Powell says rate cuts will come but slowly as US economy prosperous; China service sector expands; EU inflation falls; UST 10yr 4.36%; gold at another new high and oil up; NZ$1 = 60.1 USc; TWI-5 = 69.2

Here's our summary of key economic events overnight that affect New Zealand, with news progress toward lower inflation is underway but the road is bumpy.

First up today we should note that American mortgage application levels decreased again last week. Their mortgage rates moved lower last week, but that did little to ignite overall mortgage application activity which is now -13% lower than the weak year-ago levels. Their overall economy may be in a broad-based and resilient expansion but this does not include their housing market.

American employments levels are rising. Private businesses in the US hired an extra +184,000 workers in March following an upwardly revised +155,000 in February, and beating forecasts of +148,000. This is the biggest increase in hiring in eight months, with employment especially strong in services. In this ADP survey, pay was up +5.1%. The US non-farm payrolls are out on Saturday NZ time for March and they are expected to show a +200,000 increase.

So it might have been a surprise to see that the ISM services PMI for March ease off a little (even if new order levels expanded strongly). Then again, that was not reflected in the S&P Global (ex-Markit) US services PMI which noted further rises in output and new orders, but rates of growth did ease. They found the pace of job creation moderated and selling price inflation rose to an eight-month high. Nothing here signals imminent recession, but clearly inflation is not beaten.

Fed boss Powell spoke earlier today, but kept to his recent script saying a rate cut may come later this year, but they are watching the recent firmer inflation data even if they expect it will ease back soon. A colleague suggested the first cut there won't come until Q4.

American vehicle sales were expected to rise in March but they disappointed, coming in at an annualised pace of 15.5 mln. Still, this is about the same pace we have seen since April 2023 so it is holding its rise from the depressed period two years earlier than that.

In China, new order levels boosted its Caixin services PMI in March. The expansion isn't swift but it is better than a contraction. It was the 15th straight month of growth in services activity, with new business rising to the fastest pace in the year so far.

The Qingming Festival 3 day holiday in China will mean data releases there will be light until next week. Equity markets will be closed. They may be glad of the break; a survey of local economists cast growing doubt that the "about 5%" growth target will be reached this year, and it will be progressively harder in years to come.

In Europe, inflation levels fell more than expected, getting closer to the ECB target. It declined to 2.4% in March, matching November's 28-month low and that was lower than market expectations of 2.6%.

The UST 10yr yield is now at 4.36% and unchanged from this time yesterday. The key 2-10 yield curve inversion is less at -32 bps. And their 1-5 curve inversion is also less at -70 bps. Their 3 mth-10yr curve inversion is now at -101 bps and a bit less as well. The Australian 10 year bond yield is now at 4.16% and up +4 bps. The China 10 year bond rate is down -1 bp to just under 2.30%. The NZ Government 10 year bond rate is now at 4.70% and down -1 bp.

Wall Street has opened its Wednesday session up +0.4%. European markets were generally in positive territory with Frankfurt up +0.5%, Paris up +0.3%, but London was unchanged. Tokyo ended its Wednesday session down a full -1.0%. Hong Kong dropped +1.2%, but Shanghai ended down only -0.2%. The ASX200 fell -1.3% and the NZX50 ended -0.5% lower yesterday.

The price of gold will start today firmer by +US$34 from yesterday at US$2293/oz, and a new all-time high.

Oil prices have risen +US$1 to just under US$85.50/bbl in the US while the international Brent price is now up at just under US$89.50/bbl. These are new five month highs.

The Kiwi dollar starts today at just on 60.1 USc and +½c firmer than this time yesterday. Against the Aussie we are little-changed at 91.5 AUc. Against the euro we are holding at 55.4 euro cents. That all means our TWI-5 starts today just on 69.2 and up +20 bps from this time yesterday.

The bitcoin price starts today firmer at US$66,285 and up +1.2% from this time yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.8%.

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