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 ».
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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.
Indeed a bear steepener
France now taking the prospect of gas rationing seriously.
We have a looming global food crisis, one that will hit developing and emerging markets hard...
That's quite interesting isn't it? I typically think of developing countries as being heavily reliant on subsistence farming and not reliant on global food markets. If you'd asked me to guess I'd have thought a food crisis would start in more densely populated countries like the UK, Japan etc.
Maybe I need a lecture on food production and consumption globally.
In a lot of developing countries the people have moved to the cities. Agriculture has become focussed on commodity crops to be sold on world markets. Unfortunately they can’t eat cotton, tea or coffee. The maize and soybeans are for animals not people, also a lot of crop land is used for growing biofuel instead of food. Globalisation has prioritised money over sustainability and self sufficiency.
What do they do for employment within cities if the country isn't economically developed? In New Zealand we've experienced urbanisation but that was predominantly driven by agricultural modernisation and moving towards producing industrial goods. Classically we moved from primary, through secondary to tertiary sectors (and we're currently inching our way towards the quaternary sector.)
In developing countries they have neither the mechanisation of agriculture nor factories to produce industrial goods.
Depends which developing countries you are referencing I guess? Sub Saharan Africa has been suffering extreme drought in places, forcing farmers from the land. The rush from the land has been into extractive industries, energy etc. North Africa/Middle East have limited ability to produce their own food, but the oil bounty has allowed them to explode population, on imported food. Asia? Highly productive, but of course population has also exploded to match.
Swings 'n' roundabouts. Explain it to people and they look at you as if you have two heads. I would of given other examples, but it's a waste of time!. Our exports should leap up in value this year. It won't do our farmers any harm to ease up on the imported fertilizer. Do they still import palm kernels for cattle feed, for crying out loud.
"swings IN roundabouts"?! :)
now that would be sick making!
I remember my grandparents thriving back yard vege patch when I was a kid. It was a source of great pride for them and surprisingly productive.
A lot of us won’t be able to return to this tradition as a food backup as we are either apartment dwellers or the garden has been lost to infill housing.
It’s another example of pulling out the rungs beneath us as we strive for ever more growth.
https://foreignpolicy.com/2022/03/05/sri-lanka-organic-farming-crisis/
They went organic over night without sourcing alternative plant nutrient products. No fertiliser = failed crops = no food. It’s a shame because if they had done it properly they could have been world leaders in organic production.
I don’t agree with all of the conclusions in the article attached but it does provide background to the situation.
You certainly can’t do it like Sri Lanka did. It takes time and a lot of careful management to transition away from high inputs. There is a big difference between growing a few organic veggies for the middle classes at Clevedon farmers market and trying to feed millions of hungry poor people.
"While Germany was willing to impose economic and social catastrophe on countries it claimed had been irresponsible in their borrowing, it has been unwilling to impose far smaller costs on itself despite the undeniable irresponsibility of its past energy policies". Krugman.
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..
Russia's central bank says it will stop buying gold at a fixed price
Front and center on Stuff this morning; yet another article invoking the spectre of national security to justify banning behaviour that certain people don't like. While credible death threats against anyone should never be tolerated, and some of the personal attacks against Ardern are pathetic and frankly distasteful, public name-calling is a PR issue, not a national security one. From the article:
[This behaviour] appears to be part of a concentrated effort to suppress women’s participation in public and political life, borne from far-right ideology designed to oppress women that has spread to a more mainstream audience.
Apparently they're not just misguided Facebook posters disillusioned with the current state of affairs; they're part of a "concentrated effort", a "far-right ideology" hell-bent on destroying women's influence in politics. Probably associated with Russian trolls or something, and as such they must be stopped.
It's getting out of hand. The next step will be to start using the "T" word, which frankly I don't think is too far off.
Barely. Examples are given in the article; photoshopping Ardern's head on a sex workers body, saying "hang the bitch" without any meaningful intent, silly horse jokes. All of these things in my opinion are childish, but none represent a national security issue.
One man was arrested for making death threats, and as long as it was a credible threat, I fully support that response.
Really, no meaningful intent?
I have no idea why this sort of bollocks should be tolerated. And I'm inclined to agree that it is a concerted effort reinforced by use cult like use of language to encourage it. logarithims certainly have a tendency to bring perps together in one place and set things off.
The internet has given instant ability on a global scale for any individual to express views on any platform on any subject. Unfortunately this avenue is likely to be more greatly availed by those extreme and vicious views and opinions more than normal people simply because it is inherent in their nature to vigorously broadcast their material. In the old days, those such as Hitler, started off on street corners & soap boxes. Today they can be anytime, anywhere in the world. Also greatly concerning is the discovery of on line abuse in Christchurch with the instigators having National Party affiliation. Rather than being told to resign they should have been publicly sacked full stop. Both Labour & National in recent times have been exposed with unsavoury attitudes & activities emanating out of let’s say junior ranks. There should be a great deal more vigilance and discipline by party management to act meaningfully before anything like this even gets started.
Of course the far right don't oppress women! They already know what the best interests of women are! https://www.bbc.com/news/world-us-canada-61005390
It is use of language. For normal usage left means 'try something new and progressive' and right means 'don't alter a working system; it often leads to unanticipated problems'. Far-left would be admirers of North Korea and Maduro in Venezuela. Far-right would be the KKK and wearers of swastikas. But how immense the gap between far-left and say supporters of Danish socialism or Jacinda Ardern. Similar to the immense gap between far-right and say British Conservatives or Christopher Luxon.
Far-left or far-right are very small minorities unable to convince the public. They may resort to violence: the Red Brigade and the Weathermen or Anders Breivik and the Oklahoma bombing.
Best to avoid use the prefix 'far-' because it muddies the argument.
I wonder how much truth there is in that a large chunk of Taiwan's export increases are Chinese by origin & slipped (shipped) through the net?
Wholesale interest rates have taken off over the past 6 months. It's a little scary if you're a borrower. Too little action, too late in the day, as some have posted here before. How Mr Orr keeps his job is now beyond me. In trying to stabilise the money markets he has set them on fire, first by overprinting too much money & secondly by undercosting the price of it all. He & Mr Robertson have got a lot to answer for.
https://www.marketwatch.com/story/its-now-clear-that-the-federal-reserv…
Even now economist and media are polite by saying error, which in fact is a Blunder.
Why were media and economist silent when the writting was on the wall that government as well as central bankers are going in extreme and for long even when emergency was over.
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