You ready for another week of financial turmoil?

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 investors are bracing for another week of financial turmoil.

But first up, there has been a "thumping win" for the Labor Party in the NSW state elections, far more decisive than anyone expected. The Greens struggled and got no coat-tail advantage. Their Teals held on to repeat some of the Federal election gains. The hard-conservatives, characterised by the religiously-inspired Abbott and Morrison leadership suffered another big loss and is finding its culture war stands are losing stands.

In Europe, markets are increasingly worried about Deutsche Bank. It has been eyed for years over some long-standing shady practices often with Russia, but now, post-Credit Suisse, confidence is leaking away to a serious extent. On March 9, its share price was €11.51. It ended on Friday at €8.54. Shareholders are nursing a -25% dive in just two weeks on growing speculation the giant German bank could be following Credit Suisse's deadly path. It has wide-ranging issues. When confidence in a bank goes, it can go suddenly. The German Government is scrambling to reassure the market. But the odour is affecting many other banks as well.

On a more positive note, Eurozone economic growth accelerated to a ten-month high in March according to the latest flash PMI survey data, adding to signs that their economy is reviving after falling into decline late last year. Inflationary pressures have continued to moderate, with input prices even falling sharply in manufacturing. Jobs growth has also accelerated and business confidence in the outlook has remained resilient despite concerns stemming from recent banking sector stress and higher borrowing costs. Having noted all those positives, the overall rate of expansion is still quite modest.

Across the Atlantic, American durable goods orders fell -1% in February from January, to be just +1.0% ahead of year-ago levels. Mainly this was because of weak aircraft orders which have been a drag for a few months now. Orders capital goods were up +3.8% if you exclude defense and aircraft orders. Including both, capital goods orders were down -4% from year-ago levels.

But perhaps the March data will be better? The latest PMIs for March are healthy in the US. The flash Markit PMI for March reports the fastest uptick in US private sector business activity for almost a year, as new orders returned to growth. Their services sector expanded faster in March, and their factory sector's February contraction was almost eliminated in March. There is nothing in this report to indicate the US labour market is pulling back, but there are indications that price inflation remains high. This will steel the US Fed for an even higher benchmark interest rate to try any take more steam out of the expansion. Certainly that was the view of Fed hawk James Bullard overnight.

And banking turmoil issues are still playing out in the US with reports that depositors are moving funds from banks to money market funds, and close to NZ$½ tln has shifted this way through Friday. This is a significant funds flow, even for the giant US banking industry. The beneficiaries? money market funds run by JPMorgan Chase, Goldman Sachs, and Fidelity.

North of the border, Canadian retail sales grew more than expected in January from December, but the year-on-year situation sagged somewhat to be +5.0% higher. It was healthy car-buying that helped the January data.

Across the Pacific. the Japanese inflation rate fell to 3.3% in February from January's 41-year high of 4.3%. The latest figure also marked the lowest since last September. They had serious and sudden deflation in February from January, running at an annualised -7% rate.

The inflation fall came even as the Japanese services sector expanded at a faster rate in March. And their factory sector held it own, even if it isn't back expanding yet.

As the Brazilian president visits Beijing this weekend, China has agreed to restart beef imports after trade was initially halted due to a case of mad cow disease a month ago.

Singapore reported some awful industrial production data for February, far weaker than anyone saw coming. The contraction is running more than -11%

Separately, the IMF boss noted over the weekend that the risks to global financial stability have increased. She also urged China to 'rebalance towards consumption'.

The UST 10yr yield starts today at 3.37%, unchanged from Saturday and back to early February levels. 

The price of gold will open today at US$1978/oz and up +US$1 from this time Saturday. A week ago the gold price was US$1975/oz, so very little net change here.

And oil prices start today unchanged from Saturday at just over US$69/bbl in the US. The international Brent price is now just under US$74.50/bbl. 

The Kiwi dollar is unchanged against the USD and now at 62 USc. Against the Aussie we are little-changed at 93.4 AUc. Against the euro we are also little-changed at 57.7 euro cents. That keeps the TWI-5 down at 70.1, which compares with the week-ago level of 70.9.

The bitcoin price is little-changed today, now at US$27,734 and up +0.1% from this time Saturday. Volatility over the past 24 hours has been modest at +/-1.9%.

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’ll do this again tomorrow.