Here's our summary of key economic events over the weekend with news war has focused minds on the energy consequences.
The IEA is warning of "the biggest supply crisis in decades" as the Eastern European war consequences sweep over energy markets. But it also reports sudden important responses in regions hardest it, especially Europe. Measures implemented this year could bring down European gas imports from Russia by over one-third, with additional temporary options to deepen these cuts to well over half - while still lowering emissions. It seems war is bringing sudden innovations in some areas. It is a great shame it takes a war crisis to motivate these adaptions.
Some of the recommended IEA measures to tackle the energy crisis include: car-free days, limiting air travel, reducing speed limits, and WFH. They sound remarkably like some things that are already happening during the pandemic.
The Saudi's now say they are ramping up crude oil production. Australia is ramping up gas production.
Aluminium prices spiked on the invasion of Ukraine. Since, they have stayed high, but they have been volatile in the past six weeks, and again last week. But they ended the week high again.
Although global coal prices remain very high, they are easing off their early March peak.
High prices are one thing, but commodity markets are also suffering a liquidity crisis as intermediating traders disappear because the risks are too high and real buyers and real sellers have trouble agreeing terms directly. Aluminium isn't being spared in this crisis.
The Russian central bank reviewed their monetary policy settings on Friday, and they left things unchanged - at a 20% policy rate. There is little they can do after their government invaded its neighbour. Inflation is rampant, their currency is in the toilet. Monetary policy isn't able to do anything about either in the short term. But they know a huge decline is ahead of them, calling it a “large-scale structural transformation”.
We are expecting China to review its prime loan rates this afternoon. Although no change is expected, convoluted official references in China shows they are clearly concerned about their slowdown. A rate cut remains possible.
In Hong Kong, things are grimmer by the month. More than -71,000 people left the City than arrived in February and many fear it is a portent of worse to come. It is a building trend after years of mass protests, erosion of civil liberties, crackdowns on press freedoms, and, finally, two crushing years of the pandemic, with no immediate relief in sight. Banks are leaving - slowly still - and pan-Asian deals are being done elsewhere. Hong Kong will remain a gateway to China, but a lot depends now just on the Chinese opportunity.
It is not only Hong Kong that is feeling heat. London-based CVC Partners, a major private equity firm, has decided to list in Amsterdam in what is being seen as a reputation blow. This comes after the LME debacle. These may be 'small' events in the scale of London as a financial center, but they are being seen as watershed moments.
Meanwhile, American existing home sales faded in February continuing the see-sawing pattern of the past few months. High mortgage interest rates are one reason they were down a rather sharp -7.2% from January, and down -2.4% from a year ago. The other reason is the very unusually low houses being offered for sale at present, about seven weeks worth at the current rate. Those that are selling are at the top end of the market, so average prices seem like they are rising.
The very good Canadian data continues. Their retail sales rose more than expected in January, up +3.2% from the prior month, up +12% in a year. The virtuous trend continued for strong February jobs gains too. The ADP report showed a +475,000 gain in the month, more than making up for the under-result in January. It was also the strongest monthly rise ever recorded in this series.
Japan's consumer inflation rose by +0.9% in the year to February, and as low as that may seem to us it is the most since April 2019. It comes after a +0.5% January gain. The latest figure marked the 6th straight month of annual inflation, with food prices rising at the fastest pace in 4 years, up +2.8% pa. Japan's central bank likes the rise, but it was not enough for them to shift their policy direction.
The Bank of Japan reviewed its policy settings late on Friday, leaving them unchanged at +0.1%. The recent pickup in their economy is undermined by the recent Ukraine war impacts
In South Australia, there has been a sweeping election result that cleared out the governing Liberal Party, replaced by a resurgent Labor Party. It is a result that is said to signal a desire for change from incumbents. Nationally, Australia goes to the polls on or before May 21, the last possible day it can be called.
Meanwhile, a Parliamentary report on Australia's housing affordability problems has recommended that their States should ditch stamp duty and replace it over time with a broad-based land tax, review the taxes holding back development of the emerging build-to-rent sector and reform surging developer contributions that are not being used to fund crucial local infrastructure. These are just a few of their 16 recommendations to improve long term housing affordability there.
And you know it is election season in Australia when talk of tax cuts grows, even as their deficit rises.
And there is more evidence that the Hayne financial services review is being gutted. The Canberra government is going to let the obvious conflict of interest stand that mortgage brokers have by receiving commissions from banks. New Zealand regulators turn a blind eye to that as well. Few things in the financial world are more obvious than this, but no one wants to do any about it.
The UST 10yr yield opens today at 2.15% and up +1 bp from this time Saturday. A week ago though this yield had just risen to 2.00% so it has been a big mover up this past week. The UST 2-10 rate curve starts today steeper at +21 bps. Their 1-5 curve is little-changed at +92 bps (but much steeper over the week), ditto their 30 day-10yr curve, little-changed at +193 bps (but much steeper in a week). The Australian ten year bond is down -1 bp at 2.52%. The China Govt ten year bond is unchanged at 2.82%. And the New Zealand Govt ten year is also little-changed at just on 3.19%.
The price of gold starts today at US$1922/oz and down -US$7/oz from this time Saturday. A week ago it was at US$1990/oz but that was its recent high point.
And oil prices are unchanged from Saturday. In the US they are now just on US$103.50/bbl. The international price is just on US$106/bbl. The Saudi's now say they are ramping up production.
The Kiwi dollar will open today little-changed, now at just on 69 USc and still near a four month high. The Kiwi dollar has appreciated +1.6% last week. Against the Australian dollar we are little-changed at 93.2 AUc. Against the euro we are still at 62.5 euro cents. That all means our TWI-5 starts today at just under 74.2 and also a four month high.
The bitcoin price was down -0.4% from this time Saturday to US$41,414. That is a +7.5% weekly gain but really only taking it back to levels of two weeks ago. Volatility over the past 24 hours has been modest at +/- 1.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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