US inflation resists the Fed; US new home sales rise and sentiment improves; Japanese inflation rises; Singapore suffers; China dumps central bank boss; UST 10yr 3.95%; gold weak and oil firm; NZ$1 = 61.6 USc; TWI-5 = 70.1

Here's our summary of key economic events overnight that affect New Zealand, with news central banks clearly haven't taken strong enough action against inflation yet.

And we start today with data that shows the American policy response against inflation isn't working. Their core PCE price index, the Federal Reserve’s preferred gauge to measure inflation, rose by 4.7% annually, higher than 4.6% in December and surpassed market expectations of 4.3%. More concerning is that the annualised rise from December to January was at a rate above 7%.

"Better" or "worse" depending on your perspective, is that incomes are rising at the same rate. It is "good" that workers are not falling behind, and a tight labour market helps that. But it is "bad" because policy makers will see that wage claims are a driver, and wage-push inflation is settling in. The only way out of that is to induce a recession. But they don't look like they are anywhere near that yet.

Markets are nervous. Equity prices fell, bond yields rose, and the USD jumped. Markets are expecting the Fed will push on and do what it says it wants to go; kill off wage-push inflation. And that means tough times are ahead.

Sales of new American homes in January came in higher than expected, and a boost to housing confidence.

More generally, the widely-watched University of Michigan sentiment survey also showed rising confidence. It not only rose from the prior month, it is up strongly from a year ago. Americans seem to be tolerating higher prices when they aren't being hurt on the income side.

Japan reported CPI inflation in the year to January of 4.3%, up from 4.0% in December. This is their highest rate in 42 years, since December 1981. Food prices were up 7.3%. But generally it was driven by rises in the cost of imported raw commodities and yen weakness. The annualised rate of change between December and January was almost +5%, so the pace is quickening. There is now a greater chance the Bank of Japan will pivot away from its long-standing ultra-loose policies. Not only is there a new BofJ boss incoming, but major companies are starting to raise wages sharply, a key factor for the central bank.

Going the other way, Singapore's industrial production fell in January and by much more than expected. It was expected to dip slightly from December but the actual data was much worse and twisted the year-on-year result to a retreat.

In China, they are about to dump the respected technocrat boss of their central bank with new political appointments and giving Beijing even closer control over monetary policy. It is a shift that raises the risks of unexpected consequences in policy shifts. It is also very noticeable how little economic data is being published by China these days. It was already quite light for a major power, but the flow is drying up even more. Their push to deny international news organisations visas has tightened the flow inexorably. China is more opaque than ever.

Germany updated their interim Q4-2022 GDP result with a slightly bigger retreat than first indicated and a loss of momentum as the year ended. Weaker business investment was behind this shift

In Australia, another BNPL champion as reported continuing cash burn and been forced to retreat from more offshore markets to stem the flow. It is pulling out of Mexico, Singapore and the UK. And it will soon retreat from India, Turkey, the Czech Republic, South Africa, Poland and the Philippines. BNPL has hardly every been a profitable business for anyone, lots of 'mystery' with no positive 'history'.

It is interesting to note that the rare metal molybdenum has zoomed in price recently. It is the ingredient that hardens steel. There is a severe supply squeeze on at present. This one stands out as most other major metal prices are stable or soft.

The UST 10yr yield starts today at 3.95% and up +4 bps from yesterday and up +14 bps in a week. The UST 2-10 rate curve is more inverted at -86 bps. But their 1-5 curve inversion is less inverted at -84 bps. Their 30 day-10yr curve is little-changed at -66 bps. The Australian ten year bond is up +2 bps at 3.920%. The China Govt ten year bond is also unchanged at 2.94%. And the New Zealand Govt ten year is starting today at 4.67% and also little-changed from yesterday. But it is up +26 bps in a week.

Wall Street started its Friday session with the S&P500 down -1.3% on the US inflation data. That will make the loss -2.9% for the week as equities get repriced. Overnight, European markets were all down about -1.7% except London which closed down -0.4%. That means for the week, Paris lost -2.4%, Frankfurt lost -2.0% and London lost -1.6%. Yesterday Tokyo was closed up +1.3% for an unchanged week. Hong Kong ended down another -1.6% for a weekly drop of -3.3%. And Shanghai fell -0.6% on the day but gained +1.1% for the week. The ASX200 ended up +0.3% yesterday but for the week fell -0.5%. The NZX50 inched up +0.2% in Friday trade but had to settle for a weekly drop of -2.0%.

The price of gold will open today at US$1811/oz and down -US$9 from this time yesterday. But that is a -US$30 fall in a week.

And oil prices start today up +US$1 at just over US$76/bbl in the US. The international Brent price is now at US$82.50/bbl. Both are unchanged in a week.

The Kiwi dollar is at 61.6 USc, and down another -½c than this time yesterday. And that is almost a -1c drop in a week and taking it to a three month low. Against the Aussie we are little-changed at 91.6 AUc. Against the euro we are soft at 58.4 euro cents. That all takes the TWI-5 to 70.1 and actually very little-changed in a week.

Bitcoin has dipped -3.2 % since this time yesterday and is now at US$23,103. And that is down -5.4% from a week ago. However, volatility over the past 24 yours has again been moderate at +/-2.5%.

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