Here's our summary of key economic events overnight that affect New Zealand, with news Wall Street retreated today after realising that the US Fed won't be deterred in their inflation fight. It is them, and their valuations that will have to change. Their hope that the Fed would blink isn't likely now.
The giant US economy added more jobs than expected in September even if the gain was the lowest in 18 months. The headline gain was +263,000 when a +250,000 gain was expected. Holding it back was a -41,000 fall in Government workers. Apparently schools are finding it very difficult to recruit teachers in the charged political environments in many communities. But as regular readers will know, we also look at the raw data that is not seasonally adjusted. That shows overall payrolls rose +431,000 in September and taking the paid workforce to 153 mln.
The jobless rate fell to 3.5%. Their participation rate rose to 62.3%. Average weekly earnings rose +4.8% pa but at a +7.8% pace in September from August.
By any measure this represents a tight American jobs market. And the US central bank will know it can keep targeting inflation on the back of a resilient labour market that shows no sign of being hurt by that press. In fact the 'real' +431,000 rise in employment will bring even more spending impetus to the American economy. Rising wages do to. So the Fed isn't easing up on the rate rises any time soon.
The prospect of another +75 bps hike has equity and bond markets retreating as they revalue their asset holding to reflect the lower P/E ratios this implies.
Data out on American consumer debt shows that it grew by +US$32 bln in August from July, a much faster +8.3% pa rate than was expected. American now owe US$4.7 tln in this type of debt, or 21% of their annual economic activity (GDP).
Canada also delivered a positive employment report, a bounce-back in September from their August slip. They added both full- and part-time jobs with their participation rate rising to 64.7%, wages rising +5.2% pa, and their jobless rate falling to 5.2% which is 'average' for them but it is below pre-pandemic levels.
China's week-long holiday is ending and it is clear many people were staying at home this year. Travel data reflects that with activity down -36% compared to last year - which itself wasn't a strong event either.
China's foreign exchange reserves were expected to fall to US$3 tln in September, a -US$55 bln retreat. But they didn't actually fall that hard, only declining -US$26 bln to US$3.029 tln. (Note that China's foreign exchange reserves only run at two-thirds of American consumer debt.)
Taiwanese exports dived in September, down -5.3% when a +1.5% rise was expected. This is a big and maybe important miss,
German retail sales fell -4.3% in 'real' terms in August, the retreat they were expecting. In nominal terms, like every other country reports, they rose +5.4% due to the effects of inflation..
In Australia, they are getting close to deciding whether to stop the impending tax cuts for high earners. This is a policy left over from the Morrison Government. The new prime minister has come out supporting the rollback by implication at least. No formal decision has been taken on that yet, however.
The UST 10yr yield starts today at 3.88% and up another +7 bps from this time yesterday. The UST 2-10 rate curve is little-changed at -42 bps. But their 1-5 curve is less inverted at -6 bps. And their 30 day-10yr curve is a little flatter at +91 bps. The Australian ten year bond is +5 bps steeper at 3.91%. The China Govt ten year bond is unchanged at 2.76%. The New Zealand Govt ten year will start today at 4.30%, and up another sharpish +12 bps.
On Wall Street, the S&P500 is fearful the goods jobs data will keep the Fed on track with sharp rate rises and has fallen a sharp -3.2% in late Friday trade there and that has trimmed their weekly gain to just +0.4%. Overnight, European markets were all about -1.3% lower, except London which was unchanged. But for the week, Frankfurt booked a +2.7% gain, Paris a +3.0% gain and London a +1.4% gain. Yesterday Tokyo ended its Friday session down -0.7% but that capped a strong +5.2% weekly rise. But Hong Kong fell -1.5% yesterday but still managed a weekly rise of +3.3%. And of course Shanghai has been closed all week for public holidays. The ASX200 ended Friday down -0.8% but that capped a very strong +5.8% weekly rise. But the NZX50 ended down -0.2% and could only manage a +0.4% weekly rise.
The price of gold will open today at US$1700/oz. This is down -US$12 from this time yesterday.
And oil prices start today +US$4 higher than this time yesterday at just under US$91.50/bbl in the US while the international Brent price has risen to be just over US$97/bbl.
The Kiwi dollar will open today at 56.2 USc and another -¼c lower than this time yesterday. Against the Australian dollar we are little-changed at 88.1 AUc. Against the euro we are a tad softer at 57.6 euro cents. That all means our TWI-5 starts today at 66.7, and -20 bps lower than this time yesterday.
The bitcoin price is now at US$19,449 and down -3.2% from this time yesterday. Volatility over the past 24 hours has been modest again at just under +/- 2.0%. Binance has revealed yet another gigantic crypto hack where 'investors' have lost almost NZ$1 bln.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.