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US non-farm payrolls rise almost +300,000; US inventories fall; SEC faults credit raters; China CPI rises; UST 10yr yield 2.12%; oil and gold fall; NZ$1 = 65.4 US¢, TWI-5 = 70.9

US non-farm payrolls rise almost +300,000; US inventories fall; SEC faults credit raters; China CPI rises; UST 10yr yield 2.12%; oil and gold fall; NZ$1 = 65.4 US¢, TWI-5 = 70.9

Here's my summary of the key events over the weekend that affect New Zealand, with news of surprisingly strong labour markets in the US.

American payrolls rose strongly in December and the job counts for both October and November were revised higher as well. Almost 300,000 new jobs were added in December, significantly above expectations. The US economy seems to be on solid ground despite a troubling Chinese situation.

And despite low wage growth of +2.5% year-on-year, given inflation is very low as well, real wages are rising.

Adding to the positive news, stocks in American businesses are falling. While that may show up in restrained GDP growth data, it also shows that excess inventory stress is not building. In fact, these results drew one Fed member to say that if growth picks up, the pace of rate hikes will need to as well.

While we were on vacation, the US SEC issued a staff report on how the credit ratings agencies are performing. They were not overly impressed, documenting evidence of serious conflicts. Hard to be convinced the major credit ratings agencies are any better than they were before the GFC. Certainly the staff at the SEC aren't, although they do say they are "improving".

This is important because the better jobs report and rising American consumer confidence is encouraging their households to borrow more. The incentives are there to grease the system.

In China, inflation is rising. In December, consumer prices rose at the rate of +1.6%, the second highest pace in 2015. However, producer prices are still falling. Neither data was different to market expectations.

Although it is 'opinion' more than 'news', it has been interesting to watch seasoned observers wonder whether President Xi is losing his grip on events. No doubt Central Committee members will be wondering too.

Back in New York, the UST 10yr yield benchmark has continued its fall and is now at 2.12%. Local swap rates have softened as well, but do not yet reflect the full Wall Street shift down.

And crude oil just gets cheaper and cheaper. The oil price has fallen yet again and is now just over US$33/barrel. That's now a 12 year low. In the past week or so, the US rig count has dropped sharply, down -5%.

And the gold price has inched back down on the good US jobs data and is now at US$1,102/oz. The recent run-up does not look like it can be sustained.

The New Zealand dollar fell sharply against the greenback following the good US data, now at 65.4 US¢, but held its own against the Aussie, now at 94.1 AU¢, and it fell against the euro too, now at 59.9 euro cents. So these changes mean the TWI-5 is now at 70.9 and back to where it was in nearly November.

If you want to catch up with all the local changes on Friday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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27 Comments

An antidote to this happy-clappy US cheerleading:

http://www.cnbc.com/2016/01/09/recession-people-are-worried-about-is-al…

''Looking at International Monetary Fund data, "the year-over-year change in global exports is at the second lowest level since 1958," Raoul Pal, Publisher of the Global Macro Investor told CNBC's"Fast Money"this week.

Basically, it means economies around the world are shipping their goods at near historically low levels. "Something massive is going on in the global economy and people are missing it," Pal added.

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yes, the BDI at around 450 never having been this low (when it was 11000 8 years? ago) just makes you wonder just what is going on. So the thing that has me perplexed is who is right? ie we are really OK, or really somehow un-seen we are badly off. So much info seems to go in different directions that I wonder.

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Newsflash From The December ‘Jobs’ Report—–The US Economy Is Dead In The Water
http://davidstockmanscontracorner.com/newsflash-from-the-december-jobs-…

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Hence, Consumer Borrowing in U.S. Rises at Slowest Pace in 10 Months Read more

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Anyone with any experience with 'My food bag'? A friend is having a play with them and very impressed.

https://www.myfoodbag.co.nz/

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....yep. family member in shared flat i Auck all use it (6 girls). They love it, no wastage, no shoppng trips required, quality foods...and they reckon it's no dearer than the old money n the kity your turn to buy type approach. If it was public I'd be investing!

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Every one of many conversations with many foodbag users has been positive++. Foodbag have to miss the mark sometimes but I haven't heard it. Remarkable.

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All good feedback from folks I know using it. Surprised me how popular they are.

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Some folks I know used them for their Christmas Day meal (and consequent holiday break) and were very impressed. They said that they believed that it was more cost effective in part due to less wastage of food. (Most people over buy for festive occasions?)

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It's all unfolding as expected:

"For dollar bulls, policy makers in China navigating currency and stock market turmoil may compete with U.S. economic performance for attention from the Federal Reserve."

http://www.bloomberg.com/news/articles/2016-01-09/dollar-s-fate-hangs-o…

Who's going come out on top, the US economy or the unknown in China? Place your bets.

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The U.S. is big on rhetoric, China on action. They might just flip the bird at the Fed and the U.S.

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Crackerjack:

http://www.theguardian.com/business/2016/jan/11/australia-bet-the-house…

''Australia, though it frequently features high on lists of the world’s most desirable locations, currently has the world’s second most indebted household sector, at 122% of GDP, soon to overtake Denmark in first place. Combined with private non-financial business sector debt, Australia has a staggering total of 203%, vastly larger than public debts at all levels of government.

Australia’s long-term bet on China was and still is conceptually simple – an incredibly flawed assumption that the country would never cease to consume increasingly more iron ore.''

''With the Chinese economy beginning to falter, the fear is Australians must now figure out where their economic future lies for the next generation who have been brainwashed into believing that digging up rocks and flipping houses by accumulating a gargantuan mountain of private debt is how a modern western country builds its future. The results will not be pretty.''

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How are we different? We're not. And if it wasn’t so serious for farmers and for the country, now and for the future, it’d be a comedy routine.

The banks, the government, MPI, the agribusiness experts, all agree the maths is simple. China = lotsapeople; Lotsapeople = plentyadairy; Plentyadairy = loadsamoney.

And for loadsamoney, anything goes. More cows. Millions of them. Wreck the freshwater. Poison the soils. They’re wasted? Grab that palm kernel stuff. It’ll do for feed. Elected environmental council in the way? Sack it. Get some toadies to do the job. Climate policies? Haha! Rip em up. Need money? Pile up the debt. Borrow as much as you can imagine. Even more. Have it in sacks. Bring a trailer! Costs a problem? Bring in thousands of immigrant workers, give them a minimum wage. It’ll keep them happy. Health and safety? Take a jump. Not round here, son. More cows even better? Factory farming, just like other places. Stuff our green, clean differentiation. Who needs it? As Key said, it’s aspirational. So ignore it. Anyway, the next generation will pick up the costs, the layabouts. It’s easy. Easy. This is the same stuff everybody makes. We’ll just make more of it. Start thinking rich!

And in the Beehive, ‘China on the phone?! China?!! Quick, pass it to me. Quick! Idiot! Quick!’

‘…Hello, hello, yes, yes, I’m sorry, yes, yes, of course… good to talk… always here on the end of the line… anytime… just ask, anything… no, never even heard of the Dalai Lama… not me… Falun Gong? …no we were never going to go… I’ll make sure no-one does… yes, of course, a comprehensive strategic partnership… that’s how we see it too… a great idea… a defence agreement? … defence? …d-e-f…? of course, yes, that’s even better… why not… you thought of that? Brilliant… mutual defence, it’s brilliant if you don’t mind my saying, brilliant… and, and, ah, if you don’t mind, and, ah, and, about that, that, ah, milk powder?... What? … no, no, no, not disappearing lawyers… heck no, not me…. never… never… it’s the line… I said milk powder… You know, ah, we talked about it… Hello? Hello? Are you there? Hello?’

‘Strange. Line’s gone dead. Weird. But of course he’s very busy.’

But it's not a comedy.

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Workingman, what a brilliant piece of writing. Thank you. Well said!

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Jun Kei should really go to Weipu Kove.

Waipu Cove, sorry, where every thing is in the red, lettuce say and so will the surrounding businesses be, if someone does not pull their finger out.

At least businesses are taking it into their own hands and moving the red luttuce from sea to Farm Gate to use as fertiliser.

Wise move,well maybe.? We do not want to be in the red, but clean and green would be nice.

The local Council who are already overpaid by the local citizens and businesses via the rate explosion have not lifted a Finger to aid the area.

Well maybe the middle digit, but that is nothing new.

Environmentally clean and green...well not quite yet. Deep in the red...yes.

Lettuce pray.

Waipu Cove deserves better. The tourists from Asia, might agree. They do not come here for more of the same red ideology, clean and green is their new Motto too.

Unless you are a journalist, disagreeing with the powers that be, when all bets are off and a disappearing act,may be initiated.

So beware of the powers that be, I say.

A bit of Journalistic License is one thing...some do not like.

Hence my moniker.

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Workingman, are you in Canterbury? Your comment re elected environmental Council only applies there as far as I know. Happy to be corrected. :-)

IMO you are going to see a change in farming practices over the next few years as the regional council's bring in rules and policies that will heavily impact the BAU model of farming as you see it now. It is not going to happen overnight and people need to get used to that. The point is change is taking place on farms, the benefits of which may not be seen in some waterways for decades. Get used to it.
Otago is already starting to see some of the issues arise as farmers get to grips with their limits that come in to force in the next few years. The most productive land in the region is going to be most impacted which could see the shift to dairying in areas like Central Otago where it will be much easier to meet the nutrient limits set by ORC but will be by using irrigation.(IMO this is a disaster waiting to happen, for water quality) History may well show that ORC has served itself an 'own goal' by making blanket limits without considering individual catchments.

Cost is not the main reason migrant workers are employed in the dairy industry. The migrant workers usually have strong networks in the big dairy areas and keep each other up to speed on pay rates etc. Migrants are employed because it is difficult to get NZ born staff to work in the more remote areas and/or to move away from family/friends for employment. There is a move in the dairy industry to pay staff on hourly rates now - and higher than minimum wage. Yes there are some employers out there who let the side down, but this is not exclusive to the dairy industry.
A Department of Labour audit of 80 dairy farm businesses through 2013 and 2014 found breaches of employment law in almost half, including failing to record hours worked and wages paid. Three breached minimum wage laws.
http://www.stuff.co.nz/business/75781525/former-union-boss-calls-for-in…

Helen Kelly is reported as saying (in regards to dairy) "Many of the jobs advertised require staff to work 60 hours a week, in some cases for more than 10 days straight without a break."
I have a friend working in an orchard currently as are 100's of backpackers. In the orchard my friend works in if they can't pick enough fruit (paid piecemeal) to earn the minimum wage they are fired. Is this to be condoned? Friend is on to their 10th straight day working approx 7-9 hours a day- with a half hour lunch break. Lunch is eaten under the trees. But the press and Ms Kelly don't appear to be interested in the conditions for the thousands of casual staff employed in the viticulture/horticulture industries. Double standards.

Factory farming (Barn systems as opposed to herd homes) - Fonterra sees the real value in their products as being from non-factory farming and has already signalled it is up for discussion. Regional Councils are slowly coming to realise that 'factory farming' is not going to be the panacea for all water quality issues either. So while a few may believe in it the vast majority do not.

Health and Safety: Agriculture does not have the highest number of serious harm injuries despite what the MSM may like you to believe:
http://www.business.govt.nz/worksafe/research/health-and-safety-data/se…

But it does have the highest death rate. Could the age of some working farmers be a factor?
http://www.business.govt.nz/worksafe/research/health-and-safety-data/wo…
http://www.business.govt.nz/worksafe/research/health-and-safety-data/fa…

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Whoa back CO - don't let facts get in the way of ole city slicker rant.

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Hilarious Working Man - can't wait to see some of that on some hard hitting NZ comdey show. Also a piss take of Dr Key bad mouthing our scientists on the BBC as per your theme would be highly watchable.(http://www.listener.co.nz/commentary/john-keys-unhappy-week-at-the-bbc/ )

You are right - anyone not adhering to the government line is in trouble.

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Utter denial....so with our beloved leader hell bent on ignoring the best science just what can we expect from him on sound decision making on NZ's future?

bound to go well.

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Plunging global confidence is reflected in stockpiles of oil and further falls in price. Now below $33 and headed for $32 a barrel.

Plunging global trade is reflected in a record low Baltic Dry Index.

Plunging global confidence is reflected in falling markets. Aussie down 2000 points from 2015 peak and down again today (4961).

Awaiting the opening of the big markets. Frantic propping up or more carnage?

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What can be expected of a currency trader? Economics? Business? Science? Not interested. Or is it something darker? How traumatic was his childhood, school days? Never hear anything about it. Is it plain ignorance or revenge assassination of the country from those days (TPP)?

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Long term planning for a FX dealer is closing your positions on Friday evening. Key's current long term planning is looking towards the next election. His legacy will not be as good as it perhaps should have been. Hard decisions on immigration, housing and the environment have been delayed or ignored. Sad really.

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Dr Copper has done the unthinkable

http://finviz.com/futures_charts.ashx?p=d1&t=HG

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