Powell signals Fed will go after inflation hard. Taiwan export orders rise sharply. EU:China relations sour further. China demographics irreversible.
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 Jerome Powell goes on the offensive to tackle inflation.
In a very direct speech, the boss of the US Fed clearly signaled that inflation is enemy #1. "Inflation is much too high. We have the necessary tools, and we will use them to restore price stability," he said. There is no equivocation here, not even for the war. In fact, war is aggravating inflation. Bond markets jumped. The USD rose. Equity markets waivered.
Markets now feel certain a +50 bps rise is coming from the Fed in six weeks on May 5 (NZT) and repricing for this is underway.
Meanwhile, the Chicago Fed's national activity index is settling in at a high level, showing the same good expansion it has for four of the past five months.
China has kept its prime loan rates unchanged in their March review. This was what markets were expecting.
Taiwanese export orders continued to impress in February, up +21% from the same month a year ago, which itself was up +43% on the same basis.
German producer prices were up +1.4% in February from January. But the startling data was the year-on-year result, up +26%. And this survey was carried out before the actual Russian attack on Ukraine, although it does reflect the rising tensions.
The invasion of Ukraine is severely straining EU:China relations, and a break is possible there. They weren't good in the first place after EU reactions to human rights abuses in Xinjiang.
And domestically in China, more evidence their demographics are changing "irreversibly". Their marriage rate fell in 2021 to its lowest level ever recorded, and the average age of marriage rose to its highest. Their birth rate will never rise on this basis. China's population is set to "go Japanese" and shrink, even quite quickly.
In Australia, independent media are going on "a news strike", protesting the cozy deals that Facebook and Google have negotiated with mainstream media outlets to keep them quiet - deals that exclude the smaller more independent sector of the media.
The UST 10yr yield opens today at 2.30% and up a very sharp +15 bps from this time yesterday and approaching a three year high.
The price of gold starts today at US$1932/oz and up +US$10/oz from this time yesterday.
And oil prices are up nearly +US$5/bbl. In the US they are now just on US$108/bbl. The international price is just on US$111.50/bbl. Russia is able to sell its output but at steep discounts. Meanwhile the EU is looking at ceasing all purchases from Russia.
The Kiwi dollar will open today lower, now at just on 68.8 USc as the greenback firms. Against the Australian dollar we are a little softer at 93 AUc. Against the euro we are still at 62.5 euro cents. That all means our TWI-5 starts today at just at 74 and now off a four month high.
The bitcoin price was down 1.2% from this time yesterday to US$40,937. Volatility over the past 24 hours has been modest at +/- 1.4%.
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.