Here's our summary of key economic events overnight that affect New Zealand, with news the stock market seems to be looking past the current turmoil, but the bond market can't keep its eyes off the current risks. Oil prices see demand falling sharply, but the OECD thinks the global policy settings are on the right track for the current economic situation. Meanwhile, bitcoin is surging. There is something for everyone in today's data.
US data released overnight was a touch softer than expected with industrial production slipping slightly in February and the University of Michigan sentiment survey for March coming in a little weaker than expected. But at least inflation expectations retreated in this survey.
With over 5000 banks, the US has always looked backward in terms of its payments system. Companies and people still use checks (cheques) a lot and 'float' is still a thing there. But they are getting closer to a modern payments system with the launch of FedNow, which will allow 'instant' transfer of funds between bank accounts - like we have had here for essentially since the 1970s (remember Databank?). It's been a real anomaly for the American banking system. (Watch out though; it will probably just become another culture-war battleground for 'conservatives'.)
In Canada producer prices fell in February, the seventh dip in the past ten months. They are now only +1.4% higher than year-ago levels and may be a key reason the Bank of Canada skipped a rate increase at its review last week.
In China, they have cut their reserve ratio again to induce even more lending. The cut it by -25 bps, the first reduction this year. For its biggest banks it is now 10.75% and its lowest in sixteen years. For smaller institutions it is down to about 7.6%. Rating agencies are probably still nervous about where Chinese banks are at present.
China also said their fiscal revenues fell -1.2% in the first two months of 2023 from a year earlier. Of note is that local governments are finding fewer buyers for land, an important source of 'income' for them as the housing development markets stay in the doldrums.
China is brutal when it changes direction; just ask bond traders. Suddenly and unexpectedly, regulators cut off market data for their US$21 tln bond market on the basis that providers of quotation details weren't 'permitted' properly. Suddenly bond traders were operating blind. Things are returning to a sort-of-normal now.
Meanwhile, China has reduced its holdings of US Treasury paper by -17% over the past year. Other countries are too. But to be fair, foreign holders of American debt have always been a minority.
Singaporean exports fell -8% in February from January, much more than anticipated. Year to date they are down -16%.
In Switzerland, Credit Suisse is huddling, looking for a way forward after the Swiss national bank supported them with big funding, but their cross-town rival UBS shunned any idea of a merger.
The OECD has raised the expansion prospects for major economies from the trim they made a few months ago. This improvement is because they see inflation easing now. But the improvement will be muted because interest rates will keep risks high. However, higher interest rates to squash inflation is the right medicine, they say.
Meanwhile the prices of some core commodities are rising again, like iron ore, and steel. But coal is continuing its steep retracement. And copper is going nowhere.
The UST 10yr yield starts today at 3.40% and down -17 bps from this time yesterday. But the UST 2-10 rate curve is sharply less inverted at -47 bps. Their 1-5 curve inversion is however more inverted at -89 bps. But their 30 day-10yr curve is little-changed at -57 bps. The Australian ten year bond is down -1 bp to 3.38%. The China Govt ten year bond is still at 2.88%. And the New Zealand Govt ten year is starting today at 4.43%, bucking the trend and up +5 bps from this time yesterday. A week ago however it was at 4.50% so on net it actually hasn't moved much compared to the UST 10yr which has dropped -31 bps.
On Wall Street, the S&P500 is ending its Friday session back down -1.0% but heading for a weekly gain of +2.2%. Overnight European markets all fell about -1.2%. Yesterday Tokyo closed up +1.2% to limit their weekly loss to -2.0%. Hong Kong rose +1.6% to tip their weekly gain up to +0.6%. And Shanghai rose +0.7% which was all they got for a weekly gain. The ASX200 ended its Friday session up +0.4% on the day limiting its weekly fall to -2.1%. The NZX50 closed up another +0.2% but despite that ended the week essentially unchanged.
The price of gold will open today at US$1975/oz and up a very sharp +US$61 from this time yesterday. That is up +US$111 or +6.0% in a week.
And oil prices start today little-changed from yesterday at just on US$67/bbl in the US. The international Brent price is however down -US$2 and now just on US$73/bbl. A week ago these prices were US$77 and US$82.50 so today's level is -12% lower than a week ago.
The Kiwi dollar is up +1c against the USD, and now at 62.7 USc. Against the Aussie we are up +¾c at 93.5 AUc. Against the euro we are also up up +¾c at 58.8 euro cents. That puts the TWI-5 at up to 70.9 with an +80 bps surge. A week ago it was at 70.1.
The bitcoin price is much firmer today, now at US$26,545 and up a sharp +7.0% from this time yesterday. That is up a third in a week and the first time over NZ$40,000 since June 2022. And volatility over the past 24 hours has been very high at +/-4.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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