China readies new stimulus and the copper price zooms higher

Economy Watch

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 on the cusp of bringing back its traditional stimulus play to bolster its misfiring economy.

But first up today there is more evidence US inflation isn't cooling as the Fed would want. A respected survey by the NY Fed shows that consumer inflation expectations for the year ahead increased to 3.3% in April, the highest since November, from 3% in each of the previous four months. These year-ahead price expectations rose across the board.

Canadian residential building consent levels were expected to fall in March after an unusually strong start to the year. A -4.5% pullback was expected. But in the end the retreat was much larger, down -11.7% from the February level and down almost -15% from the same month a year ago.

Indian inflation seems to be stable, but it is running high at 4.8%.

In China, we are getting new promises of "opening up". Sadly for them this is just a replay of a tired meme and is unlikely to bring the benefits promised like of the many earlier "opening up" promises made of the past decade (which got them to the current funk).

They need to something necessarily big. And something big seems to be coming. They are readying a ¥1 tln sale of very long bonds (NZ$230 bln) to fund a stimulus program. It may not be the only bond issue for that purpose.

Australia's closely-watched NAB business confidence index stood at +1 in April, holding steady for the second straight month while staying below its long-run average. Weak sentiment in retail, wholesale, and mining offset improvements in recreation, personal services, construction, and manufacturing. But the main feature is the lackluster current conditions.

All eyes will be on the Australian Federal Budget to be released later today, but actually not until about 9:30 pm (NZT). The expectation is that it will report a +AU$9 bln surplus.

We should note that the copper price rose sharply again overnight, now back up to US$10,500/tonne and the peak and all-time high last reached last in February 2022. (It is likely to spike copper theft again. Be warned.) There is no evidence this bull-run is anywhere near over yet. As is usual, it will attract speculators because of the confluence of bullish demand (especially from China) and tightening supply. The sky-high regulatory costs of starting new projects has discouraged miners for years who turned to consolidation until that pressure eases.

The UST 10yr yield is now at 4.49% and down -1 bp from this time yesterday.

The price of gold will start today down -US$25 from yesterday at US$2335/oz.

Oil prices have risen slightly to just over US$78.50/bbl in the US while the international Brent price is now just on US$83/bbl. Both are minor net +50 USc/bbl gains.

The Kiwi dollar starts today little-changed from yesterday at just under 60.2 USc. Against the Aussie we are also unchanged at 91.1 AUc. Against the euro we are little-changed at 55.8 euro cents. That all means our TWI-5 starts today just on 69.5 little-changed from yesterday.

The bitcoin price starts today at US$62,739 and up +1.8% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.2%.

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.