China's property woes worsen. Hong Kong exodus intensifies. No Japanese inflation rise. Ukraine juices some commodity prices. AGL gets surprise bid.
Kia ora,
Welcome to Monday’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 various crises got worse, including Ukraine and the Chinese property sector.
China’s property developers started 2022 with weak sales, as many real-estate companies struggled to rekindle interest from home buyers despite Beijing’s recent attempts to ease some restrictions on the troubled sector. January contracted sales reports released in recent days by more than a dozen Chinese developers showed year-over-year declines ranging from about 10% to more than 80% for some companies. They also reflected price reductions by industry heavyweights such as Country Garden Holdings and Sunac.
And Zhenro Property Group, one of the few large property developers thought to be in ok shape has succumbed to the same liquidity stresses that have befallen its peers. After calling news reports about the company "untrue and fictitious", it has had to admit that "existing internal resources may be insufficient to address its upcoming debt maturities in March". The train-wreck that is China's property development sector rolls on.
And staying in China, total vehicle sales fell to a 25.3 mln annual rate, down from a 27.9 mln sales rate in December.
Hong Kong's city-wide lockdown to test for COVID is the last straw for many expats there and an exodus is underway.
Japanese consumer prices rose by just +0.5% in January from a year ago, easing from a +0.8% gain a month earlier which was the highest figure in 2 years. But the January rise is their fifth straight month of increase.
In the geopolitical front, Russian-backed separatists packed civilians onto buses out of the breakaway Donbas region in eastern Ukraine overnight, a shock turn in a conflict the West believes Moscow plans to use as justification for all-out invasion of its neighbour. But it turned out to be a farcical operation that collapsed early. However, the prospect of sanctions is hitting market risk appetite. Russia is now pouring more troops into Belarus, and close to the Ukraine capital.
US financial markets will be closed for Presidents Day (ex-Washington's Birthday) tomorrow, making this a long weekend holiday there.
In economic news, the American real estate market turned in a stronger result in January, selling homes at a 6.5 mln annualised rate, up +6.7% from the equivalent December rate and beating forecasts. Their median price is now US$350,300 (NZ$523,000) per dwelling, boosted by a record low inventory of houses for sale of just 7 weeks at the current sales rate.
Meanwhile the Conference Board's leading index tracking for the US slipped in January when a rise was expected.
Fed speakers were out in force over the weekend, all talking up the need to "make adjustments" to fight inflation. Evans (Chicago Fed), Bullard (St Louis Fed), Mester (Cleveland Fed), Williams (NY Fed) and Brainard (Fed Vice Chair) have all been on the hustings. Williams was less enthusiastic about an outsized hike.
And the White House Council of Economic Advisers told Congress that several factors in the coming months should help slow the recent steep rise in consumer prices.
Canada's retail sales rose more than expected in January compared to January 2021. They were up +8.6% on that basis, easily beating the inflation effect. However, the sales rate in the month slowed from December.
EU consumer sentiment got slightly worse in February, when it was expected to get slightly less bad. It is almost always negative, but the track isn't encouraging even if it is now at 'average' levels.
The Ukraine standoff is still pushing the aluminium price higher, yet another new record high. And nickel has hit a 10 year high. Meanwhile the lithium carbonate price rose even faster over the weekend, taking the weekly rise to almost +7%, but in this case not due to the Ukraine tensions.
In Australia, JP Morgan analysts have been tracking listed company earnings and they report that we are in for a bumper set of December 2021 results. In fact, they are likely to be up more than +20% from a year ago, to a record for any period pre-or-post pandemic. Half will exceed broker expectations, and that includes two of the four big banks, some other financials, miners, surprisingly some retailers, and property companies invested in online distribution centers.
And an Aussie billionaire has teamed up with Canada's Brookfield (Mark Carney is a director) to make a serious bid for one of their largest power generators, AGL Energy, with the aim of getting them to shut their coal-fired capacity much sooner that currently planned and invest much more (AU$10 bln) in renewables.
The UST 10yr yield opens the new week at 1.93% and unchanged. Recall, it started last week at 2.04%.
The price of gold starts today at US$1899/oz and up +US$2 from this time Saturday. Last week, gold was up +3% and is now at a 35 week high.
And oil prices are up +50 USc at just on US$90.50/bbl in the US, while the international Brent price is still just under US2/bbl.
The Kiwi dollar will open today little-changed at 66.9 USc. Against the Australian dollar we up slightly at 93.4 AUc. Against the euro we are marginally firmer at 59.2 euro cents. That means our TWI-5 starts today at just on 71.5 and +40 bps firmer in a week.
The bitcoin price is down another -4.3% since this time Saturday and now at US$38,313. Volatility over the past 24 hours has moderate at +/- 2.9%.
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.