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

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 ».