing a faster run up in wholesale inventories. But it turns out this is still a minor influence - strong sales in a strong economy is the major reason those stock levels are up. It may have expanded at a +4% pa rate in Q1-2022, and faster since. The inventory/sales ratio has remained lower than normal and is still sitting near historic lows.

After a very strong expansion in February, the Canadian labour market expanded further in March although this time pretty much as expected. Their rapid shift from part time to full time employment was in evidence again this month. Wages only rose at a modest +3.4% pace however.

Japan consumer confidence fell again and this survey is now at its lowest level in a year. Apart from the pandemic shock, we haven't seen such Japanese glumness since the GFC crisis.

In China the pandemic emergency is not improving - in fact it is getting worse in Shanghai. It is hard to know how bad it is elsewhere with a broadening clampdown on news reports. It might be concentrated only in Shanghai as it seems, but you would think the Chinese media would say so if that was the case. The risks to global supply chains are rising, not falling. The depth of their economic retreat isn't obvious. We are left seeking signals in oblique ways, like calls for 'helping hands'.

Taiwanese exports rose at a fast clip again, but now this is as expected and the latest March data didn't beat estimates. But in value terms, this was their best month ever and by a long shot, and nearly five% more than the prior record set in November 2021.

Taiwanese CPI inflation is up to a 3.3% pa rate, which is fast for them and the highest in ten years.

The Indian central bank left its policy rate unchanged at 4% and its accommodative settings in place. But they are now talking about shifting to tighter settings soon, prioritising the inflation fight rather than growth. They are talking of 'tectonic' upward shifts in food prices (p86). Wholesale rates are rising and their 10 yr bond yield spiked on the commentary, hitting 7%.

In Australia, the RBA has released its Financial Stability Review. It found that while local systems are resilient, Russia's European invasion and other global pressures will cause volatility which they think they are prepared for. They say borrowers should brace for a -15% fall in home prices if interest rates rise by +2% or more. But they are confident the vast majority of borrowers will be able to manage rising repayments as rates increase.

The UST 10yr yield opens today at 2.73% and up another +7 bps from this time yesterday so that is a +35 bps rise for the week. The UST 2-10 rate curve starts today more positive at +21 bps. A week ago it was inverted by -5 bps. Their 1-5 curve is steeper at +98 bps (+86 bps last week). Their 30 day-10yr curve is also steeper at +250 bps (+220). The Australian ten year bond is up +3 bps at 3.00% and an eight year high (2.79% a week ago, so up +21 bps since). The China Govt ten year bond is unchanged at 2.80% (2.83%). And the New Zealand Govt ten year is up just +1 bp today at just on 3.47% and a seven year high. A week ago it was at 3.31% so a +16 bps weekly rise.

Wall Street is flat in late Friday trade, and heading for a -1.2% weekly fall. Overnight European markets were all very positive, up +1.5% across the board. But the weekly results varied. Paris ended down -2.4% for the week, Frankfurt down -1.5% but London ended up +1.8% for the week. Yesterday Tokyo finished up +0.4% but that cemented a -2.5% weekly drop. Hong Kong only traded for four days this week ending on Friday up +0.2% for a weekly rise of +0.8%. Shanghai only traded for three days, ending up +0.5% on Friday for a weekly dip of -0.1%. The ASX200 rose +0.5% on Friday to limit its weekly loss to -0.2%. The NZX50 ended its Friday session little-changed but was also down a minor -0.2% for the week.

The price of gold starts today at US$1943/oz and +US$8 higher than this time yesterday and +US$18 higher in a week..

And oil prices are a little firmer today, up about +US$2.50 to just under US$98/bbl in the US. And the international Brent price is now just under US$102.50/bbl. A week ago these prices were at very similar levels.

The Kiwi dollar will open -½c lower than at this time yesterday at 68.5 USc. Against the Australian dollar we are -½c softer too at 91.8 AUc. Against the euro we are -40 bps lower at 63 euro cents. That all means our TWI-5 starts today at just over 74.2 and -30 bps lower for the week.

The bitcoin price has stayed down and slipped a further -1.8% since this time yesterday and now at US$42,772. W week ago it was at US$46,477, so an -8% decline since then. Volatility over the past 24 hours has remained modest at +/- 1.8%.

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