US CPI inflation stays high; US budget repair gathers momentum; China inflation modest; Malaysia hikes rates; Aussie sentiment falls; UST 10yr 2.92%; gold and oil firm; NZ$1 = 63.1 USc; TWI-5 = 70.6

Here's our summary of key economic events overnight that affect New Zealand with news the US budget repair is having impressive results.

But first, their April CPI data was released earlier this morning and it came in at 8.3%, fractionally lower than March's 8.5% but slightly higher than the expected 8.1%. The core readings were lower at 6.2% year-on-year. But the monthly change from March actually rose at a faster pace than was expected, and this has grabbed market attention.

Separately, American mortgage applications rose marginally last week, a second consecutive increase, and despite a rise in borrowing costs as their Spring housing market enters its historically busiest time. Applications to purchase a home surged 4.5% while those to refinance a mortgage loan fell 2%. The average contract rate on a 30-year fixed-rate mortgage jumped by 17bps to 5.53%, the highest since 2009.

The better management of the US Federal Government is starting to show up in reduced deficits. In fact, their April result reported a spectacular surplus. That surplus was a remarkable +US$308 bln in the month, reducing the annual deficit to "just" -US$1.2 tln (5% of GDP) from -$2.8 tln (11.6% of GDP) on the prior full fiscal year. The April surplus was the largest ever recorded, built on fiscal restraint (spending was down -16% on the same month a year earlier), and fast rising tax revenues from the booming economy.

The US Treasury ran a ten year bond auction today which was well supported with US$90 bln in bids for $36 bln on offer. The resulting median yield was 2.85%, up from 2.62% at the prior event a month ago.

We should also note that American farmers are running out of time to plant crops in their spring season. Wet and cool weather in key parts of the Midwest has left farmers with just days to get their crops in the ground at a time when global grain supplies are already under pressure.

In Japan, they now seem to be getting some real economic expansion.

In China, they are starting to get some modest consumer price inflation. April CPI ran at an annual rate of 2.1%, up from an annualised 1.5% rate in March, above market forecasts of 1.8%. This was the highest since November, amid logistic disruptions caused by their strict pandemic measures. Food prices rose for the first time in five months, and its highest since October 2020. 

The reverse is occurring in their factory sector where high producer price inflation is easing, even if only marginally.

Separately, China is lashing out at the recent WHO comments that its zero-COVID policy is unsustainable. Further, it is more aggressively censoring local views that say similar things. China seems to have backed itself into a tough corner.

In Malaysia, their central bank pushed through an unexpected rate hike overnight, taking their policy rate up +25 bps to 2.0%. Their authorities said a better growth outlook, higher inflation expectations, the global rate hiking cycle, and a need to normalise, all played a part in this rise. More are expected in coming months now. Other Asian central banks are also expected to join the rate hiking bandwagon, the next being South Korea.

In Europe, the ECB has signaled that it will be raising its policy rates in July.

In Australia, the Westpac-Melbourne Institute Index of Consumer Sentiment fell -5.6% month-over-month in May 2022, the most since June 2015 and down for the sixth month in a row, amid a combination of surging prices and the prospect of faster interest rate hikes.

And in their final televised debate before their federal election, polling indicates the challenger won. The ALP leader won overwhelming support from voters based in seven marginal seats across the country, in a debate dominated by kitchen table economics.

The UST 10yr yield starts today down another -7 bps since this time yesterday at 2.92%. The UST 2-10 rate curve is flatter at +29 bps and their 1-5 curve is also flatter at +95 bps. Their 30 day-10yr curve is flatter too at +238 bps. The Australian ten year bond is now at 3.43% and down -4 bps. The China Govt ten year bond is little-changed at 2.84%. And the New Zealand Govt ten year is down -4 bps at 3.77%.

After being up for all the morning Wednesday session, Wall Street has turned lower and is now down -1.1% in late trade as the CPI result sinks in. Overnight European markets all rose more than +2% except London which was up a lesser +1.4%. Yesterday, Tokyo ended up +0.2%, Hong Kong up +1.0% and Shanghai ended up +0.8%. The ASX200 finished its Wednesday session up +0.2% but the NZX50 ended with no gain on the day.

The price of gold starts today up +US$7 since this time yesterday at US$1852/oz.

And oil prices have moved higher today by +US$4.50 at just under US$104/bbl in the US, while the international Brent price is now just over US$106.50/bbl.

The Kiwi dollar will open today marginally firmer at 63.1 USc and off its two-year low. Against the Australian dollar we are also slightly firmer at 90.8 AUc. And against the euro we are also marginally higher at 59.9 euro cents. That all means our TWI-5 starts today at 70.6.

The bitcoin price has fallen -6.0% from this time yesterday and is now at US$29,789. Volatility over the past 24 hours has been extreme again at just over +/- 5.2%.

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