US labour costs and retail sales rise; US sentiment sags; China PMI's marginally positive; EU growth better; Aussie retail soft; UST 10yr 4.68%; gold and oil lower; NZ$1 = 59 USc; TWI-5 = 68.9

Here's our summary of key economic events overnight that affect New Zealand, with news that as we await our local labour market report, the global economy is expanding modestly, but inflation isn't killed off yet.

[Note: There are no video versions this week due to staff illness.]

First in the US labour costs rose +4.2% in the year to March, up +1.2% from the prior quarter. This is the highest rate of increase since mid-2022 and is more indication that inflation's pressures remain at a sticky level - not excessively high, but not tracking down as their central banks needs.

American retail sales at physical stores were up +5.5% last week from the same week a year ago, another indicator that consumers are still spending those higher payroll increases, and keeping inflationary pressures on.

But the Conference Board survey of consumer sentiment retreated in April. What American consumers say and what they do are diverting again. This time it isn't about present conditions which they think are ok, rather about future conditions which they are more worried about. But there are some interesting differences. Those on modest incomes are more confident than those on higher incomes. Those under 35 are more confident than those older.

In Japan, it is becoming clearer that their central bank did in fact intervene in currency markets to support the yen yesterday.

In China, the private Caixin factory PMI survey was more bullish that the official version. The modest Caixin expansion held in April, and in fact the sixth straight month of growth in factory activity recorded by this survey (which is concentrated in smaller private sector firms) and even though low, the fastest pace since February 2023.

On the other hand, the official factory PMI survey, which is more focused on large State-owned enterprises was less positive even if it was their second straight month of (low) expansion in factory activity. Basically it is just holding.

More positive is the official services PMI, but that was less positive in April than March and it came in well below what analysts were expecting, and the softest pace since January, as new orders shrank at a steeper rate. But it is positive still and that streak is now out to 16 consecutive months.

In an earnings call comment, the Yili boss said Chinese milk supply has been higher than demand which isn't growing as it once did. But he was optimistic that the back end of 2024 would improve for the Chinese dairy industry.

In Europe they said their April inflation was stable at 2.4% (Euro Area), and that their overall economy grew by +0.5% in the year to March (whole EU), which was a bit better than expected. Interestingly, it was led by Spain, Portugal, France and Greece, and held back by Germany.

In Australia, retail sales were softer than expected in March, dropping by -0.4% from February and missing market estimates of a +0.2% growth. February was also downwardly revised. It was the first decline since last December as turnover fell in all retail sectors.

Even though May Day was established as an "international" workers holiday to mark a Chicago riot involving unionisation in 1886 (someone threw dynamite at the Police who took exception and retaliated hard), it is mainly now a holiday in Europe (co-mingled with a traditional spring break, without the labour ties), Taiwan, Singapore and China - but not in the US. It is a public holiday in India too. So many markets will be closed today.

Locally, we will get our March quarter labour market data later this morning. We will have a full update then (at 10:45am).

And the RBNZ releases its important Financial Stability Report prior to that (at 9am) and will have full coverage on that too.

And we should note that as speculators unwound long positions, the cocoa price is falling as rapidly as it rose.

The UST 10yr yield is now at 4.68% and up +6 bps from yesterday. The key 2-10 yield curve inversion is now at -35 bps and marginally less. And their 1-5 curve inversion is also marginally less at -54 bps. Their 3 mth-10yr curve inversion is now at -72 bps and 5 bps less. The Australian 10 year bond yield is now at 4.51% and down -1 bp. The China 10 year bond rate is down -5 bps at 2.31%. The NZ Government 10 year bond rate is now at 4.96% and down -7 bps..

Wall Street has opened its final trading day of the month with the S&P500 down -1.0% in its Tuesday trade, heading for a -3.4% monthly retreat. Overnight European markets fell -1% except for London which was unchanged. Yesterday Tokyo rose +1.3%. Hong Kong was unchanged and Shanghai was down -0.3%. Singapore ended up +0.3%. The ASX200 ended its Tuesday session up almost +0.4% and the NZX50 ended up a similar +0.4%.

The price of gold will start today much lower, down -US$46 from this time yesterday at US$2294/oz.

Oil prices are down another -US$1 from yesterday at just under US$81.50/bbl in the US while the international Brent price is now just on US$86/bbl.

The Kiwi dollar starts today down -¾c at just over 59 USc. Against the Aussie we are holding at 91 AUc. Against the euro we are -½c lower at 55.3 euro cents. That all means our TWI-5 starts today just under 68.9 and down -40 bps from yesterday.

The bitcoin price starts today at US$60,270 and -4.4% lower that this time yesterday. And this is a two month low. Volatility over the past 24 hours has remained very high at just on +/- 3.9%.

The easiest place to stay up with event risk is by following our Economic Calendar here ».