Mixed signals from the US; Chinese yuan devalues; Japanese inflation rises; German PPI eases; travel to Australia from China weak; UST 10yr 3.69%; gold up and oil stable; NZ$1 = 62.8 USc; TWI-5 = 71.3

Here's our summary of key economic events overnight that affect New Zealand, with news the week is ending it a bit of a muddle even as investors push equity prices up sharply.

Markets are unsure of what to make of today's signals. In the US it was reported that Republican negotiators walked out of a debt ceiling meeting. On the other, Fed Chair Powell said that because of stress in the banking sector, it might be unnecessary to raise rates to curb inflation.

The debt negotiations were reportedly going well with no key sticking points - but House Speaker McCarthy intervened to call a 'pause' and calling the Whitehouse negotiators 'unreasonable'. McCarthy was not at the negotiating meeting. It just seems silly theater, designed to cause maximum stress and damage. But still, markets think it will get resolved as it always does.

In Canada, data for March retail sales was weak coming in only +2.4% higher in value terms than year ago levels but falling from February levels. But in volume terms, retail sales were up 1.2% in Q1-2023, so the March result is a bit of an aberration. The same data shows that things will likely be back with a good +2.5% pa annualised rise in April from March. The falling petrol price is causing these signals to be a bit odd.

In China, their currency continues its devaluation, falling well past 7 to the US dollar, and now up to 4.43 to the NZD. From the start of April, the Chinese yuan has devalued -2.3%. Against the NZD the devaluation is -3.0%. It may have been more if it hadn't raced to put in place direct deals with many developing countries, oil exporters, and Russia. These effectively hide demand and supply transactions from the open market. That opacity is holding the yuan from falling further. At some point the non-Chinese traders will tire of having a discount imposed on them.

And it isn't helping that foreign buyers seem to be shunning the important Canton Trade Fair this year.

Japanese inflation came in at 3.5% in April, well above the expected +2.5% and above March's 3.2%. Japanese inflation is settling in above the Bank of Japan's 2% target rate. That's twelve consecutive months higher than that target.

And perhaps we should note that there is a good chance that Pita (Tim) Limjaroenrat will likely become the next Prime Minister of Thailand, having led the Move Forward Party to an unlikely front-running and winning position in their recent elections. As a young student, he was sent to Hamilton for his high school years, so there is a Kiwi connection. He later graduated from Harvard. The final decision about whether he actually gets the Prime Minister job rests with the Thai military who have to consent, and they will find that hard given their candidates too a heavy drubbing at the hands of Move Forward.

German producer price inflation rose +4.1% in April from a year ago, the smallest increase since April 2021. The annualised rate between March and April was even lower.

Australia is feeling left out of inbound travellers from China. There were 26,810 short-term visitors from China in March compared to 124,370 in March 2019. This semi-official snub has a flow-on impact on New Zealand where only 7119 short-term visitors from China arrived here compared to 41,063 in March 2019. China may be punishing Australia, but we get blowback too.

The UST 10yr yield starts today at 3.69%, and up another +3 bps from this time yesterday and a two month high - and up +25 bps for the week. Their key 2-10 yield curve is a bit less inverted at -59 bps. Their 1-5 curve is a bit less inverted too at -127 bps. But their 3 mth-10yr curve is little-changed at -179 bps. The Australian 10 year bond yield is now at 3.63% and up another +6 bps. That is a +24 bps rise in a week. The China 10 year bond rate is unchanged at 2.73%. And the NZ Government 10 year bond rate is at 4.46% up another +10 bps from yesterday and up a massive +40 bps in a week.

Wall Street has opened its Friday session with a -0.2% dip on the S&P500 but heading for a weekly rise of +1.6%. Overnight European markets were all up +0.6% excpt London which was up a lesser +0.2% on the day. Yesterday Tokyo closed up another respectable +0.8% to end its week up a massive +4.3%. Hong Kong fell -1.4% on the day to end the week down -0.4%. Shanghai was down -0.4% in its Friday session to end up +0.4% for the week. The ASX200 closed its Friday session recovering +0.6% for a weekly rise of +0.3%. And the NZX50 ended up +1.0% on Friday to be +1.3% ahead for the week.

The price of gold will start today at US$1976/oz and up +US$19 in a day, but down -US$35 for the week.

And oil prices are unchanged from yesterday to be just over US$71.50/bbl in the US. The international Brent price is still just over US$75.50/bbl. These levels are +91.50/bbl higher than this time last week.

The Kiwi dollar is up +¾c against the USD from yesterday and now just on 62.8 USc. And it is up a full +1c in a week. Against the Aussie we are up +½c at just under 94.5 AUc. Against the euro we are up nearly +½c too at 58.1 euro cents. That means the TWI-5 is up to 71.3 and up +50 bps from this time yesterday and up +120 bps in a week.

The bitcoin price is lower today, now at US$26,882 and up +1.5% from this time yesterday. Bitcoin was at US$26,359 a week ago, so very little change since then. Volatility over the past 24 hours has remained modest at just on +/- 1.9%.

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