Here's our summary of key economic events over the weekend that affect New Zealand with news the Chinese economy might be at risk of unravelling, or at least in need of some emergency stimulus far above what has happened so far.
Also, trouble in global equity markets may not be over yet with investors looking for further clues on the course of Fed monetary policy and monitoring earnings result from big retailers. American retail sales, housing data and speeches by several Fed officials will take center stage there. Elsewhere, the inflation rates for UK, Canada, and Japan will be closely watched. And for us, the Government's Budget will be front and center on Thursday. In Australia, it is their last week of election campaigning.
But first in China, the extent of their stall has been revealed in their "new yuan loans" data. Chinese banks extended just ¥645 bln (NZ$152 bln) in new yuan loans in April, the lowest since December 2017 and well below market expectations of ¥1,515 bln. In March, this level was ¥3,130 bln (NZ$736 bln), so the -80% dive in just 30 days has been dramatic. Their lockdowns to contain the pandemic spread are having a stifling impact on their economy.
And warnings are growing that more aggressive measures will be required to 'save the economy'. Many families and small businesses are losing their ability to resist economic shocks.
Shanghai chipmaker SMIC, listed and "partially state-owned", told investors late last week that demand for mobile phones, personal computers and home appliances has dropped "like a rock" and shows no signs of recovering. Its stock has dropped -23% in the past three months.
In an attempt to tempt more buyers back to their moribund property markets, over the weekend their central bank surprised with an order that first home buyers be given a -20 bps discount on their mortgage interest rate. Most mortgages are longer than five years and pegged to the five-year Loan Prime Rate - at 4.6% now - so the new floor is effectively 4.4%.
But perhaps there is some light at the end of the Chinese tunnel. Shanghai might be over the worst of their lockdown pressures, at least that is what global investors are betting on. But whether that will actually be enough to regain momentum is very uncertain.
In the US, at the end of last week the Fed boss has signaled that they will raise their policy rate by "50-basis point increases at the next two meetings" despite "some pain" as they find new resolve to battle inflation. And he has plenty of support among voting members.
Meanwhile, American consumers have similar concerns about inflation. The latest sentiment survey, this one from the wide-watched University of Michigan, fell to its lowest level since August 2011, and below market forecasts.
In Canada, the Q1 update to their senior loan officer survey revealed credit conditions got less tight in the period.
At the G7, countries have been huddling in Germany and warned that the war in Ukraine is stoking a global food and energy crisis which threatens poor countries, and urgent measures are needed to unblock stores of grain that Russia is preventing from leaving Ukraine.
India has banned wheat exports, as more countries prioritise fear over cooperation. India isn't a significant wheat exporter on a global scale, but some poor countries rely on it. It is the signal it is sending that worries some, a country behaving like shoppers who hoard toilet paper.
And speaking of commodity 'bans', keep an eye on cotton prices as climate issues and water availability affect the prices consumers may have to pay for clothing.
Russia is battling rampant inflation, up to +18% in the April data released overnight and its highest since 2002. But to be fair, this is mild compared to what is going on in Turkey, where that same rate reached +70% year-on-year in April. Both make our 6.9% seem tame which reinforces the value of generally sensible and bi-partisan economic policy making. Lose a hold on common sense and things can quickly spiral out of control.
The UST 10yr yield will start the week little-changed at 2.93%. The UST 2-10 rate curve is just a little steeper at +34 bps but their 1-5 curve is flat at +92 bps. Their 30 day-10yr curve is little-changed too at +225 bps. The Australian ten year bond is now at 3.38% and up +1 bps. The China Govt ten year bond is unchanged at 2.83%. And the New Zealand Govt ten year is also unchanged at 3.61%.
The price of gold starts today up +US$2 since this time Saturday at US$1812/oz. A week ago it was at US$1881/oz, so it has declined by -3.8% over that time.
And oil prices are still just under US$109/bbl in the US, while the international Brent price is now just over US$110/bbl. The momentum to bring new oil rigs into production in North America seems to be rising.
The Kiwi dollar will open today firmer against the US dollar, now at 62.9 USc. Against the Australian dollar we are also firmer at 90.7 AUc. Against the euro we are up at 60.4 euro cents. That all means our TWI-5 starts today at 70.6 which is marginally firmer in a week.
The bitcoin price has risen +2.1% from this time Saturday and is now at US$30,050. Volatility over the past 24 hours has been moderate at +/- 2.1%. The dive in the past week or so is threatening El Salvador's solvency which went all-in on the crypto - at the peak.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».