Here's our summary of key economic events overnight that affect New Zealand with news China has pulled the trigger on a significant increase in infrastructure spending. And that is not to ignore a sharp jump in the UST 10yr yield overnight.
But first up today, the UN is saying the Ukraine crisis risks tipping up to 1.7 billion people - over one-fifth of humanity - into "poverty, destitution and hunger". Ukraine and Russia supply 30% of the world’s wheat and barley, 20% of its corn, and over half of its sunflower oil. Prices are rising sharply now, and there is a direct correlation between rising food prices and social and political instability. They see a "perfect storm" that is likely to devastate the economies of developing countries. There is no real evidence yet the developed world has turned it attention to this looming crisis.
In the US jobless claims rose slightly last week, but an increasing number of those on these benefit shifted into employment, taking the number on them to a record low 1.57 mln as their labour market continues to strengthen.
Even though car sales slipped in March, retail sales of everything else rose at a very healthy rate. Overall they came in +7% above year-ago levels. Without vehicles, the rise was +9.4%. In fact for Q1-2022 retails sales excluding vehicles were up +13.3% from the same period a year ago. That is far more than inflation.
But these practical expressions of sentiment (jobs, retail sales) are not being reflected in attitudes. A steady diet of news negativity is keeping sentiment down, although it is latest survey, the widely-watched University of Michigan survey is starting to reflect a more up-beat sentiment, one that 'surprised' the surveyors.
And this was despite higher American mortgage rates that are continuing the slowdown in mortgage applications. In fact a key measure has now hit 5% for their main mortgage interest rate in an extended sharp runup. Mortgage brokers say in fact it is now at 5.13%.
US industrial production rose again, up +5.5% in a year and the March increase booked a fifth solid rise in the past six months. The rise of production for both consumer goods and business equipment was actually quite impressive in the month, tipping an annual pace of about +15%.
And that was backed up by a strong result in the New York Fed's regional factory survey where new orders and shipments rose strongly in March. Employment rose as well. But there was no escaping high costs, which hit a record high gain.
Maybe some of that is a beefing up of supply-chain resilience. Business inventories rose slightly more than expected, and the inventory-to-sales ratio picked up marginally. But it remains at historically low levels, and therefore not indicating supplier stress.
But a closely-watched freight monitoring service is showing the froth is going out of their logistics industry.
China has pulled the trigger on more generous credit expansion settings. As expected it has cut its reserve ratio, this time by -25 bps. After this cut, the weighted average deposit reserve ratio of financial institutions becomes just 8.1% - that is, on average their financial institutions now only need 8.1% of reserves backing up their lending activity. But in the grand scheme of things, it has been a modest move so far.
Far more impressive is its rush to get big new infrastructure projects approved and underway. They have already approved 32 projects worth NZ$120 bln for new transportation, energy, and high-tech activity. In all of 2021 they approved 90 projects worth NZ$180 bln, so the pace is startlingly faster in 2022. And the private sector is getting regulatory encouragement too.
They need it right now, because the pandemic lockdown in Shanghai is close to causing a widespread business stall there.
Container freight rates out of China continue to fall. But bulk cargo rates have started to trend up again.
Chinese house prices are said to be rising. But the latest data sows them falling in March from February in 38 of the 70 largest Chinese cities, although that does not include Beijing or Shanghai. But it does now include Guangzhou. Year-on-year, the overall increase is now down to just +1.5% and a stall seems to be underway there. Separately, Hong Kong house prices have stopped rising and may also be falling now.
In Europe, the ECB left all its settings unchanged, inhibited from returning to 'normal' by the sudden rise in risks in Eastern Europe.
In Australia, their March labour market data revealed only minor changes. Employment rose +17,900 to a fresh record high of 13.4 mln, below market forecasts of +40,000, as full-time employment increased by +20,500 to 9,248,600 while part-time employment fell -2,700 to 4,141,300. Their jobless rate was unchanged at 4.0%. Despite all the small gains, the total number of hours worked in their economy slipped, and not for the first time. The March 2022 level is actually lower than the March 2021 level. Plus, total hours worked in March 2022 was lower than for February 2022.
The UST 10yr yield has risen sharply again while we were on holiday, up a significant +14 bps to 2.83%. The UST 2-10 rate curve starts today steeper at +37 bps. Their 1-5 curve is steeper at +103 bps. Their 30 day-10yr curve is unchanged at +257 bps. Just about all the other minor curves are quite 'positive' again. The Australian ten year bond is now at 3.03% and and up +5 bps. The China Govt ten year bond is unchanged at 2.82%. But the New Zealand Govt ten year starts today at just on 3.43%, down -5 bps.
Wall Street is closed today, but ended its Thursday session down -1.2% to be down -2.3% for the week. European markets were all closed as well, and although they all booked a Thursday gain, most were lower for the week. Tokyo fell -0.3% in its Friday trade but managed a +0.8% weekly gain. Hong Kong was closed ending its week down -0.7%. Shanghai ended its Friday session down -0.5% and its week down -0.9%. Of course the ASX and the NZX were closed yesterday. The ASX200 ended its shortened week up +0.6% and the NZX50 ended down -1.4%.
The price of gold starts today at US$1974/oz and down -US$5 from this time Thursday.
And oil prices are up +US$2.50 today at just over US$106/bbl in the US while the international Brent price is now just on US$111/bbl.
The Kiwi dollar will open today a little weaker at 67.2 USc. But against the Australian dollar we are almost +½c firmer at 91.6 AUc. Against the euro we have firmed as well to 62.7 euro cents. That all means our TWI-5 starts today at 73.8 and little-changed.
The bitcoin price is down -1.4% from this time Thursday at US$40,415. Volatility over the past 24 hours has been modest at +/- 1.5%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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