US incomes rise, inflation falls; industry still struggles; stress levels moderate; China's rebound holds questions; Japan up; EU inflation down; UST 10yr 3.48%; gold down and oil up; NZ$1 = 62.5 USc; TWI-5 = 70.5

Here's our summary of key economic events overnight that affect New Zealand, with news that most major regions are making good headway in their fight against inflation - and equity markets approve. But bond markets aren't quite so sure.

American personal incomes rose at a +6% rate in February from January, and their personal spending rose at a +2.5% rate. This is not a sign of growing household stress. The inflation measure in this latest data shows it receding, running at an annualised 3.6% in February from January, and +5.0% higher than year-ago levels. That is actually its lowest rate since August 2022 when it was on its steep rise.

Meanwhile the Chicago PMI remained very negative in March but unchanged from February, in this barometer of the American industrial heartland.

And the University of Michigan sentiment index slipped in March, but driven mainly by those who self-identify as 'Republican'.

Even in a long perspective the share market VIX index of stress isn't currently elevated. And the broader financial stress index maintained by the St Louis Fed isn't either, quickly retreating after a brief and relatively minor spike last week. Even the Fear & Greed index is currently running at Neutral, after running in Fear territory a week ago, and Greed territory a month ago.

Even though the battle isn't anywhere near over and the Fed still signals inflation is their top concern, markets are saying they like the PCE track.

Taiwan's factories held all their February recovery in March but couldn't quite break back to an expansion mode. The downturn in production continued to ease, while firms signaled only marginal drops in new orders and employment in the latest PMI update.

Yesterday we noted that China's recovering car industry is doing so because of steep discounts rolled out by manufacturers, and at a level that is unsustainable. Today we can note that China's airlines are riding higher passenger traffic but also booking huge losses at the same time. Neither industries seem to have a sustainable business plan.

And staying in China, their factory expansion extended to a third straight month, even if it didn't quite rise to the expected level. But according to the official data, their service sector is positively booming. But before accepting those conclusions it is probably best to await the private survey results which are due out on Monday.

Japan's stats are a different story, accepted as unvarnished. They reported a surprise rise in industrial production in February, far stronger than anticipated. And they reported far better retail sales for February than expected as well. If they keep this up, the world's third largest economy may become a driver of international trends.

German retail sales came in unexpectedly weaker for February.

French inflation eased in March to 5.6% and Italian inflation eased to 7.7%. Along with easing German inflation that we have previously reported, the EU says its overall bloc inflation was 6.9% in March, lower than the 7.1% expected and very much lower than February's 8.5% rate. They will count these declines as 'wins'. Falling energy prices are behind all these improvements, aided by the price caps imposed in Russian energy.

We often note that the American participation rate is much lower in their labour market than elsewhere. Now a NY Fed review shows that is largely due to a rapid ageing of their workforce and a propensity for baby boomers to quit working. It may also explain why public safety net programs Medicare, Medicaid, and Obamacare are all now untouchable even by Republican politicians who railed against them. In the end, pay-as-you-go systems involve a massive free lunch because you never contribute enough to cover what you take out in retirement. As such they are hugely popular - and in the end massively dangerous to social cohesion.

We should also note that the New Zealand carbon price seems to be in free-fall after the recent failed NZU tender. The price ended the week at NZ$54.50/NZU as investors flee for what they can get. For reference, the EU carbon price is currently at €96.13, about where it was in February 2022, or NZ$167/tonne.

The UST 10yr yield starts today at 3.48%, and down -8 bps from yesterday. The UST 2-10 rate curve is marginally more inverted at -57 bps. But their 1-5 curve inversion is greater again at -101 bps. And their 30 day-10yr curve is very much more inverted at -120 bps. The Australian ten year bond is down *12 bps at 3.24%. The China Govt ten year bond is little-changed at 2.87%. And the New Zealand Govt ten year is starting today unchanged at 4.25%. A week ago it was at 4.17% so an +8 bps rise since..

Wall Street ended up strongly, with the S&P500 booking a +1.4% rise in Friday trade. That means it has risen +3.2% for the week and +4% for the month. Its been a very good quarter for equity investors. Overnight, European markets were all positive and up another +0.7% except London which gained only +0.2%. Yesterday Tokyo ended its Friday session up +0.9% and up +2.0% for the week. Hong Kong was up +0.5% on the day and up +2.8% for the week, and Shanghai ended up +0.4% on Friday and up +0.3% for the week. The ASX200 ended up a +0.8% on Friday to be +3.2% higher for the week. And the NZX50 fell -0.47% in its Friday trade to end up +2.6% for the week.

The price of gold will open today at US$1972/oz and retreating -US$11 from this time yesterday. A week ago it was at US$1977/oz.

And oil prices start today up +US$1.50 from yesterday at just on US$75.50/bbl in the US. The international Brent price is now just on US$79.50/bbl. A week ago these prices were US$69 and US$74.50/bbl respectively.

The Kiwi dollar is little-changed against the USD and now at 62.5 USc. Against the Aussie we are firmish at 93.5 AUc. Against the euro we are firm at 57.6 euro cents. That means the TWI-5 is now at 70.5 with very little daily change. But it is up +40 bps from a week ago, and up +30 bps from this time last month.

The bitcoin price is very little-changed again today, now at US$28,325 and up a very minor +0.2% from this time yesterday. But it is up +2.2% from week-ago levels. Volatility over the past 24 hours has remained moderate at +/-2.0%.

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