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Strong US economic data boosts consumer sentiment; China turns in good Q1 results; commodity prices rise; China eyes large gold imports; UST 10yr at 1.59%; oil steady, gold up; NZ$1 = 71.4 USc; TWI-5 = 73.4

Strong US economic data boosts consumer sentiment; China turns in good Q1 results; commodity prices rise; China eyes large gold imports; UST 10yr at 1.59%; oil steady, gold up; NZ$1 = 71.4 USc; TWI-5 = 73.4
Hauraki Gulf at Waiheke Island

Here's our summary of key economic events overnight with news of rising optimism in both the world's #1 and #2 economies.

US housing starts rose strongly in March, bouncing back after the surprise February hesitation, and are now at an all-time record high. New housing permits rose as well, and new housing completions rocketed higher.

Reflecting that optimism, American consumers reported higher confidence in early April from surging economic growth and strong job gains due in turn to record stimulus spending, low interest rates, and the positive impact of vaccinations. The UofM Sentiment Index rose to its best level in a year on the strength of recent gains in current economic conditions, while future economic prospects remained unchanged from March. This is opposite of the usual pattern over the past fifty years, when recoveries were paced by larger and earlier gains in expectations.

Last week, the US Fed 's balance sheet rose to almost US$7.8 tln at a time when the Fed boss started talking about tapering bond purchases. Clearly they don't need to pump in as much monetary support in a rising economy, especially as fiscal support is kicking in now, but how markets will react when they do pull back will be interesting

Yesterday, China turned in the expected 'very good' economic data anticipated by analysts. The Q1-2021 GDP rose +18% above their pandemic affected Q1-2020 levels. Their fixed asset investment levels were even higher on that basis (+25%) and as anticipated. However, industrial production there undershot expectations at +14%.

Some analysts are warning of data accuracy with this latest Chinese release, but they do see the momentum continuing there. Excessive leverage remains a key risk.

The iron ore price price has pushed back up to its recent highs, and on rising volumes. Chinese coking coal prices are rising too. (These greatly benefit Australia and gives them leverage in the political disputes between the two countries - at least, room to ignore Chinese attempts to punish them.) Anticipation of rising demand emanating out of the US is behind the moves up. Many other commodities are rising too, including copper. And the prices paid in China for some key agricultural products (corn, soybean, rice) are also showing signs of rising again, something that will be bad news for global food prices (if you are a consumer).

Chinese retail sales however out-performed the expected year-on-year rise, up +34% when a +28% rise was expected. And there is an expectation that this will improve sharply as spending is anticipated to jump around their upcoming May Day holiday, a five-day long weekend.

House prices in China are rising at a faster rate now too, up +11.4% in a year.

China’s holdings of US Treasuries rose in February to the highest since mid-2019. These holdings increased by +US$9 bln to US$1.1 tln, the highest total since July 2019. It was the fourth straight monthly increase, and the longest buying streak since 2017. China is the second-largest foreign holder of US government bonds after Japan, who reduced its holdings slightly.

In Australia, Citigroup says it will sell its retail banking operations there, ending a 35 year presence and part of a pullback from 12 other markets as well. In this region Citigroup is focusing on Singapore and Hong Kong. This move will come just as Westpac is moving to sell its New Zealand operations, creating an interesting opportunity for an international bank it raise its exposure here. And that may make Westpac NZ perhaps a bit less likely to end up as part of Kiwibank's shareholder's plan. Kiwibank has assets of NZ$27 bln. Citibank Australia has assets of AU$29 bln (NZ$31 bln). Westpac NZ has assets of NZ$105 bln.

On Wall Street, the S&P500 is up another +0.4% in late afternoon trade. That means it is heading for a new all-time record high, up another +1.4% for the week and a gain of +US$½ tln. In fact, since the November 2020 election, Wall Street has been on a one-way rise, adding a massive +US$7.4 tln in capitalisation, or +26% in 'value'. Year-on-year it is +52%. Major European markets were up an average of +0.8% overnight with London being the laggard (+0.5%) otherwise the rise would have been +1%. Yesterday, the Shanghai market ended up +0.8%%, Hong Kong was up +0.6%, while the very large Tokyo market closed up another +0.1%. The ASX200 rose +0.1% yesterday for a weekly gain of just under +1.0%, while the NZX50 Capital Index was up +0.4% on the day for a weekly gain of +0.9%.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now 139,464,000 have been infected at some point, up +883,000 in just one day. The rise of untracked variants, especially in India, is a new concern. Global deaths reported now exceed 2,992,000 and up +15,000 in one day. Vaccinations in the world are also rising fast, now up to 863 mln (+19 mln) and in the US more than half of their population (197 mln) have had at least one dose as they keep up their fast rollout. However, the number of active cases there rose again to 6,897,000 and up another +9,000 overnight as new pockets of infection variants take hold.

The UST 10yr yield has arrested yesterday's decline, up +4 bps today at 1.59%. The US 2-10 rate curve is unchanged at 140 bps. Their 1-5 curve is marginally steeper at +76 bps, as is their 3m-10 year curve at +156 bps. The Australian Govt 10 year yield is also up +5 bps at 1.69%. The China Govt 10 year yield is holding at just on 3.19%. And the New Zealand Govt 10 year yield is down -5 bps at 1.64% and catching up with the recent international retreat.

The price of gold starts today at US$1778/oz and extending its rising trend, up +US$13 in a day, and up +US$33 for the week. China seems to be back in the market for gold, mainly for jewelry purposes.

Oil prices are -50c lower at just over US$63/bbl in the US, while the international price is still at US$66.50/bbl. At these prices, more US domestic oil wells are being brought back into production.

The Kiwi dollar opens today a little lower at 71.4 USc. Against the Australian dollar we are little-changed at 92.4 AUc. Against the euro we are softer at 59.6 euro cents. That means our TWI-5 is just under 73.4, which is a +0.8% appreciation in a week.

The bitcoin price will start today at US$61,747 and -1.3% lower from this time yesterday. But for the week, it is up +8% and the period included its all-time high of US$64,829. Volatility in the past 24 hours has been high at +/- 3.2%. 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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End of day UTC
Source: CoinDesk

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9 Comments

Last week, the US Fed 's balance sheet rose to almost US$7.8 tln at a time when the Fed boss started talking about tapering bond purchases.

Large US banks are dogged in their purchases of the same riskless, liquid securities.

Near zero repo rates reflect the demand for this useful collateral class.
What Drives U.S. Treasury Re-use?

Figure 5 shows the level of the aggregate and repo collateral multipliers for U.S. Treasuries. The measure shows that primary dealers can create up to seven times as many private liabilities backed by Treasury securities as they own.

http://www.gisborneherald.co.nz/local-news/20210416/house-prices-soar/

If in Gisborne with a house, congrats for getting Capital gain worth five year average wage in just one year and that too tax free.

12
up

Alternatively, commiserations on the destruction of the value of your labor and that of your friends, peers, and family. We know it's not your fault, but these are the actions of our central and commercial banks who don't see anything wrong with the destruction of money if it fits with their own dogma and status quo of the ruling elite.

Dalio appears to have flipped on Bitcoin. Bet he’s been filling his boots recently.

https://www.kitco.com/news/2021-04-16/Diversification-is-key-as-world-fa...

Closer to home.
& things not aging well - from a year ago, 15/4/20.
- but as for stand-up, priceless.

https://www.interest.co.nz/news/104552/grant-robertson-says-we-must-also...

Back to Robertson - he said that while taking account of the “massive disruption to some sectors”, his longer-term plan is to also “address some of the long-standing challenges we face”.

He specifically mentioned climate change, inequality, New Zealand’s low productivity, and trade diversification.

Robertson reiterated the sentiment of a comment Ardern made on Tuesday, saying, “we must also not allow inequality to take hold in our recovery. In fact we need to take this opportunity to improve the prospects of all New Zealanders and tackle those long-standing divisions.”

He mentioned his “strong personal belief in the power of the state to do good”.

There is a thesis that members of left of centre parties lead unhappier lives than others.

We found another use case for residential property investors, the planning is to evict tenants and build new on the current address, preserve % interest deduction, new property at higher rent, and... bank funds everything on existing "unrealized gains"..

He is so full of sh#t. All of the things he said he wants to fix, he has made considerably worse since his time in power.

Inequality is almost certainly now more entrenched than it was (thanks to his and RBNZ's reckless actions over the past year, the rich have been creaming it as well as property owners).
Poverty, mostly linked to housing, is dramatically worse under Labours 4 years in power, every statistic points to it being the case (homelessness/child poverty/wage destruction through reckless monetary policy etc etc)
Climate change shows increasing emissions in the latest reports, all under Labours "nuclear free moment".
Labour Productivity has grown a pathetic 2.2% over the last 4 years, likely to have disappeared in the last year.

When the state has no idea how to go about solving the problems it has caused, it is no surprise they cannot change what they claim to want. Their solution is to do more of the same to try and fix the problems created via those exact policies. Really they are running around like headless chickens without a clue.

And you all voted for it!

LOL - GR has made inequality much worse by standing on the sidelines

Welcome back DC, I hope you had a good week off

Would anyone like to posit why central banks target inflation rate is 2%?