US QE to run to counter 'longstanding disparities'; world's factories expanding faster; Australia, NZ and Philippines stand up to China; UST 10yr at 1.60%; oil and gold up; NZ$1 = 72.1 USc; TWI-5 = 73.8

Here's our summary of key economic events overnight that affect New Zealand with news the global factory expansion is getting stronger, but tensions with China are the main risk.

First in the US, Fed boss Jay Powell said the American economic outlook has brightened overall but is advancing more slowly for low-wage workers, underscoring the need for continued support from policy makers. "These longstanding disparities [matter] because they weigh on the productive capacity of our economy," he said.

That brightening is clear from two contrasting PMIs out overnight, but both are recording a strong expansion. The locally-watched one slipped back from an even stronger expansion recorded for March, with the April result well below expectations. But the internationally-benchmaked Markit one held its March levels in April. Both are now recording roughly the same expansion. New orders, including export orders are growing, as is employment. But prices are rising fast, mainly because inputs are in short supply.

Canada's factory PMI is expanding too, but at a more restrained pace.

In the EU, their manufacturing economy registered another stellar performance in April, with operating conditions improving at a rate that surpassed March’s survey record. The new April records are built on strong new order levels, and are across all the main countries.

Taiwan reported a booming factory sector - despite the drought, and despite the geopolitical risks and pressures. South Korea is expanding well still, but not quite at the Taiwanese pace.

In a stark contrast, the Singapore PMI is barely expanding.

But Australia is carrying on the pattern of fast-recovering factories. They have two PMIs out. The local one reported its best result since March 2018 and it third best since 2001. New orders remained very strong, but input costs are now rising fast and much faster than output prices. The internationally-benchmarked Markit one was also very expansionary, and its best improvement ever. They also report fast-rising costs however. The local one reports employment is a laggard, presumably because factories don't think these conditions will last. The Markit one found fast employment growth.

And staying in Australia, they have started a review on whether to force a Chinese company to sell a container terminal lease in the strategically important port in Darwin. This is likely to inflame the Chinese. And it comes the same day our Prime Minister delivered a blunt message to China on the importance of human rights to New Zealand at an Auckland business forum, one stridently rejected by China's ambassador to New Zealand. The tension is rising as Australia presses on defense issues and New Zealand presses on human rights issues. Trade is the lever China can pull. And we should note that the Philippines is also getting exasperated about Chinese claims and incursions into their territory.

Boil over risks are seeing more consideration being given to supply chain risks from excessive exposure to supply from Chinese sources.

Australia’s rapidly rising property prices have started to slow, with new figures showing price growth eased last month after hitting a 32-year high in March.

On Wall Street, the S&P500 is up +0.5% in midday trade. Overnight, European markets rose more than +0.6% (except London, +0.1%). Shanghai and Hong Kong were closed for public holidays yesterday, but Tokyo was open, giving up -0.8% on the day. The ASX200 had a flat day, while the NZX50 Capital Index rose +0.3%.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now 153,036,000 have been infected at some point, up 658,000 in one day, largely driven by rises in India. Global deaths reported now exceed 3,206,000 and up +10,000 in one day. Vaccinations in the world are also rising fast, now up to 1.164 bln (+13 mln) and in the US more than half of their population (243 mln) have had at least one dose as they keep up their fast rollout. More than 30% have been fully vaccinated (106.1 mln people). The number of active cases there has fallen to 6,770,000 with -15,000 fewer new infections than recoveries in the past day.

The UST 10yr yield starts today at 1.61%, down -2 bps overnight. The US 2-10 rate curve is little-changed at 145 bps. But their 1-5 curve is flatter at +78 bps, as is their 3m-10 year curve at +160 bps. The Australian Govt 10 year yield is unchanged at 1.69%. The China Govt 10 year yield is also unchanged at 3.19%. The New Zealand Govt 10 year yield is up +3 bps at 1.69%.

The price of gold starts today at US$1792 and that is up +US$23 since this time yesterday.

Oil prices are up +US$1 today at just under US$64.50/bbl in the US, while the international Brent price is just over US$67.50/bbl.

The Kiwi dollar opens today at 72.1 USc and up +½c since this time yesterday. Against the Australian dollar we are little-changed at 92.8 AUc. But against the euro we are also little-changed at 59.7 euro cents. That means our TWI-5 is now at 73.8.

The bitcoin price is now at US$58,052 and up +2.0% since this time yesterday. Volatility in the past 24 hours has been moderate at +/- 2.4%. 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 ».