Ukraine dominates headlines. China's house prices slip. Taiwan export orders high. EU PMIs positive, ditto Australian PMIs.
Kia ora,
Welcome to Tuesday’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 all eyes are on the political situation, but the global economic indications are mostly positive.
On the global stage, it has been announced that there will be a face-to-face summit meeting between US President Biden and Russian President Putin, brokered by the French, to try for a Ukrainian resolution. It's an 'in principle' agreement. Russia seems lukewarm because it delays plans, and is signaling it will recognise Russian-speaking breakaway regions as independent countries. Both regions suffer from declining populations and economic stagnation.
A spillover consequence of these tensions is that a state-owned Belarusian potash miner that accounts for about 20% of global supply has declared force majeure because it is hit by sanctions, shaking up a market that’s already contending with soaring fertiliser prices.
For the US, just a quick reminder that Wall Street is closed as the country is on a long weekend holiday.
Markit reported their preliminary PMIs for Japan for February yesterday. Both dipped. The factory one is still expanding however, but the services one took a large tumble as the country battles Omicron, and is now contracting. Still, companies remained optimistic that activity would improve in the year ahead.
Westpac says that with the Covid-affected New Year festival, and the sanitised Winter Olympics behind it, they expect "China's economic promise to shine bright in 2022". China kept its prime loan rates unchanged today after review.
China's house prices slipped in January. This was true for both sales of new units, and resales. The official data shows the declines widespread but small, except in Beijing and Shanghai where they held. But what the official data doesn't show is the volume of transactions and that seems to have fallen rather more widely.
And in Guangzhou, China's four big state-owned banks cut mortgage rates aimed at lending support to a property sector reeling from a severe cash crunch there.
Taiwanese export orders came in right at about the level expected, up +12% in January from a year ago, which was also the gain in December.
The acceleration rate of German producer prices fell back from the extreme levels in December, but they didn't fall back as much as was expected. They are up +2.2% from the prior month, and up +25% from January 2021. It is cost pressure driven by energy prices mainly.
But German, indeed all EU factory PMIs are expanding at am unusually solid clip. The EU factory PMIs retained their fast expansion and their services PMIs rose to a good expansion even if it isn't as fast as the factory sector. At these rates, business is expanding much faster than pre-pandemic levels. Much of these gains are on the back of new order growth, and the rebound is most in France and Germany, the EU's core economies. The British PMIs rose too.
The takeover offer of AGL we noted yesterday has gone from 'friendly' to 'hostile', with the bidders taking their campaign wider after the formal rejection. The Federal government is threatening to veto it if it succeeds to save the local coal industry.
Separately, a rail lockout in NSW is underway. Both this and the AGL saga are now part of the upcoming Federal election campaign as issues harden because the governing parties look like they are heading for a loss.
In Australia, Markit also issued their preliminary February PMIs. The factory one posted a good further expansion and its best level since mid 2021, and the services on jumped from a contraction to a solid expansion. Overall business sentiment in the Australian private sector is positive with the level of confidence rising to a two month high.
The UST 10yr yield opens today still at 1.93% as Wall Street remains closed.
The price of gold starts today at US$1896/oz and down -US$3 from this time yesterday. Gold is getting a boost in Japan on stagflation fears.
And oil prices are up another +50 USc at just under US$91/bbl in the US, while the international Brent price is just under US$93/bbl.
The Kiwi dollar will open today up +¼c at 67.2 USc. Against the Australian dollar we are down slightly at 93.2 AUc. Against the euro we are marginally firmer at 59.3 euro cents. That means our TWI-5 starts today at just on 71.6 with a marginal daily gain.
The bitcoin price has recovered +1.3% since this time yesterday and now at US$38,943. Volatility over the past 24 hours has high at +/- 3.0%.
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.