US mortgage applications retreat, retail sales rise; Brazil on mad-cow watch; German sentiment up; Aussie wages up half their inflation rate; UST 10yr 3.90%; gold and oil lower; NZ$1 = 62.3 USc; TWI-5 = 70.4

Here's our summary of key economic events overnight that affect New Zealand, with news that high bond yields are rattling international equity markets. 'Good' economic news is currently 'bad' for market prices because it brings expectations the monetary authorities will keep raising interest rates.

But first, US mortgage applications took another sharp dive last week, down -13% from the week before to be a stunning -72% lower than year ago levels. That was undoubtedly because benchmark mortgage interest rates jumped to 6.62% and their highest of the year so far. The American real estate market seemed to have effectively stalled.

Meanwhile, consumers have turned their attention to retail therapy. Same-store sales rose last week to be +5.3% higher than year-ago levels, roughly keeping pace with retail inflation, and bucking the idea than things are generally grim. It seems to be only their housing market that meets that criteria.

We will get the US Fed minutes from the last meeting at 8am this morning NZT. They are expected to reinforce the official view that they have more work to do to quash inflation's impulse. Perhaps they will also clarify the endgame for their rate hikes.

In Brazil, they are mobilising investigations into a suspected case of mad cow disease. If Brazil suddenly stopped exporting beef, that would throw the international market into turmoil - and be inflationary everywhere else.

We noted yesterday that German business sentiment is improving, and another widely-watch survey on that is out today confirming the trend, their most optimistic since June last year.

In Australia, their wage price index rose again in Q4-2022 to reach its highest in a decade. That's the good news. The bad news is that wages are rising at only half the inflation rate, so Aussies are suffering a sharp loss in real wage levels. It seems to be a uniquely Aussie problem, with the data here showing that wage gains seem to have kept up with inflation - so far at least.

We should note again that the international price of natural gas just keeps on falling, now back to levels we last saw in 2020 and first saw in 1990. After some strategic shocks, it looks like the world has effectively pivoted away from growing use, leaving suppliers with an unprofitable trade. The inflation-adjusted cost of natural gas is its lowest ever, and it is similar for crude oil.

And we should note that the cost of lithium is sinking very fast now, almost a collapse. It is down -30% from its high in November. Waning demand for EV's is said to be the driver of this sharp shift.

It is also worth noting that the cost of carbon credits in New Zealand continue to retreat, now at one year lows.

The UST 10yr yield starts today at 3.90% and down -4 bps from yesterday and off its recent highs. The UST 2-10 rate curve is less inverted at -75 bps. But their 1-5 curve inversion is little-changed at -90 bps. Their 30 day-10yr curve is also less inverted at -64 bps. The Australian ten year bond is unchanged at 3.89%. The China Govt ten year bond is also unchanged at 2.94%. But the New Zealand Govt ten year is starting today at 4.55% and up a very sharp +11 bps from yesterday following the RBNZ MPS.

Wall Street has started its Wednesday session with the S&P500 little-changed near the close. There seems to be a trend developing where firms are priortising dividend payouts. But that doesn't include Intel, or Rio Tinto. Overnight, European markets were mixed, bookended by London down -0.5% and Frankfurt up very slightly. Yesterday Tokyo finished down a sharp -1.3%. Hong Kong ended down -0.5% as did Shanghai. The ASX200 ended down another -0.3% but the NZX50 ended flat with a strong rise at the close.

The price of gold will open today at US$1832/oz and down -US$2 from this time yesterday.

And oil prices start today down -US$2 at US$74.50/bbl in the US. The international Brent price is now at US$81/bbl.

The Kiwi dollar is at 62.3 USc, very little-changed from this time yesterday. Against the Aussie we are +1c firmer at 91.4 AUc. Against the euro we are almost +½c higher at 58.7 euro cents. That all takes the TWI-5 to 70.4 and a +50 bps rise.

Bitcoin has retreated sharply from this time yesterday and is now at US$23,605 which is down a large -6.5%. Volatility over the past 24 yours has been moderate at +/-2.4%.

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