US real estate industry struggles, but wider economy still shows good expansion; China pivots to serious stimulus; Aussie inflation leaps; UST 10yr 2.82%; gold lower and oil stable; NZ$1 = 65.6 USc; TWI-5 = 72.7

Here's our summary of key economic events overnight that affect New Zealand with news we are starting to see more overt political responses to economic pressures, from oil and gas to food ingredients, and these will all magnify inflationary problems.

But first, there was another sizable fall in mortgage applications last week in the US, coinciding with a sharp rise in mortgage interest rates. That has taken overall mortgage activity to an historically low zone. Brokers are reporting mortgage interest rates have risen to 2009 levels now and the shift has been fast.

American march home sales fell in March, under the same pressures.

But the American home ownership rate has remained stable at 65.4% and their rental vacancy rate remains low at 5.8%.

In their wider economy, inventories at both wholesale and retail levels remain little different from recent levels, although the small gains are accumulating as global supply chains force more resilience into these systems. They are also increasing because economic activity is increasing and that may in fact be the greater reason.

Certainly it is sucking in imports. In March, US imports rose a rather remarkable +24% year-on-year as domestic demand stays very strong. Some of that will be cost increase, but most is volume. US exports rose a healthy +18% and to a record high and that would normally be a stellar result. But it is overshadowed by the leap in imports. And the fastest rise in imports are "industrial supplies" and not "consumer goods" as is usually assumed. Capital goods imports rose fast too. Their goods trade deficit remains about -5% of US GDP and will be reduced when the services surplus is announced.

The latest US Treasury bond tender brought higher yields again, even if the event was very well supported. This 5 year bond had a median yield of 2.72%, a relentless step-up from the prior event at 2.46%.

China reported a strong rise in industrial profits in the March quarter, but that was mostly from the mining sector (coal and oil). Factory profits fell. This distortion has Beijing's attention as it "announces" major new infrastructure spending, especially noting the funds being redirected to "national security" in face of "extreme conditions" at home. Unlike similar prior announcements, there is no mention this time of "financial stability". This seems to be an all-out effort to recover an economy that is now withering as they battle the spread of Omicron.

Interestingly, the sharp rise in American imports does not seem to be helping China's economy. China may not be getting its usual share.

The cost pressures facing China are no different to other countries. And Indonesia's sudden and unexpected ban on the export of very low-cost palm oil will push a largescale substitution to other vegetable oils and push up worldwide food costs fast.

In Germany, an updated survey of consumer sentiment tanked. It came in far lower than what was expected to the lowest reading on record as the war in Ukraine hit household budgets and dashed hopes of their post-pandemic recovery.

Aussie headline inflation jumped to 5.1% in the year to March, the highest annual level in more than 20 years. Economists said a May election campaign rate hike was now in play because it came in far above the 4.6% rate expected. That is, a rate hike for them next week and in the middle of their election campaign. Worse, the March quarter rate was 2.14% so the recent jump in prices is running far higher than the annual rate suggests. Even their "trimmed mean" rates came in higher than expected. This data will probably have an echo in New Zealand yields, keeping them elevated.

The UST 10yr yield starts today up +6 bps at 2.82%. The UST 2-10 rate curve is a little steeper at +24 bps. And their 1-5 curve is also steeper at +84 bps. Their 30 day-10yr curve is little-changed at +244 bps. The Australian ten year bond is now at 3.07% and up +4 bps. The China Govt ten year bond is up +1 bp at 2.86%. And the New Zealand Govt ten year up +2 bps at 3.64% and still building ahead of the next expected RBNZ rate hike which markets have more than fully priced in at +50 bps.

On Wall Street, the S&P500 is up +1.2% in late afternoon Wednesday trade. Overnight, European markets all rose about +0.5%. Yesterday Tokyo ended its Wednesday session down a sharpish -1.2%. Hong Kong was little-changed on the day. But Shanghai recovered +2.5% on the stimulus announcements. The ASX200 ended yesterday down -0.8%. The NZX50 ended down -0.7%.

The price of gold starts today down -US$9 since this time yesterday at US$1891/oz.

And oil prices are little-changed at just under US$102/bbl in the US while the international Brent price is now just over US$105/bbl.

The Kiwi dollar will open today softer again at 65.6 USc. Against the Australian dollar we are soft too at 91.9 AUc. And against the euro we are marginally firmer at 62 euro cents. That all means our TWI-5 starts today at 72.7 and little-changed since where we left it yesterday.

The bitcoin price is up +1.8% from this time yesterday at US$39,102. Volatility over the past 24 hours has been moderate at just under +/- 2.3%.

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