Kia ora,

Welcome to Wednesday’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 yields are climbing as markets recognise the Fed is serious about wanting to see sustained inflation at 2%, and the US economy just keeps on powering ahead. And that is hurting equity valuations.

But first, the overnight dairy auction brought higher prices. In USD terms they were up +2.75% and nearly making back the drop at the prior event. However in NZD terms the gain was +4.2%, so risks to farm gate payout forecasts have faded for now. The rises were pretty much across the board and were led by cheddar cheese, WMP and butter.

In the US, the February JOLTS report delivered a little-changed set of results, far better than the expected labour market retreats. Job openings actually rose slightly.

Meanwhile US factory orders came in higher than expected. New orders rose by +1.4% from the previous month in February. This was above market expectations of a +1% increase to point to further resilience of the US economy. Year-on-year they rose +3.6%.

Adding to the bullish theme, the US Redbook index of retail sales rose +5.2% last week compared to year-ago levels.

There's more. The Logistics Manager’s Index rose to its highest reading in four months in March amid broad-based expansions in all metrics and continued progress in the transportation sector and a build-up of inventories upstream at the manufacturing and wholesale levels.

But it is not all good news; Tesla missed its delivery targets in Q1-2024 by almost -15%, their least since 2022. Their stock dived -4.8% today.. But to be fair it has been on a slide since its peak in July 2023 and has since shed more than -40%.

In China, all the news is about Country Garden's current sales failures. But we have heard that all before.

German inflation has eased to 2.2% in March from 2.5% the previous month. This was their lowest rate since May 2021, moving closer to the ECB's target of 2.0%.

In March, Australian house prices barely moved in both Sydney and Melbourne from the prior month according to CoreLogic analysis. But they zoomed higher in most other major centers. Brisbane, Adelaide and Perth all booked big gains, and year-on-year, Perth is up almost +20%.

The UST 10yr yield is now at 4.36% and up another +3 bps from this time yesterday. 

The price of gold will start today firmer by +US$19 from yesterday at US$2259/oz, and only -US$7 below its new all-time high reached intra-day yesterday.

Oil prices have risen +50 USc to just on US$84.50/bbl in the US while the international Brent price is now up at US$88.50/bbl. These are five month highs.

The Kiwi dollar starts today at just on 59.6 USc and +20 bps firmer than this time yesterday. Against the Aussie we are unchanged at 91.6 AUc. Against the euro we are holding at 55.4 euro cents. That all means our TWI-5 starts today just on 69 and actually unchanged from this time yesterday.

The bitcoin price starts today softer at US$65,516 and down another sharpish -4.6% from this time yesterday. Volatility over the past 24 hours has been very high at just on +/- 4.1%.

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.