Here's our summary of key economic events over the weekend that affect New Zealand, with news metals prices eye a boost from the Chinese housing rescue.
But first in the week ahead, it will be one dominated by the RBNZ's Wednesday Monetary Policy Statement, one that itself comes about a week before the new Government's first full Budget - and that too is likely to have a key influence on monetary conditions. No-one is expecting any change to the OCR, but signals for when it will be cut will be keenly awaited.
In the US we will get advance PMIs for May, durable goods orders, and new and existing home sales for April. China (today), South Korea and Turkey also have rate decisions due this week. And inflation rates will be released for Canada, the UK, and Japan. Sentiment surveys will be released in Australia and the EU, along with retail sales data in Canada.
Wall Street has just booked a strong set of earnings reports. Most S&P500 companies have reported now (93%), and they have reported a +5.7% rise in profit growth, matching the outsized gains in Q2-2022 which was off the back of the prior pandemic weaknesses. Almost 80% of these companies came in with better than expected earnings-per-share, and 60% better than expected revenues. These sort of outcomes help explain why both the Dow and the S&P500 are at record highs. And why many investors don't think these equity markets are overvalued. But we should note that PE ratios are higher than long-term averages now.
In China, industrial production growth recovered in April after a disappointing March to be back to the expansion level in the prior three months. But this is the only 'good news' in Friday's data dump from the Middle Kingdom.
Their retail sales rose by only +2.3% year-on-year in April, down from +3.1% in March and missing market forecasts of +3.8%. That is quite a miss.
Electricity production slipped in April from March to be up only +3.1% in the year. That is a long way lower than the +8% rise in the year to December. If 3.1% is a proxy for GDP, they are not on track to achieve Beijing's growth targets.
Prices for new dwellings fell their most since July 2015. Prices for resales fell even more. The depth of their property sector retreat is laid bare here - and this is official information. It is no wonder they considered a wholesale state intervention in the sector.
To clear away the drag that their property market has created, Beijing has taken some 'drastic moves'. The central bank has removed the lower limit banks can charge for home loan rates, nationally. It has cut interest rate benchmarks for housing-related lending by -25 bps.
And it has allocated ¥300 bln (NZ$42 bln) for lending aimed at buying by local authorities for unsold housing for "social purposes". They said the ¥300 bln of central bank cash will translate into an estimated ¥500 bln of credit overall.
We should keep an eye on their giant car manufacturing industry too. Its sales options are being constrained by new US tariffs, plus the market-dominant players are cutting prices aggressively as well. (BYD cut another -5% last week.) Few are going to report profits in the current year, and many may not even survive. Competition this fierce is unstable for a nationally-important manufacturing base. It would be no surprise if Beijing has to step in to clean things up here too.
And we should keep also an eye on what is happening to China's Agriculture minister. He was in charge of their food security program, and has suddenly fallen out of favour, receiving the standardised accusation of 'corruption' from Beijing authorities.
More generally. the UN says India’s growth will rise in 2024 to +6.9%, from the 6.2% they estimated in January, driven by strong public spending and growing private consumption. The other big mover is Brazil, up to an expected +2.1% in 2025 from a January estimate of +1.6%. The US is still expected to expand +2.3%, Japan by +1.2%, China by +4.8% and the EU by +1.0%. Australia is +1.6%. New Zealand is ignored by this UN review.
The EU released its final April CPI rate which came in at 2.6% for the bloc, 2.4% for the Euro Area. Both were little-changed from March but sharply lower than a year ago. In April 2023 the EU rate was 8.1%, the Euro Area was 7.0%. Getting rid of dependence on Russian oil and gas has not been at the cost of higher inflation. But we should observe that the range is wide across the bloc between countries. Denmark recorded at 0.5% annual inflation rate in April, whereas Belgium 4.9% and they are less than 700 kms apart.
We should note that the social tensions in New Caledonia are echoing in the nickel market because there is an important mine there. It is the world's third largest producer, and may help explain why France isn't taking any backward steps. Global nickel prices have risen more than US$2000/tonne, up +11.3% over the past week over supply fears. It is a key ingredient for making stainless steel.
In Australia, casino operator SkyCity Entertainment (SKC) has said it had agreed to a proposed penalty with the AML regulator AUSTRAC, admitting it had broken the law by not carrying out customer due diligence with higher-risk customers. It will cost them NZ$73 mln to resolve the matter. It has provided for about $150 mln in its accounts in anticipation, so oddly it will get a profit boost when it reconciles the provision with the actual penalty.
The UST 10yr yield is now at 4.42% and unchanged from Saturday but down -8 bps from this time last week. The key 2-10 yield curve inversion is holding at -41 bps. Their 1-5 curve is still at -69 bps. And their 3 mth-10yr curve inversion is still at -96 bps. The Australian 10 year bond yield is now at 4.29% and unchanged. The China 10 year bond rate is unchanged at 2.32%. The NZ Government 10 year bond rate is now at 4.66% and also unchanged from Saturday.
The price of gold will start today down -US$4 from Saturday at US$2415/oz. That is up US$45 for the week and just off it's all-time high. Silver has shot up too, up +12% over the past week.
Oil prices are still up at US$79.50/bbl in the US while the international Brent price is still just on US$83.50/bbl. Both are a bit more than +US$1 higher than a week ago.
The Kiwi dollar starts today down -10 bps from Saturday at just over 61.3 USc. That is up almost +120 bps in a week. Against the Aussie we are still up at 91.7 AUc and a new one month high. Against the euro we are also firm at 56.5 euro cents. That all means our TWI-5 starts today just on 70.4, unchanged from Saturday and up +80 bps in a week.
The bitcoin price starts today at US$66,732 and down a mere -0.2% from this time Saturday. And up +10.6% from this time last week. Volatility over the past 24 hours has been low however at +/- 0.8%.
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