US payroll expansion probably stronger than it looks; Canada payrolls jump too; China's FX reserves swell; Taiwan exports drop hard; world food prices ease; UST 10yr 4.07%; gold and oil firmer; NZ$1 = 62.1 USc; TWI-5 = 70.3

Here's our summary of key economic events overnight that affect New Zealand, with news of a surprise US labour market expansion that appeared more modest than expected.

The headline non-farm payrolls expanded +209,000 when analysts had expected +225,000 - and other observers noticed yesterday's ADP employment report that signaled +497,000. It was not to be, and in fact the very strong May expansion was dialed back a bit to +309,000. The headline June expansion is the lowest in almost three years.

These are the data markets reacted to, taking the signal that the labour market pressure wasn't as strong as feared - feared because it might have brought an outsized Fed rate reaction.

But as regular readers know, we look below the surface to the 'actual' and not seasonally-adjusted data. US employer payrolls rose from 156.3 mln employed in May to just under 157.0 mln in June - and that is an expansion of +697,000 more people employed - on top of the May rise of +897,000. Over the past year, employer payrolls have risen a remarkable 3.75 mln (from 153.2 mln), and even for an economy as large as the US, that is a huge increase in payrolls and brings with it resilient demand. The year-on-year seasonally adjusted data shows the same, so the big picture is consistent.

But recall there is another series, looking at employment from a household survey. This picks up unincorporated sole trader jobs as well. That reports a +551,000 expansion in paid employment in June from May, and an annual rise in people employed to 161.6 mln and up +2.9 mln in a year.

By any measure, the American labour force is still growing quickly and generating rising demand and consumption. It certainly isn't an economy on its knees, far from it.

Pay gains held steady in June, and their youth unemployment rate is only at 7.5% which is low in comparison to many countries (including New Zealand).

Although the headline numbers cooled, economic activity hasn’t slowed as much as Fed officials expected, likely keeping the central bank on track to raise interest rates later this month to combat its persistent and above target inflation. The labour market has their backs.

Canada also released its June labour force data and that came in better than expected, up +59,900 in June from May when a +20,000 rise was anticipated. In fact, they had a +109,600 rise in full-time employment and a fall of -49,800 in part-time employment. So the net quality of the new jobs improved. This probably paves the way for another central bank policy rate hike there too and it will come on Thursday next week (NZT). Their policy rate it is already 4.75%.

For all its economic recovery issues, China's foreign exchange reserves rose in June when no change was expected. Yes, the rise was small in USD terms but is was a rise. They are now at US$3.193 tln, with less than US$0.9 tln held in US government debt.

Taiwanese exports fell sharply in June from May, down more than -10%, and down an uncomfortable -23% from June of 2022. Ameliorating the pain was that imports fell even more.

Japanese household spending remained low in May and is falling, with households there prioritising saving. If this trend embeds it will be hard for Japan to maintain its recent economic expansion, and it will be up to their Government to convert those savings into some sort of spending.

The latest update to the FAO world food price index shows it continuing to retreat with the pressures well and truly behind us. It fell for a second month in June and to a fresh low since April 2021. The May increase was downwardly revised. Obviously global food supply and cost pressures have eased a lot since their peak in March 2022, falling by almost a quarter. Meat prices have remained stable since October last year, but dairy prices continue to ease.

The UST 10yr yield will start today at 4.07% and up another +2 bps after yesterday's sharp run up. But it is up +22 bps in a week and that is a big move, and to its highest level since the brief March spike and before that, November. Their key 2-10 yield curve inversion is 8 bps lower at -88 bps. Their 1-5 curve is unchanged at -109 bps. And their 3 mth-10yr curve is slightly more inverted at -121 bps. The Australian 10 year bond yield is now at 4.27% and up another +3 bps on top of yesterdays surge. The China 10 year bond rate is unchanged at 2.70%. The NZ Government 10 year bond rate surged up +12 bps to 4.90% and that is now a twelve year high.

Wall Street was lower in their Friday trade with the S&P500 down -0.3% and resulting in a -0.5% weekly fall. Overnight, European markets were all higher by about +0.4% except London which fell -0.3%. Yesterday, Tokyo ended its Friday session down -1.2% for a weekly dump of -3.4%. And Hong Kong fell -0.9% also for a -3.4% weekly fall. Shanghai was down -0.3% on the day to end its week down a modest -0.4%. The ASX200 ended its Friday session down -1.7% for a weekly drop of -2.2%. The NZX50 ended the day up +0.2% with its now customary late rise, and it ended the week up +0.5%.

The price of gold will start today at US$1926/oz and up +US$16 from yesterday and up +US$6 from this time last week.

And oil prices are up +US$2 at just over US$73.50/bbl in the US. The international Brent price is firmer too at just over US$78.50/bbl.

The Kiwi dollar starts today just over 62.1 USc and back up more than +½c from this time yesterday - and from a week ago. Against the Aussie we are still firm at 92.8 AUc. Against the euro we are holding higher at 56.7 euro cents. That means the TWI-5 is now just over 70.3, little-changed from yesterday but up +50 bps in a week.

The bitcoin price has again fallen marginally from this time yesterday and now is at US$30,162 which is a -0.4% fall. Recall, this time last week this price was US$30,316, so little change from then too. Volatility over the past 24 hours has been modest at just under +/- 1.2%.

Crypto darling (and giant) Binance is unravelling now and senior executives are fleeing, and the company downsizes sharply with rising layoffs. Their general counsel, chief strategy officer, chief business officer and a senior vice president for compliance all departed in recent days amid the turmoil.

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