Huge Chinese property sector support may not be enough

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 news China seems to be struggling to find its way through the wreckage of its property crisis.

The Chinese central bank left both its 1- and 5-year rates unchanged in their monthly review today, still at 3.45% and 3.95% respectively. The one year benchmark has been unchanged for nine consecutive months now, the five year benchmark for three. These 'holds' come amid a flurry of other loosening activity last week, targeted at reviving their property markets and saving the remaining large property developers.

Analysts are forming the view that the actions China has taken to reinvigorate its property sector won't be enough to achieve that. Bets that much more stimulus will be required are juicing up some commodity markets. Copper, for example, has now risen to US$11,250/tonne, up +7.5% in a week, up double that in a month. Zinc has taken off too, up +10% in a month.

Meanwhile that are chalking up some global success in other areas. The number of new shipbuilding orders in China rose almost +60% in Q1-2024 from the same period a year ago. This accounted for about 70% of global orders for ships. Almost 40% of those orders were for bulk cargo ships, 12% for container ships. But there was a notable surge in orders for oil tankers, accounting for 35% on Q1 orders. Normally they account for less than 10%.

We should get the Chinese foreign direct investment data for April later today and markets are braced for another quite weak result as the two superpower blocks disentangle.

And we should note that the southern province of the Guangxi (at the border with Vietnam) is suffering unusually heavy rainfall currently with widespread flooding. Both hourly and daily rainfall records have been broken.

Meanwhile Taiwanese export orders came in in April at the same level as March, a very good result because that is almost +11% higher than April 2023 and well above the expected +4.5% gain.

And we should also perhaps note that the New Zealand carbon price is falling away quite quickly now, with the NZU down to just $46/tonne. (You will recall it at over $80/tonne more than a year ago.) That is now miles below the NZ$132/tonne EU carbon price, which is languishing but not really falling.

The UST 10yr yield is now at 4.44% and up +2 bps from this time yesterday. 

The price of gold will start today up +US$19 at US$2434/oz. 

Oil prices are down -50 USc at US$79/bbl in the US while the international Brent price is still just on US$83.50/bbl.

The Kiwi dollar starts today down -20 bps from yesterday at just over 61.1 USc. Against the Aussie we are still up at 91.6 AUc. Against the euro we are softish at 56.3 euro cents. That all means our TWI-5 starts today just on 70.2, and down -20 bps from yesterday.

The bitcoin price starts today at US$68,332 and up +2.4% from this time yesterday. Volatility over the past 24 hours has been moderate however at +/- 2.1%.

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.