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.

Today we lead with news Beijing seems to be on the back foot in a range of policy positions, and investors are not impressed.

But first, US jobless claims for last week fell marginally, but were at about the expected level. The number of people claiming these benefits also fell to 1.475 mln, that is to 1.1% of their workforce, and another all-time low.

Another American regional factory survey came in reporting a good expansion, but in this Philly Fed one there are signs the impetus could be fading. This survey’s indicators for current general activity, shipments, and new orders declined from last month’s readings even if they did remain positive. The employment index and both price indexes edged higher and remain elevated. But the future indicators for general activity and new orders fell sharply, even if overall, firms continued to expect growth over the next six months.

Meanwhile, Fed Chair Jay Powell made it clear when speaking as part of an IMF panel that the central bank remains committed to taming inflation, currently at 40-year highs, while virtually sealing in a +50 bps interest rate hike in May. Several other Fed policymakers, including regional presidents Mary Daly of San Francisco, Charles Evans of Chicago and Raphael Bostic of Atlanta, had delivered the same message earlier in the week. Now the outlier is hawk St Louis Fed President James Bullard who has been saying that hikes of +75 bps could be necessary to tame runaway inflation. No-one is out there saying a +25 bps is the right call.

China stocks were sharply lower yesterday as policy decisions to bolster a fading economy disappointed investors. The malaise runs deeper; capital outflows, triggered by market expectations of more aggressive rate rises in the US and Europe this year have alarmed officials in Beijing. And the Chinese yuan is depreciating in a worrying way as well. Investors are not optimistic that the side China is on in the coming new bipolar world will be the right one, and seem to be bailing. China's current economic policy making looks decidedly archaic.

The cost of shipping containers out of China fell again last week in a building trend. Bulk cargo rates remained static.

Inflation in the EU rose from 6.2% in February to 7.8% in March. This was marginally less than what was expected. It was less in the euro zone countries. (The US is at 8.5%, New Zealand at 6.9%. Australia is expected to come in at about 5%.)

In something of a surprise, EU consumer confidence improved in April. Didn't see that coming. Admittedly it is still at a very low level, but the grinding war in the east isn't weighing as much as you might have thought. But the pall hangs especially heavy over Turkey where war, inflation, and dodgy policy-making have driven them into a major funk.

And there were hawkish comments from the ECB that markets noticed as well.

In Australia, an annual study by KPMG and the University of Sydney Business School is reporting that Chinese firms invested NZ$900 mln in Australia during the 2021 calendar year, down very sharply from NZ$2.8 bln in 2020, as the pandemic accelerated a trend that started well before based on a falling out between the two.

Ratings agency Moody's has held its credit rating for New Zealand at Aaa, the maximum. Moody's said it "expects New Zealand's wealthy and highly competitive economy to continue its recovery, growing by 3.0% in 2022, from 5.0% in 2021. The economy demonstrated strong resilience in the face of the substantial shock of the Covid pandemic."

The UST 10yr yield starts today back up +8 bps bps at 2.92% and recovering up all of yesterday's fall. 

The price of gold starts today down -US$9 since this time yesterday at US$1947/oz.

And oil prices are marginally firmer at just under US$103/bbl in the US while the international Brent price is now just over US$107/bbl.

The Kiwi dollar will open today down more than -½c at 67.4 USc. Against the Australian dollar we are very marginally firmer at 91.4 AUc. Against the euro we are more than -½c weaker at 62.1 euro cents. That all means our TWI-5 starts today at 73.5 and -60 bps lower. 

The bitcoin price is up just +0.6% from this time yesterday at US$41,670. Volatility over the past 24 hours has been moderate at just under +/- 2.5%.

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.

Note that it is a public holiday in New Zealand on Monday, ANZAC Day.

Kia ora. I'm David Chaston and we’ll do this next again on Tuesday.