Extended economic expansion drives up key metal prices

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.

And today we lead with news the ongoing rise in the world economy is shifting some key metals prices into a bull-run.

But first a look ahead. The American data to be updated this week will be their advance Q1-2024 GDP which is currently expected to come in at +2.5%. That will follow key updates to durable goods orders and new home sales - and advance April PMIs. It will be peak reporting for their earnings season this week too. April PMIs will also come for Australia, Japan and the EU, as will CPI updates in Australia. And there will be key central bank policy decisions for Japan, China, and Turkey this week

In the dominant global economy, their central bank reported that sticky inflation and sticky high interest rates were cited as the key risks to financial stability in its survey of key contacts, with geopolitical troubles and the upcoming American presidential election also getting a strong mention. These heightened risks were reported in the US Fed's half-yearly Financial Stability Report.

The Fed itself is worried about a steady decline in the liquidity of life insurers’ assets and their use of non-traditional liabilities and other novel funding which would be hard to control in a crisis. They were less worried about American households. Vulnerabilities from household debt were judged as only moderate. Inflation and uncertainty surrounding the direction of federal policy on trade, and government spending are banks' own top financial stability concerns.

Meanwhile in the financial world, yet another key voting Fed member is out dampening down prospects of rate cuts. The Atlanta Fed boss said US inflation is only coming down "very, very slowly" and "let's not be in a hurry" on interest rate cuts.

In China, and in all of March in all of the country, their incoming foreign direct investment was only +NZ$20.7 bln in March. But that was far better than the tiny +NZ$3 bln in March a year ago. Still the total for the first three months of the year was down a startling -26% compared to Q4-2023, up just +3.9% from the same quarter a year ago which was unusually weak. From Q1, 2022 the current levels are -28% lower. It will worry Beijing policymakers that these levels are bedding in so low.

China will review its two Loan Prime rates later this afternoon (NZT). No change is expected this month.

And we should note that the large southern Pearl River system is flooding, some of it severe.

Over in Germany, March data shows that their producer price deflationary impulse is easing. Their PPI was down -2.9% from the same month a year ago, but that was far less than the February equivalent of -4.1%. And those March producer prices actually rose +0.2% from the prior month and that was better than the no-change expected.

It is worth noting that the IMF and the World Bank have been having their annual talkfest Spring Meetings this past weekend.

In the real world, we should also note that it is not only the aluminium price that is rising at present (which is up +20% since the end of February), but the copper price is on the move higher too, up +16% in the same timeframe and actually approaching its all-time high set a year ago.

Other base metals like nickel, tin, and zinc, have all been rising sharply recently too. But not iron ore, lead, titanium or lithium - or the carbon price. (Even locally, here.)

The UST 10yr yield is now at 4.62% and down -3 bps from Saturday but up +10 bps over the past week. 

The price of gold will start today down -US$3 from this time Saturday at US$2391/oz.

Despite continuing Middle East tensions and uncertainties, oil prices have slipped lower to just over US$82/bbl in the US while the international Brent price is up slightly at just under US$87/bbl. Over the past week these prices have fallen -US$2.50 respectively.

The Kiwi dollar starts today little-changed at just under 58.9 USc. But that is down nearly -½c in a week. Against the Aussie we are up +10 bps at 91.8 AUc. Against the euro we are still at 55.3 euro cents. That all means our TWI-5 starts today just on 68.8 and unchanged from Saturday, -30 bps lower for the week.

The bitcoin price starts today firmer at US$64,854 and a minor +0.8% gain from Saturday. A week ago this price was US$67,601 so a -4.8% retreat from then. Volatility over the past 24 hours has been modest at just on +/- 1.1%.

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.