Chinese Premier call for measures to 'boost confidence'

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.

And today we lead with global eyes are on how China will manage itself out of its economic funk.

First a reminder that it is a public holiday in the US, holiday, Presidents Day, and financial markets are closed there.

To the north, Canada said it's producer prices fell marginally in January from December, as expected, and they are now -2.9% lower than a year ago. This is the fourth consecutive month of falls.

Across the Pacific, Japanese machinery orders bounced back in December after a terrible November. They came in better that expected (+2.7% vs +2.5%) but nowhere near enough to make up for that November -4.9% fall.

Later today the Chinese central bank will reset its Loan Prime Rates. They are widely expected to cut them both to support an economy that seems to be misfiring. The cuts won't be large, probably -15 bps for both the one year and the five year rates. Premier Li is urging officials to do everything they can to support the Chinese economy and "boost confidence".

Rivals are becoming concerned that China will dump production resulting from stimulus boosts on world markets. The US has already issued a warning to China on this.

In Europe, more evidence inflation is proving quite sticky in the lower ranges, just as it is here. The "last mile" is tough for everyone. Sweden said its rate rose to 5.4% in January, from 4.4% in December. Not exactly what they want or need. A rise was expected, but not by this much. This sort of backsliding affects inflation expectations, a crucial central bank mentric.

And European natural gas reserves are at decade highs, and prices have dived. Overall EU gas reserves are currently over 65%, their highest level for the time of year since at least 2011, with Germany at 72%, Italy at 60%, and France at 50%. They started winter with almost 100% of their requirements stored in underground facilities, far above the targets they set for themselves. In the US prices are falling sharply too, now back to levels first seen in 1995. Too much supply, not enough demand. Suppliers using energy as a weapon no longer seems effective.

Off the coast of Yemen, although things have quietened recently, there was another serious attack overnight with a South American-registered bulk cargo ship attached and probably sunk. Underwater drone attack weapons were likely used.

The UST 10yr yield starts today at 4.33% and up +5 bps from this time yesterday. 

The price of gold will start today up another +US$3/oz from yesterday at US$2016/oz.

Oil prices are still just over US$78.50/bbl in the US while the international Brent price is also still just over US$82.50/bbl.

The Kiwi dollar starts today at just on 61.4 USc and up +20 bps overnight. Against the Aussie we are also marginally firmer at 94 AUc. Against the euro we are firmer still 57.1 euro cents. That all means our TWI-5 starts today at just on 70.9 and up +20 bps from yesterday.

The bitcoin price starts today at US$51,908 and a mere +0.2% up from this time yesterday. Volatility over the past 24 hours has been low at only on +/- 0.8%.

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 tomorrow.