Rest of the world doing ok as China stumbles

Kia ora,

Welcome to Friday’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.

And today we lead with news that the rest of the world doesn't actually need an expanding China. Their financial market struggles are - so far at least - having little impact elsewhere even as some investors take sharp losses in the Middle Kingdom, especially on bonds.

The strength of the US labour market is on display again with jobless claims falling more than expected last week. There were 233,000 new claims last week a decrease of -32,000 from the week before. There are now still 2.1 mln people on these temporary benefits but that is slightly above year ago levels - although not when you account for the growth of their labour force over that time.

Overnight, the USDA released its February World Agricultural Supply and Demand Estimates (WASDE) report. They raised ending stock estimates for American corn, soybeans, and wheat more than traders expected. And they noted a bumper Brazilian soybean harvest. For 2024, beef import estimates were raised largely on higher expected imports from Oceania. 2024 milk production forecasts were lowered and the US expects to export less.

The US Treasury had a big 30 year bond auction earlier today, one that was well supported. But the median yield rose to 4.31% from the 4.16% at the prior equivalent tender a month ago. Increases like this are evidence that global rates are still pushing higher.

The Reserve Bank of India held its benchmark policy rate at 6.5% for the sixth consecutive meeting at its overnight meeting. This was as widely expected and comes amid persistent price pressure. Indian inflation rose to a four-month high of 5.69% in December due to rising food prices. But that is still within the RBI's generous 2-6% target range "in the medium term". However, dominating this review were questions about how they handled the blocking of Paytm.

China released its January CPI data and it isn't calming nerves. Consumer prices fell by -0.8% in January from a year ago, marking the fourth straight month of decline which was the longest streak of drop since October 2009. This data came worse than market forecasts of a -0.5% fall, and is the steepest retreat in more than 14 years. Food prices declined at a record pace with beef prices down -7.7% in a year and lamb prices down -5.9%. Milk prices were more insulated, down just -0.8% in the year.

Meanwhile the -2.5% drop in producer prices is actually an easing of the declines in the factory sector, even if it is running more deflationary than consumer prices.

Global container freight rates dropped by a marginal -1% last week to remain very high on the shipping crisis induced by military actions and droughts. This minor shift overall masks big changes both ways on many key routes. Meanwhile bulk cargo rates are little-changed again at historically low levels.

The UST 10yr yield starts today at 4.17% and up +6 bps from yesterday. 

The price of gold will start today down -US$8/oz from Monday at just on US$2031/oz.

However oil prices are on the move up, up +US$2.50 to just under US$76/bbl in the US while the international Brent price is now just over US$81/bbl.

The Kiwi dollar starts today at just under 60.9 and down a bit less than -¼c from this time yesterday. Against the Aussie we are up nearly +¼c at 93.9 AUc. Against the euro we open at 56.5 euro cents and down -20 bps. That all means our TWI-5 starts today at just on 70.4 and essentially unchanged from yesterday at this time.

The bitcoin price starts today at US$44,991 and up a notable +4.2% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.6%.

You can find links to the articles mentioned today in our show notes.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston. And we will do this again on Monday.