Here's our summary of key economic events overnight that affect New Zealand with news the extent of China's economic stumble amid its latest pandemic crisis is becoming evident.
But first, the level of new American jobless claims continues to fall, sinking to new modern lows with 193,000 new actual claimants last week. There are now 1.65 mln people on these benefits, the lowest since 1968, the lowest in more than half a century. Note that the US labour force grew by +100 mln in that time and is now 2.5 times larger so as a proportion of the workforce, this is easily the lowest ever.
A well-known Fed hawk is out pitching for a rate hike program totaling +300 bps, noting the US economy is booming and unless they act fast inflation will get away on policymakers. Essentially he is backing up Vice Chair Brainard's recent remarks.
There was clear evidence of the boom conditions in the US economy this morning. The Fed's data on consumer credit jumped far more than expected in March. It grew by +US$42 bln in the month, the most ever and reaching US$4.45 tln. Two thirds of the rise was for revolving credit, such as for credit cards. It isn't clear yet whether that is a sign of consumer stress, or consumer optimism. With the jobless rate being very low, and jobless benefit claims very low, it seem unlikely to be stress-related.
Later today, Canada will release its Budget for 2022/2023 and it is widely expected to contain a plan to ban foreigners from buying houses, among other housing measures. This is in direct response to the continued rise and rise of house prices. Median house prices have risen more than +50% in the past two years alone, now topping NZ$1 mln as a country-wide average. Toronto is the flash-point, but Vancouver is also in the stratosphere. (Our median is NZ$885,000 and the median for the US is NZ$518,000.)
China's foreign currency reserves fell almost -1% in March from February. It was their third monthly fall and comes amid both an outflow of foreign investment and a strengthening of the US currency. The decline has been a long-term trend. They now stand at US$3.18 tln, about 21.5% of GDP. Five years ago they stood at 25.5% of GDP.
It is also becoming clear that China's 2022 growth target of "about 5½%" is going to undershoot. We are only a quarter of the way through the year and already analysts think it will be more like 4½%. But that assumes the stresses ahead don't get worse.
The growing pandemic crisis in China is having severe hardship consequences, and not only the well-publicised ones in Shanghai. Less than a year after President Xi claimed victory over "extreme poverty" some provinces are about to fall back into that condition. Oddly, Beijing's ‘common prosperity’ push is said to have been put on back-burner until their economy recovers, which is telling about the current state of their overall economy. It is clear that no-one in China actually knows how to get out of this situation, one forced on them by the combination of a healthcare system unable to cope, a vaccine that isn't very effective against Omicron, and widespread antivax sentiment especially among the older, traditional population.
The fallout on trade from New Zealand could be significant and over a longish period.
In Australia, all four economic teams at their big banks are now saying their central bank will start raising its policy interest rate in June.
A widely-watched local services PMI in Australia expanded much less in March than it did in February. But the high February level was the outlier, not these March results.
The UST 10yr yield opens today at 2.66% and up another +5 bps from this time yesterday. The UST 2-10 rate curve starts today more positive at +20 bps. Their 1-5 curve is little-changed at +96 bps. Their 30 day-10yr curve is steeper at +249 bps. The Australian ten year bond is up +4 bps at 2.97%. The China Govt ten year bond is unchanged at 2.80%. And the New Zealand Govt ten year is up just +1 bp today at just on 3.46%.
Wall Street is turning up. The S&P500 was down for all the morning trade but has now turned higher, up +0.3% so far in Thursday afternoon trade. Overnight, European markets all fell by -0.5%. Yesterday, Tokyo ended down -1.7%. Hong Kong was down -1.2% and Shanghai closed down -1.4%. The ASX200 ended its Thursday session down another -0.6% but the NZX50 ended flat.
The price of gold starts today at US$1935/oz and +US$14 higher than this time yesterday.
And oil prices are down again, but only by -US$1 to just under US$95/bbl in the US. And the international Brent price is now just under US$100/bbl.
The Kiwi dollar will open lower than at this time yesterday at 69 USc. Against the Australian dollar we are firmer at 92.3 AUc. Against the euro we are little-changed at 63.4 euro cents and holding recent gains. That all means our TWI-5 starts today at just under 74.7 and very little-changed.
The bitcoin price has stayed down and slipped a further, and minor, -0.8% since this time yesterday and now at US$43,538. Volatility over the past 24 hours has been modest at +/- 1.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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China's foreign currency reserves fell almost -1% in March from February. It was their third monthly fall and comes amid both an outflow of foreign investment and a strengthening of the US currency. The decline has been a long-term trend. They now stand at US$3.18 tln, about 21.5% of GDP. Five years ago they stood at 25.5% of GDP.
Reducing capture risk? Nonetheless, recent USD strength is an indicator of soft global credit growth demanding US reserve liquidation to offset ever present eurodollar credit requirements.
In the 1960s the Bank for International Settlements investigated the offshore, shadow-money system and found it straightforward and to be ignored. In the 1970s the Federal Reserve said same system had become complex and difficult to define; it then told the US Congress to ignore it. Link
Not just the Solomon Islands - Israel reaches out to China, again
It's hilarious the whole Solomon's welcoming China situation. Here we have us and Australia trying to tell Solomons not to ally itself in anyway with China in an obvious push to try and influence their political/military alliances. Yet we then state that Ukraine should be free to ally itself with anyone it chooses without political or military interference, as is their sovereign right. The double standards just keep echoing...
Yeah, that's a laugh.
Unfortunately successive governments seem to have been pretty poor at equipping the military we do have, e.g. our much vaunted SAS (some of whom used to be visible online discussing having to buy their own gear).
As much as I loved jet fighters and would've loved to watch F-16s in NZ, we could probably invest the money in better ways. Weapons-capable drones for our oceanic areas? Building ridiculously good and well-equipped army and special forces? Missiles?
You guys have no idea at all do you? Those old Skyhawks were the most capable in the world despite having the small engine (J52-P8B) when they were retired. Most are still flying to train US military pilots today. That's how capable they are!
The F16s were better than the deal of the century and would have positioned us to not only contribute to our own defense, but also to better participate in international efforts, even though they were the first generation. Instead we bludge off others.
"we could probably invest the money in better ways. Weapons-capable drones for our oceanic areas? Building ridiculously good and well-equipped army and special forces? Missiles?" This demonstrates a total lack of understanding. Militaries today are a composite force with all branches contributing. Our EEZ is beyond drone capability, and the new P8s no matter how capable will still be very vulnerable if the Chinese get too adventurous. Missiles cannot replace aircraft, and armies and special forces still need air support.
Should Australia (or us) have threatened with military force or invaded to prevent this deal from going though? (hypothetically of course, I'm not sure we had a clue it was happening)
I would think there very few reasons to have a base there none of them are friendly.
Why? If we decide that it is any countries sovereign right to choose which country they want to form military/economic alliances with, then we certainly cannot berate Solomon Islands for choosing to form an alliance with someone. It's their sovereign right, so they may choose who they want, right? It's the exactly the same thing with regards to their rights to associate with whomever they choose without outside interference according to our values. We certainly cannot berate them for choosing China as an economic partner when we have done exactly that over the past decade or more...
Will be interesting to see the mental gymnastics in a claim that there is a difference...
There was clear evidence of the boom conditions in the US economy this morning. The Fed's data on consumer credit jumped far more than expected in March. It grew by +US$42 bln in the month, the most ever and reaching US$4.45 tln.
US Personal Savings Rate - previous covid stimulus checks are more than spent.
And oil prices are down again, but only by -US$1 to just under US$95/bbl in the US. And the international Brent price is now just under US$100/bbl.
Well, I suppose it's good that households get a little relief on cost of living.
I'm quite concerned about China, they seem more stuck in a Zero-Covid loop than any other government. This will be hard on the population, economy and demographics if they can't bridge the gap on vaccinations.
The trigger has been pulled for an imminent demand destruction based recession? The unwind of UST flatteners is a strong signal.
Dutch Prime Minister Mark Rutte: “We Are Getting Poorer Every Day”
Reserve Banks seem confident on their ability to pilot the economy in to a soft landing. Mind you, so was Greenspan just before credit markets ceased and it nose dived.
If you mean China then I guess we'll likely see destruction of commodities demand but a repeat of supply chain stress and another supply squeeze on manufactured goods. What concerns me though is that there is no political resolve to move any direction at the moment.
The MSM seem to understand their role clearly but with social media making up a greater and greater percentage of peoples news sources I am not sure it will be as effective as in the past.
China is managing COVID in a way that recognises the older demographic profile of their population and also the lack of vaccines/useful vaccines. They will face as many issues from the "idle hands do the devils work" syndrome, people with time on their hands start to think and that is not going to help Xi at all.
China's covid situation would be tricky. If they go live with it now, it would probably end up with more than 4 million people dead ( using US death rate but China has far less heath resource per capita). With the "Dynamic clear" policy, life would be normal at least for people out of the affected area.
The Question is how long can you hold it like this? Eventually overseas travel will need to resume...
I can't understand why they aren't going door to door for the over 60's and just vaccinating them. There have to be some benefits to an authoritarian regime. And while their vaccines aren't as good as mRNA, they're still pretty effective at reducing the rate of serious illness with 3 shots.
$42 Billion in new revolving debt in the US in February. My daughter reports her gasoline bill for March is $120 per month up from not so long ago. That's $12 Billion alone spread amongst 100 million commutters-not to mention the commercial trucking fleet-all of that spending is on revolving credit for the most part. I would say more stress than optimism.
Strike has partnered with Shopify and NCR, one of the largest global POS and ATM operators, and incorporated the Bitcoin Lightning network into their POS. This brings the lightning network to thousands of retailers like McDonald’s, Macy’s, Walmart, etc.
This is the greatest innovation in payment networks for over 50 years, making transactions and final settlement instantaneous, and basically free. Visa, MC, PayPal, et al…days are numbered.
This is a seriously interesting bit of news thank you! I think the governments need to check this out asap, the ability to wash money tax free is clear this is in essence the digital resurgence of bartering at light speed and in safety. I wonder if this will enable the return of poll-tax discussions?
In other words…You have now the ability to pay instantly with #Bitcoin at nearly every retailer in the U.S.
And even if you hate bitcoin and it’s volatility, you can still use fiat at both ends, just use the bitcoin network to zip the value. The merchants will choose the cheapest POS option, and cut out the legacy ticket clippers.
Better check your financial privilege.
https://twitter.com/gladstein/status/1512493813218123786?s=21&t=BR5tBOU…
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