China tackles excessive leverage; China PMIs flat; wide variances in GDP growth reported; US goes on a recovery spurt for both households and factories; UST 10yr at 1.63%; oil and gold unchanged; NZ$1 = 71.6 USc; TWI-5 = 73.6

Here's our summary of key economic events over the weekend that affect New Zealand with news of some remarkable improvements in American income and spending activity.

But first, we should note that China is on its week-long "Labour Day" holiday now. Its financial markets will be closed Monday through Wednesday. But for most, it is expected to be a period of enthusiastic domestic travel.

At the same time, China is claiming "remarkable results in stabilising leverage and promoting growth" by reducing its country-wide leverage ratio by -2.6% in Q1-2021. It fell to a still-sky-high 277%, with their government ratio at 45%, households at 72% and business enterprises at an eye-watering 160%. (For perspective, New Zealand's government ratio is 33%, our households are our problem at just over 100% due to housing debt, and our business enterprises at only 56%, for a total country level of 189% of GDP.)

In China there were two factory PMIs reported over the weekend for April. The private Caixin survey reported an expanding sector with its best increase in output and sales for four months. New orders increased but supply chain issues are holding them back from even better results. The official version of this survey was more restrained, reporting a smaller expansion from the modest March one. Both these surveys reveal a timid expansion compared to the booming American one, quite the reversal of fortunes between the rivals.

But infrastructure 'investment' is still important in China. Their 26 leading excavator makers sold a total of 126,941 excavators in the first quarter, surging +85% year on year, although some of that will be base effects of the pandemic.

Stung by the return of the pandemic, Japanese consumers are increasingly depressed ahead of the Olympics, with downcast views quite separate from their business counterparts.

Singapore business confidence rose in March but is still at a low level.

There were more GDP results reported over the weekend for Q1 2021. In Taiwan, they saw their economy grow at a fast +8.2% clip from the same quarter a year ago. But Germany reported a -3.0% decline on that same basis. Overall the EU said its economic output shrank again by -1.8% on the same basis, slightly less than expected. Their bounce back has left them worse off than before the pandemic started. For them, its a double-dip recession and also a very sharp contrast to the US. Part of the problem is the EU's aggressive carbon tax, "a gift to rivals" who don't manufacture in the EU. The call is out for higher import tariffs to protect the locals who have to pay it.

Canada also reported GDP results, and it is now back to pre-pandemic levels. The data is for February, and things have progressed from there.

In the US, they reported a huge (+24%) spurt in household income in March from February, based both on Federal stimulus payments and rising employment. They also reported a large +4.7% rise in household spending in March from February. Prices rose at a +2.3% annual rate. Some now think this is just too much juice.

Consumers also now report a booming economy.

In the industrial heartland centered on Chicago, their regional factory PMI is very strong indeed, coming in far better than the strong result expected. New orders surged, plans to hire more staff were reported by more than half those surveyed, and prices rose sharply. The overall PMI is their highest in almost 40 years.

The OECD is reporting that global foreign direct investment flows decreased by a massive -38% in 2020 to just US$846 bln, the lowest level since 2005. Both Japan and China pulled back sharply. American investors maintained a steady level of investment, looking past the pandemic.

In Australia, the Chinese ambassador has gone after Australia saying they are trying to "coerce" China to their will. Apparently, this ambassador doesn't understand the irony of his remarks.

Back in China, they say Western sanctions targeting Xinjiang are no more than “a piece of waste paper” and their real purpose is to hamper Chinese companies internationally. “Their real purpose is to conduct an ‘industry genocide’, to sabotage the participation of Xinjiang in the global value chain.” It is acknowledgment that consumer pressure through the brands and buying chains is having a noted impact on this trade. And cotton is not the only trade shrinking on international pressure. Huawei is too.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now 152,378,000 have been infected at some point, up 1,585,000 in two days, largely driven by rises in India. Global deaths reported now exceed 3,196,000 and up +25,000 in two days. Vaccinations in the world are also rising fast, now up to 1.151 bln (+40 mln) and in the US more than half of their population (241 mln) have had at least one dose as they keep up their fast rollout. More than 30% have been fully vaccinated (105 mln people). The number of active cases there has fallen to 6,785,000 with -40,000 fewer new infections than recoveries in the past two days.

The UST 10yr yield starts today at 1.63%, up +1 bp overnight. The US 2-10 rate curve is little-changed at 146 bps. And their 1-5 curve is still at +80 bps, as is their 3m-10 year curve at +162 bps. The Australian Govt 10 year yield is down -1 bp, now at 1.69%. The China Govt 10 year yield is unchanged at 3.19%. The New Zealand Govt 10 year yield is also unchanged at 1.66%.

The price of gold starts today at US$1769/oz and that is up a minor +US$1 since this time Saturday.

Oil prices are little-changed today at just under US$63.50/bbl in the US, while the international Brent price is just over US$66.50/bbl.

The Kiwi dollar opens today at 71.6 USc and unchanged since Saturday. Against the Australian dollar we are still at 92.9 AUc. But against the euro we have recovered to 59.6 euro cents. That means our TWI-5 is now at 73.6.

The bitcoin price is now at US$56,871 and virtually unchanged since this time on Saturday. Volatility in the past 24 hours has been moderate at +/- 1.7%. 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 ».