China equities drop; China inflation rises; US PPI up; IMF sees China risk, but also gains; key commodity prices rise; RBA and RBNZ views turn; UST 10yr 2.50%; oil and gold down; NZ$1 = 67.3 USc; TWI-5 = 71.9

China equities drop; China inflation rises; US PPI up; IMF sees China risk, but also gains; key commodity prices rise; RBA and RBNZ views turn; UST 10yr 2.50%; oil and gold down; NZ$1 = 67.3 USc; TWI-5 = 71.9

Here's our summary of key events overnight that affect New Zealand, with news some key policy makers may be turning a bit more optimistic.

Wall Street is a little lower today following good gains in Europe overnight. But yesterday both Shanghai and Hong Kong equity markets fell sharply, down -1.6% and -1% respectively.

Consumer price inflation jumped to +2.3% in March in China, propelling it to a five month high and reversing a steady decline. A jump in food prices was behind the shift; fresh vegetables rose almost +7% and milk rose +2.6%. Pork prices fell -1.2% while lamb prices rose +11% as the ASF virus rages on. Meanwhile, producer prices remain subdued.

Meanwhile in the US, producer prices increased by +2.9% and the most in five months in March, but underlying wholesale inflation was tame. Petrol price rises shifted the dial here.

And the latest update to unemployment claims in the US has them at near 50-year lows.

The IMF is warning that a bigger-than-expected slowdown in China is a key risk for the global economy. Further, they say any Chinese policy to resort to enormous infrastructure spending could exacerbate risks to their economy. Still, the IMF is not all negative about the Middle Kingdom, raising its growth forecast marginally for 2019.

Supporting that is the rise in iron ore prices, touching recent highs. Some of that may be due to crimped supply from Brazil, but demand does remain high. Steel-making coal prices are also elevated. And shipping prices have been rising off their recent lows. It is these sort of data items that support the view that China growth may be helping arrest the recent global slowdown.

In Australia, the recent upbeat view by the RBA is pushing back expectations that a rate cut there is imminent. And the RBNZ governor has also been giving signals that indicate he is unconvinced a rate cut is warranted at the moment.

Locally, ratings agency Fitch has put both the Hamilton City Council debt, and that of the Queenstown Lakes Council on credit watch Negative.

The UST 10yr yield is firmer today at 2.50% and recovering all yesterday's move lower. Their 2-10 curve is positive at +15 bps and their 1-5 curve is still negative at -12 bps. The Aussie Govt 10yr is little-changed at 1.88%, the China Govt 10yr is down -3 bps at 3.29%, while the NZ Govt 10 yr is at 2.06%, and that is down -4 bps since this time yesterday.

Gold is down sharply by -US$17, and now at US$1,291/oz.

US oil prices have fallen by about -US$1 today, now just on US$63.50/bbl while the Brent benchmark is just on US$70.50/bbl. OPEC is mulling an output hike after Russia reneged on joint restraint plans.

The Kiwi dollar is lower this morning at 67.3 USc. On the cross rates we holding at 94.5 AUc. Against the euro we have dipped to 59.8 euro cents. That puts the TWI-5 at 71.9.

Bitcoin has dropped by more than -5% overnight to US$5,061. This 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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5 Comments

I seem to remember castigating the MSM hereabouts. This is interesting:
https://www.theautomaticearth.com/2019/04/we-will-free-the-press/

Our own press will be interesting to watch/listen to covering this.

Or not.

https://www.project-syndicate.org/commentary/west-japanization-low-growt...
Growth is also being undercut in less direct ways. For example, persistently low – and in some cases negative – interest rates tend to eat away at the institutional integrity and operational effectiveness of the financial system

There are a few key indicators that a recession may be on the horizon , one is an increase in inflation , and the other , oddly enough , is when unemployment is very low .( as in the US )

Of course one needs to watch the yield curve , as Jarrod Kerr pointed out recently , and we still have systemic risks in the EU from both "monetary easing " and debt levels that are unsustainable in Southern Europe .

Luckily , we produce and export food , and as long as we have humans on the planet everyone needs to eat , so we should be fine

As long as they can pay?

In absence of Andrewj doing perhaps more meaningful things, one from Snider. I couldn't help when reading this in thinking that negative yield curves this time might not be a transitory occurance that just happen for a year or so before a recession.

https://www.zerohedge.com/news/2019-04-10/why-2011-exposed-worlds-true-r...