Here's our summary of key economic events overnight that affect New Zealand, with news from the major economic powers.
US existing home sales fell more than the -3% month-on-month than was expected for the shorter February month. In fact they fell a rather sharp -6.6% which is being blamed on rising mortgage interest rates, cold weather and tight supply. However, it is more likely that higher prices (and decreased affordability) are playing an even larger role in the February hesitation. And we should remember they are still +9% higher than a year ago, but that was just before the pandemic started to bite. The median sales price is now up to US$313,000 (NZ$436,000) and +16% higher than a year ago.
The Chicago Fed's National Activity Index also slipped more than was expected and in stark contrast to the rise in January. The retreats by the production, personal consumption and housing categories suggests the US economy may have been in contraction in February.
All the pandemic turmoil hasn't hurt the US central bank's 'earnings'. It has reported that it sent US$87 bln to the US Treasury in 2020, up from US$55 bln in 2019. (Interestingly, this US$87 bln transfer is NZ$121 bln and about the same as the New Zealand Government's spending budget for 2020.)
We should also note that the US Fed's balance sheet took an unusually large jump last week, now at US$7.7 tln, and up +$114 bln in one week to a new record high. Still, it is "only" 36% of annual American economic activity. Putting that into perspective, the Chinese central bank balance sheet is currently 41% of the annual economic output. In New Zealand, the ratio is 24%.
China has announced it has ratified its RCEP trade deal 'baby', along with Thailand, the first of the 15 countries (a list that includes New Zealand) to do so. The RCEP is expected to come into force at the start of 2022.
And staying in China, steel prices are rising and this isn't because of rising iron ore prices. It is more because of production cutbacks for air quality and climate emission restrictions, coming at a time of rising demand. It will be inflationary.
The monetary policy turmoil in Turkey over the weekend has resulted in an -15% devaluation of their currency, a sudden pressure on their tradeable inflation and the very thing they said they wanted to avoid. (Autocratic) politicians make extremely poor central bankers.
Perhaps we need to keep an eye on Indonesia a bit more than we do. Certainly 'stability' there is strategically important to Australia. But their economy is wobbling. Motorbike sales were down -17% year-on-year in January. Now for February they are down -31% year-on-year. COVID is undoubtedly the reason, but this is a stat for Indonesia that tells you a lot about how they are faring.
Later this morning, we will get the latest signal on how the New Zealand government plans to rein in the housing market and deal with its severe affordability problem. Moves addressing the same issue are also expected in Australia, although that is likely to be just a central bank action.
On Wall Street, their Monday session has started out with a +0.9% gain in early afternoon trade. Overnight, European markets were mixed with Frankfurt up +0.3% and Paris down -0.5%. Yesterday, Tokyo ended with a heavy -2.1% loss, Hong Kong with a -0.4% retreat, and Shanghai ended with a +1.1% gain. The ASX200 rose +0.7% but the NZX50 Capital Index fell a sharp -1.5%.
The latest global compilation of COVID-19 data is here. The global tally is still rising and at a fast pace, now at 123,349,000 and up +341,000 in one day. Global deaths reported now exceed 2,717,000 and +5,000 in one day. Vaccinations in the world are rising fast however, now up to 440 mln and in the US a third (123.4 mln) have now had this protection (+3.0) and they are achieving a very fast rollout. The number of active cases there fell yesterday to 7,216,000 (-32,000 in one day), resuming the reducing trend and taking the number currently infected down to under 2.2% of their population.
The UST 10yr yield is lower by -4 bps at just on 1.69%. The US 2-10 rate curve is flatter at 153 bps. Their 1-5 curve is also flatter at +79 bps, while their 3m-10 year curve is flatter at +165 bps. The Australian Govt 10 year yield is also down -5 bps at 1.79%. The China Govt 10 year yield is down -1 bp at 3.26%. And the New Zealand Govt 10 year yield is down -7 bps at 1.76%.
The price of gold starts today down -US$4 in New York at US$1741/oz.
Oil prices are softish at just over US$61/bbl in the US, while the international price is now just over US$64/bbl.
The Kiwi dollar opens today at under 71.8 USc and marginally firmer, and still in the long term 71c-73c range it has been in all year. Against the Australian dollar we are holding at 92.6 AUc. Against the euro we are also little-changed at 60.1 euro cents. That means our TWI-5 opens today unchanged at 73.8.
The bitcoin price will start today at US$56,689 and down -1.1% from this time yesterday. Volatility in the past 24 hours has been moderate at +/- 1.9%. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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