Markets have muted reaction to Russian invasion. US retail remains strong. Global food prices rise. Aussie wages up modestly keeping RBA at bay.
Kia ora,
Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the International edition from Interest.co.nz.
Today we lead with news markets are handling the Ukraine situation calmly, so far.
As Ukraine braces for open war as Russian forces move deeper into their country, the rest of the world is bracing for the economic impacts however, which is including aggressive cyber war. RT is central to their global disinformation push. Spill-over will no doubt affect New Zealand at some point.
EU and US sanctions are hitting the value of the ruble (it’s now at an all-time low) and the yield on Russian bonds (with the 10yr now approaching 11%). Their 9% inflation rate is expected to rise. Even though current sanctions only formally hit Putin loyalists (the oligarchs), they will still have a tough impact on ordinary Russians. And there will be loud echoes in EU and other global financial markets too.
Meanwhile in the US, retail sales growth continued is strong recent expansion last week, still rising far faster than CPI, so it is still recording 'real' volume gains.
Mortgage applications fell sharply last week, down to their lowest level in more than two years as their benchmark 30 year mortgage interest rate continues its slow but relentless push higher.
Today's tender of US$62 bln of UST 5yr bonds was well supported, but the yield rose from 1.49% at the equivalent tender last month to 1.83% pa today.
January industrial production in Taiwan continued its impressive run up +10.0% and rising faster than for December. Even more impressive is a resurgence in retail sales in the country, up +6.4% from the same month a year ago when inflation is rising +2.8% over the same period.
EU inflation was up +5.1% in January, with both Germany and Italy recording the same (on a harmonised basis) but France was at +3.3% and Spain at +6.2% rounding out the major four economies in the block.
One thing the Ukraine crisis is doing is raising global food prices. Wheat, a major Ukrainian export, it now trading at a nine year high, up almost +30% in a year. It has big implications for bread prices. It isn't the only commodity rising; palm oil and soybeans are too.
China is on a self-sufficiency program - again. There seems little in this latest push different to all the others.
In Australia, their wage index was up, up +2.3% year-on-year. But that is not strong enough to make a June rate hike more certain than not.
The UST 10yr yield opens today at 1.98% an up +5 bps. There was a loud echo in New Zealand swap rate markets yesterday after the hawkish RBNZ signals, with the two year reaching a six year high.
The price of gold starts today at US$1910/oz and up another +US$7 from this time yesterday.
And oil prices are down -50 USc at just under US$91.50/bbl in the US, while the international Brent price is just over US$94/bbl. But it has been a rollercoaster rise for oil in between.
The Kiwi dollar will open today up another +¼c at 67.8 USc. Against the Australian dollar we are up slightly at 93.6 AUc. Against the euro we are also firmer at 59.9 euro cents. That means our TWI-5 starts today at just on 72.2 with another daily gain and the first time it has been over 72 in five weeks.
The bitcoin price has risen +2.2% since this time yesterday and now at US$38,670. Volatility over the past 24 hours has modest at +/- 1.1%.
You can find links to the articles mentioned today in our show notes.
And get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston and we’ll do this again tomorrow.