Kia ora,

Welcome to Wednesday'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 China seems not to care what the international community thinks of them.

But first, the Fed boss has been testifying at the US Congress and has said they are not contemplating any rate rises and they are a long way from reaching either their employment of inflation goals. But he does see 'hope for a return to more normal conditions this year". These remarks have taken some of the steam out of the bond market rate increases.

American retail sales slipped again last week, and compared to the same week a year ago the gain was trimmed back.

However a reduction in consumer sentiment has not shown up in the latest and widely-watched survey, which is actually quite bullish especially for the coming year, coming in better than expected. However, those surveyed were ;marginally less optimistic about the short-term outlook over the next few weeks.

The latest Fed regional factory survey, this one for the Mid-Atlantic states, shows little change from a healthy expansion.

And an interesting side-note. The Tesla share price has sunk -13.4% in the past two days, and is in fact now below the level it was at when the stock entered the S&P500. The price of bitcoin is slumping too. Elon Musk has lost US$15 bln in two days, and he is no longer "the world's richest man".

New data including indexes tracking electricity consumption, operating rates at factories and traffic congestion indices show that China's industrial production is resuming significantly faster than in previous years after the week-long Spring Festival holiday. That is because people were encouraged to stay where they work during the holiday to help contain the pandemic flare-ups.

China is applying a China-First policy to its southern neighbours, choking off water flow to the Mekong River and the four countries that rely on it. That is reinforcing animosity in the region. China now has eleven upstream dams on the river and is able to have a severe impact on Thailand, Cambodia, Laos and Vietnam.

And in Geneva, the Chinese foreign minister denounced ‘sensational claims’ of genocide, forced labour and religious oppression against Uygurs and other ethnic minorities in his country. As Trump taught, the "big lie" is an effective propaganda technique to deflect and confuse.

This pushback comes after Beijing said it would fix the election process in Hong Kong so that the "right result" always happens. And after more satellite evidence China is building many more military installations on reefs in Philippine waters.

In Europe, inflation rose in January, but just to the expected level. Core inflation is now up to +1.4% pa, a rise from +0.2% in December, so it is quite a move, even if as expected.

In Australia, they are facing a sharp fall away in their exports. Their trade surplus came in at AU$8.8 bln in January. January import of goods fell -10%, while export of goods fell -9%. Exports of meat were down -39% and coal was down -8% and these two drove the decline in January. Exports of iron ore fell too.

The latest global compilation of COVID-19 data is here. The global tally is still rising but at a little-changed pace, now at 111,878,000 and up +322,000 in one day.

The UST 10yr yield is up +1 bp at 1.36% today.

The price of gold will start today down -US$4 at US$1808/oz.

Oil prices are up by about +US$0.50 and are now at just on US$61.50/bbl in the US, while the international price is just under US$64.50/bbl. They have been quite volatile in between, rising another +US$1.50/bbl but then falling back just as sharply.

And the Kiwi dollar opens at 73.3 USc and unchanged from this time yesterday. Against the Australian dollar we are holding at 92.7 AUc. Against the euro we are still up at 60.3 euro cents. That means our TWI-5 is still at 74.3.

The bitcoin price is now at US$47,418 and -11.4% lower than this time yesterday and on top of the -7.2% drop the day before. It is now well off the record it set two days ago of US$58,332, in fact down a sudden -19%. Volatility has been extreme in the past 24 hours at +/- 11.2%.

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.