Here's our summary of key economic events overnight that affect New Zealand, with news global surprises continue to colour investor assessments
First up today, the US economy added many more jobs than expected. Analysts were thinking the expansion would be +200,000 in March from February, but in the end the headline seasonally adjusted gain was +303,000. On an actual, unadjusted basis the gain on employer payrolls was +659,000. The wider household survey saw an even larger rise of more than +1.04 mln in the month to 161.4 mln people employed both on employer payrolls and the self-employed. Adding more than +1 mln paid jobs in a month is very expansionary. Guessing here, but strong immigration (both legal and illegal) is helping fuel the expansion.
Average weekly pay rose +4.1%, bolstering this strength although that was slightly lower than the +4.3% rise rto February. In any case it is more than inflation and it shows that even after absorbing the migrant flow it remains 'real'.
Today investors are looking past the fact that the Fed may delay rate cuts, realising the American economy is in much better shape than they have assumed, and equity prices are rising, even though bond yields are rising too.
The US$5 tln US consumer debt market has been expanding marginally recently although it did show a faster than usual rise in January. The February data out today shows a slower rise and one less than expected. This market indebtedness level runs at 17.8% of US GDP, very much higher than the New Zealand equivalent which is only 3.7% of our GDP.
Unfortunately, Canada's labour market isn't showing the same robust expansion in March, essentially marking time with little change after February's good gains.
China is still on holiday so markets were closed everywhere yesterday except Hong Kong.
In Japan, equity prices fell sharply yesterday as investors reassessed the risks they face there. The 'risk off' mood came from recalibrating Mid-East tensions, the Taiwan earthquake implications, and the sense that US inflation may stay higher for longer delaying Fed rate cuts. And that was before the NFP payroll data was known. The Nikkei225 fell more than -1000 points on Friday. The Yen strengthened. The Bank of Japan said more rate hikes could be on the way.
In the UK, major utility Thames Water's owner has defaulted on debt repayments, making it effectively insolvent. That holding company is Kemble Water Group, and is owned by a consortium of institutional shareholders – mostly pension funds and sovereign wealth funds. Dutch bank ING and two Chinese banks will decide the company's future from here which could affect ist 16 mln customers.
Africa's weakest current, the Zimbabwe dollar is in freefall - again, now more than 25,000 to the USD. Their attempt to have a sovereign currency after a long period of just relying on the USD has failed again. Now the Reserve Bank of Zimbabwe has announced the replacement of its struggling dollar with a new structured currency (the ZiG) backed by a basket that includes foreign currencies, gold, and other precious metals.
While we are talking about struggling currencies, we should note that the Turkish lira is starting to respond to their central bank monetary tightening and is holding at about 32 to the USD. It is still too soon to know whether Argentina's "shock therapy" will stabilise their currency, now at 862 to the USD.
Australian retail sales are rising but slower than their inflation rate. They were up +1.6% in February from a year ago. But in that same time their inflation indicator rose 3.4%. Any way you look at it, that is a volume drop.
The Australian goods trade surplus halved in February from the same month a year ago. It came in at a +AU$6.5 bln surplus, down from +AU$12.9 bln in February 2023. The reasons is the combination of falling exports (-2.4%), and import growth staying high (+17.1%). Of particular note is that both rural and non-rural exports fell more than -3%, but that gold exports were up +25% on that basis.
And as we suggested might happen yesterday, Sydney has been hit with very severe rain and storms. They are continuing. The disruptions are major. And they will affect insurers significantly. Those same insurers dominate New Zealand markets, so their pain will likely be reflected here is rising premiums. They claim they are making no money now on household and car insurance, even as they raise premiums by more than 50%.
And here is another unexpected surprise. The US NorthEast region got hit with a 4.8 magnitude earthquake overnight that sent tremors from Philadelphia to Boston and jolted buildings in New York City. They haven't had one like that in almost 150 years. It did little damage however.
The UST 10yr yield is now at 4.39% and up +4 bps from this time yesterday, up +20 bps in a week. The key 2-10 yield curve inversion is unchanged at -34 bps. And their 1-5 curve inversion is still at -70 bps. And their 3 mth-10yr curve inversion is now at -101 bps and virtually unchanged as well. The Australian 10 year bond yield is now at 4.19% and unchanged. The China 10 year bond rate is holding at just under 2.30%. The NZ Government 10 year bond rate is now at 4.70% and down -2 bps but up +6 bps for the week.
Wall Street is ending its Friday session up +1.0% on the S&P500 and recovering some of the earlier fall, and will end its week down -1.2%. European markets were all sharply lower, by about -1%. Tokyo ended its Friday session down -2.0% yesterday for a weekly -4.1% tumble. Hong Kong ended yesterday unchanged and a weekly rise of +1.2%. Shanghai was closed for their public holiday so their short week ended up +0.9%. The ASX200 fell -0.6% for both Friday and the week. NZX50 ended another -0.2% lower yesterday but was unchanged for the week.
The Fear & Greed index has changed little in a week and is still in the "greed" range, similar ro a week ago and a month ago.
The price of gold will start today much higher by +US$38 from this time yesterday at US$2326/oz and yet another all time high. A week ago it was US$2233 so up US$93 or +4.2% from then
Oil prices have risen a sharpish +US$2.50 to just on US$87/bbl in the US while the international Brent price is now up at just over US$91.50/bbl. A week ago these prices were US$83 and US$87.50 respectively.
The Kiwi dollar starts today at just on 60.1 USc and -¼c softer than this time yesterday. A week ago it was at 59.8 USc so a +¼c higher than then. Against the Aussie we are holding at 91.3 AUc. Against the euro we are softish at 55.5 euro cents. That all means our TWI-5 starts today just on 69.2 and down -20 bps from this time yesterday and up +10 bps from a week ago.
The bitcoin price starts today softer at US$67,794 and down -0.4% from this time yesterday. Today's level is -2.3% lower than this time a week ago. Volatility over the past 24 hours has been moderate at just on +/- 2.5%.
Don't forget to "fall back" on Sunday morning. We get an extra hour. If you still have manual clocks, you will need to adjust them to one hour "earlier".
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42 Comments
First up today, the US economy added many more jobs than expected. Analysts were thinking the expansion would be +200,000 in March from February, but in the end the headline seasonally adjusted gain was +303,000.
Behind Today's Stellar Jobs Print: It Was Literally ALL Part-Time Jobs (And Illegals)
However, that's where the mitigating factors end, because while there was some improvement in the quantitative aspect of the March report, when it comes to the qualitative aspect, it was another disaster for one simple reason: all the job gains were part time jobs!
Here is exhibit A: in March, the number of part-time jobs soared by 691K to 28.632 million, up from 27.941 million while full-time jobs dropped by 6,000, to 132.940 million from 132.946 million.
This number only gets scarier when we extend the period to the past year: as shown in the next chart, since March 2023, the number of full-time workers has collapsed by 1.347 million while the number of part-time workers exploded by 1.888 million!
The price of gold will start today much higher by +US$38 from this time yesterday at US$2326/oz and yet another all time high.
A great wealth transfer is underway: How the West lost control of the gold market
Pricing power in a market long dominated by Western institutional money is moving East and the implications are profound
A great wealth transfer is underway: How the West lost control of the gold market
That's a very good analysis of what's going on. I bought this up around the water cooler and the responses were as what you would expect - "Jamie Dimon wears the trousers", "The Chinese are tapped out and have no money for gold", "It's a barbarous non-interest paying relic and has no value."
Financial advisors, Mary Holm, Granny Herald, etc would never suggest people have an allocation to gold (or silver). It doesn't make sense to them as they believe in the superiority of the tradfi narratives and its monetary systems. Not to mention, the ticket clipping opportunities for gold are limited.
Regardless, the relationship between the gold price and the 10-year treasury yield has been severely trashed. What a time to be alive.
Interesting.
Weeks after Federal Reserve Chairman Jerome Powell evaded a sitting congressman’s questions about the central bank’s foreign gold holdings, the Fed has also declined to comply with a Freedom of Information Act request for records about such holdings.
“Board staff consulted with staff at the Federal Reserve Bank of New York (‘Reserve Bank’) and have been advised that such records, if they exist, would be Reserve Bank records, and consequently, not subject to the Board’s Rules Regarding Availability of Information,” the Fed said.
The Federal Reserve said that this publication could take its request to the New York Fed. However, that institution isn’t subject to FOIA.
https://www.zerohedge.com/commodities/federal-reserve-refuses-provide-r…
...beating ourselves up over NZs 0.17% share of global climate emissions ?
"Just 57 companies are responsible for 80 per cent of the world's greenhouse gas emissions, according to a new report released by UK-based think tank InfluenceMap.
The report also reveals big producers did not reduce, but rather increased, their output of fossil fuels in the seven years after the Paris Agreement"
https://www.abc.net.au/news/2024-04-05/small-cohort-of-mega-polluters-p…
Stay in school and get an education...while your future world burns...
Worldwide, the average person produces about four tons of carbon dioxide each year. In the United States, each person produces about 16 tons of carbon dioxide each year and NZ 15 tonnes of COe per capita. Because carbon dioxide is a greenhouse gas, adding more of it to the atmosphere causes our climate to warm.
"...New Zealand was a net CO2 sink of −38.6 ± 13.4 TgC yr−1."
A Comprehensive Assessment of Anthropogenic and Natural Sources and Sinks of Australasia's Carbon Budget
https://agupubs.onlinelibrary.wiley.com/doi/10.1029/2023GB007845
Lol, no it won't.
Let us presume that the world is empty of humans. Just nature and animals doing their thing. NZ would indeed by a net sequester of carbon. This is not a revelation - it's basic physics - some countries will be net emitters and some net sequesters, by virtue of their flora and fauna. The world would be broadly in balance, CO2 concentrations in the atmosphere mostly stable.
Now let's say humans turn up and chop a crap tonne of forests down in NZ, introduce livestock onto the plains, and burn stuff left right and centre. Now add a couple of million cars, some coal-fired milk powder production etc. I guess NZ *might* still be a net sequester. But what difference have the humans made? Correct. They have upset the balance and contributed to additional CO2 in the atmosphere, which is driving climate change.
Now imagine those humans in NZ turn round and say, 'ahhh, but our contribution to the destruction of the planet doesn't matter because the land we occupy is *still* a net sequestor of carbon - just less so. What would you say to those humans? Fair point?
Please define my 'presumptions'.
I have not just learned that NZ is a net sequestor of carbon. I am willing to entertain that it might be true given that the world will have always had a mix of contributors and sequestors (noting the assumptions and margin of error here are huge).
BUT, even if you accept this finding, surely you see the obvious flaws in assuming that this means we are all good in Aotearoa to just crack on throwing pollutions into the atmosphere? Come on.
It doesn't account for the amount of carbon we "export" via our imports of everything. How much of our warming temps can be attributed to the concrete jungles we call cities? How much can be attributed to the loss of natural forests and their moisture retention that cools the air?
Maybe the issue isn't whether we're a carbon sink but the balance of CO2 between atmospheric, biomass and soil. Plenty of studies highlight that globally the ocean has acted as the biggest carbon sink and that's not it's role.
The carbon issue is just another example of finance capitalism, another means to leverage, to virtue signal, without changing anything.
Fact is we do not live in balance with our environment and ecosystems and this is the real issue. We continue to pump out emissions of all sorts, continue with deforestation (and pine plantations are not the answer), continue to pollute our waterways and land with plastics and toxins, continue to over consume everything. We're fed a narrative about CO2, "climate change", and the fact is scientists, economists, humans, are too ignorant to join the dots. We don't want the illusion of our 1st world, hyper individualised lifestyles to be pulled away from us.
"In addition to the territorial carbon budget quantified using the bottom-up and top-down approaches, we estimated non-territorial emissions, which are the emissions associated with the net trade of fossil fuels, crop, wood, and livestock to and from other countries. Non-territorial emissions from these products occur in the country where they are consumed, and not in Australasia where they are extracted or produced and subsequently exported outside the country.
These emissions are not considered under the UNFCCC reporting guidelines, which require countries to report on their territorial anthropogenic emissions only."
NZ is a net sequester of carbon, you don’t hear that mentioned too much by the greenies.
The NZ Greenies are the worst. They seem to believe they're beyond reproach and a higher moral level than almost everyone, particularly middle-class Americans. I remember once reading about how our global environmental footprint is far worse than other developed countries. They also seem to have no answer about the welfare of and rights of people in the developing nations having access to and being able to use fossil fuels. I have no doubt they think poor people in Kenya need to make sacrifices for the privilege of people in the developed world. Appalling attitudes really.
Not pretending anything. I don't believe that "poor people" in developing nations should have any less right to use fossil fuels than you - a "rich person" who has likely lived a life with greater access to the use of fossil fuels to enable a more comfortable life.
Not bad, have you Spruiked before?
It's hard to see how the US can cut, or even needs too, here. Apart from CRE things don't look too grim. That said CRE alone could decimate smaller banks. Seeing 50% falls in last sale price. WFH has changed everything it's not just interest rates re CRE office space.
Those thousands of financial edge types: speculators, specuvesters, equity recyclers, and Landlords will be capitulating and Forced to Deleverage, over the winter/spring/early summer of 2024.
This all due to the long heralded (Onespoof) ponzi saviour - a veritable "White Knight" of lower DDDebt price - vanishes like a fart in breeze.
Higher interest rate come Christmas 2024, now looks like an odds on, good chance!
Inflation going down??? Really?
Well, that was so last week's Granny Herald, OneWoofs, TA and ACs thinking - I think you are living in the past with them, sorry to say.
Oil is the TOTAL BOSS on inflation. It feeds into EVERYTHING, as we all know.
- Its up 15% over the last month and likely to go higher.
WAR is very inflationary - do you see Peace breaking out very soon?
So inflation will be increasing and the next print will tell us so.
When you have people arguing rates could/should go either way you know you are in a somewhat neutral position.
My pick is that for CY2024 the OCR stays where it is. Lots of people won’t like it, sure, but lots of people are also starting to understand why risk should be priced.
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