Kia ora,

Welcome to Thursday's Economy Watch where we follow the economic events and trends that affect New Zealand.

I'm David Chaston and this is the International edition from Interest.co.nz.

Today we lead with news our currency is on a fast elevator up today as the reflation trade picks up too.

But first, mortgage applications fell away sharply last week in the US, held back by rising interest rates, especially the 30yr fixed. The weather isn't being mentioned as a reason but it must have had some impact, in Texas at least.

Sales of new homes are staying high, up +19% in January from the year-ago level. New home sales make up 17% of their annual real estate transactions but you would have thought this strong driver would be keeping mortgage application levels up. But they aren't.

Taiwanese export orders are up a remarkable +49% in January on a year-on-year basis. That is much better than expected and better again than the December outcome. By any measure, this has to be the most successful pandemic recovery stat anywhere.

In Hong Kong, they are hiking taxes with their first rise in Stamp Duty in 18 years which sent their share market tumbling by the most in five years. It is all part of paying for stimulus programs after the city comes up to two years of recession. Even with this, Hong Kong is budgeting on a deficit equivalent to 4.8% of GDP.

China is launching a wave of infrastructure projects totaling NZ$5.3 tln as part of a broader effort to stimulate consumption and growth. This new and enormous program is getting little attention in the West but it is world-scale stimulus and is more than double the US Biden plan of US$1.9 tln (NZ$2.5 tln).

And staying in China, the owners of the infant formula brand Enfamil are putting it up for sale. It is a heavy-hitter in China but since the British company Reckitt Benkeiser bought it two years ago it has struggled to deliver the gains they planned on. China's birth rate slumped dramatically in 2020 and other big brands like Nestle and Danone are also reportedly reassessing their infant formula business in China.

China is relaunching its international manhunt for its fugitives, mainly for graft reasons. In 2020 a total of 1,421 fugitives, including 28 Red Notice fugitives, were captured are brought back to China. In the past some key figures were said to be hiding out in New Zealand but no data is available on how many were spirited out of here in 2020.

And China is rolling out minimum pay increases in many of its regions, averaging about +10%. That will take these minimums up to NZ$90/week. Shanghai has the highest minimum pay in the country at $120/week. The difference between these levels and what the Party bosses earn is enormous. China has extreme inequality and getting worse. So it is no surprise graft is a real problem. Beijing is making big efforts to "eliminate poverty" and while extreme poverty is reducing fast that is having no noticeable impact on inequality.

Commodity prices are rising faster overnight with copper prices now at a decade high ant nearly at their all-time high. Iron ore prices are moving up again.

Wall Street has turned higher today and ending their losing streak, with the S&P500 up by +0.8% in early afternoon trade.

The UST 10yr yield is up +2 bps at 1.38% today.

The price of gold will start today down -US$7 at US$1801/oz.

Oil prices are up by about +US$1.50 and are now at just over US$63/bbl in the US, while the international price is just over US$66/bbl.

And the Kiwi dollar opens at 74.1 USc and up +¾c from this time yesterday. This is its highest in more than 3½ years and is up +2c in just one week. Against the Australian dollar we are up as well, up to holding at 93.3AUc. Against the euro we are up at 61 euro cents. That means our TWI-5 is now up at 75 and a 4½ year high. It's been a dramatic rise overnight.

The bitcoin price is now at US$49,647 and +4.7% higher than this time yesterday and ending the recent fall. It did get up to US$51,446 in between but could hold it and is drifting lower now. Volatility in the past 24 hours is still very high at +/- 6.8%.

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.

Kia ora. I'm David Chaston. We will do this again tomorrow.