American labour markets stronger than expected; signs carmaker strikes near end; Canada jobs rise too; India tackles excess liquidity; Japanese spending rises; UST 10yr 4.78%; gold up and oil down; NZ$1 = 60 USc; TWI-5 = 70

Here's our summary of key economic events overnight that affect New Zealand, with news of much stronger jobs gains in the US in September, and signs the US carmaker strikes will end with sharply better pay and conditions.

There has been a positive 'surprise' from the US labour market in September. We had suggested the expected +170,000 gain might have an upside, but no-one expected gains as strong as the +336,000 (sa) delivered. Nor the big upwards revision for August (up from +187,000 to +227,000).

These are the seasonally adjusted headline numbers, but as regular readers know we look at the actual unadjusted survey results. And they show actual payrolls rose +585,000 in September (+394,000 in August) to now be at 157.0 mln people on employer payrolls and a new record high. Looking deeper to include the unincorporated self-employed, there are now 161.7 mln in their employed labour force. Only +29,900 of this monthly increase was for part-time work.

If there are any downsides, they include that their jobless rate was unchanged from 3.8%, their participation rate made no progress at 62.8%, and their weekly earnings were up +3.75% from a year ago, little gain from inflation's 3.65%.

US vehicle sales rose to an annualised rate of 15.7 mln in September according to updated NADA data. And there seems to be "significant progress" in union negotiations with the carmakers. The carmakers seem to be caving quickly now.

US consumer credit data will be release at 8am (NZT). Update: This metric actually fell in August when a small rise was anticipated. Overall it fell by -US$15.6 bln, driven by a sharper -US$30.3 bln fall in car and student loans, to US$3.7 tln. That was offset to some extent by a +14.6 bln rise in credit card debt (to US$1.25 tln).

It now appears more likely that another US Fed rate hike will be coming soon. A hot labour market and fat pay and conditions increases will be seen as fueling inflation by the regulators. They will feel they need to get ahead of these pressures. Bond yields are rising again.

Rising yields are causing big changes in where investors hold their liquid funds. According to LSEG/Refinitiv data, investors offloaded American bond funds worth a net -$6.3 bln this past week, the biggest amount since December 2022. Money market funds meanwhile, received about +$43.2 bln in inflows, the highest since April 2023.

And it wasn't only the US's labour market that turned in a much-better-than-expected result. The Canadians did too. They expected a +20,000 gain in employment in September but delivered a +64,000 gain and they also upgraded their August data sharply. But in Canada, it was part-time work that drove most of their gains.

In India, their central bank kept its key policy rate unchanged at 6.5% as expected but said it would keep liquidity tight using bond sales to bring inflation closer to its 4% target and this focus on bond selling was not expected. Indian CPI inflation is currently running at 6.8%. It didn't release details of what it expected to sell, but is was suddenly active and that drove benchmark bond yields sharply higher, up 13 bps yesterday, the most since August last year, to close at 7.34%.

Japanese household spending unexpected rose more than expected in August from July (+3.9%). It might still be lower than a year ago, but the month-on-month rise impressed financial markets.

In Australia, the RBA has been looking at household financial stress in their latest Financial Stability Review. They say early indicators show that financial pressures have increased and the incidence of severe financial stress has increased but remains low. The group of borrowers at higher risk of falling into arrears on their mortgage remains small. You can find this review on page 53. Household financial stress, where it occurs, does not vary much across the country. (Interestingly, Australian media played up the big percentage rise in stress, without mentioning it went from tiny to very small.)

Yesterday we noted low and declining 2023 copper prices as a sign of weakness in China. Today we can note low and falling lithium prices as a huge oversupply of lithium car batteries from China clogs markets (and drives down the cost of a key component in electric cars).

Also falling are world food prices. They may not have fallen in September from August, but they are -11% lower than year ago levels. The drop would have been more if it wasn't for sharply higher sugar prices. Dairy prices are down -25% in a year (as the GDT auctions confirmed), and global meat prices are lower too. Grain prices are -15% lower than a year ago. These are the changes for producers, not consumers. Food prices should not be driving inflation

The UST 10yr yield starts today up +6 bps from yesterday at 4.78% on the implications of the strong US labour data. Their key 2-10 yield curve is still inverted by -31 bps. Their 1-5 curve is now at -67 bps and less inverted. Their 3 mth-10yr curve inversion is also less inverted today today at -65 bps. The Australian 10 year bond yield is now at 4.56% and down -4 bps from yesterday. But the China 10 year bond rate is unchanged at 2.71%. The NZ Government 10 year bond rate is up +1 bp to 5.61%. A week ago it was 5.39% so up another +22 bps in a week on top of last week's +13 bps.

Wall Street is up +1.5% in Friday trade preferring to focus on the avoidance of recession rather than the implications for Fed policy. Overnight European markets closed mixed. Frankfurt was up +1.1% but London was up only +0.6% to bookend these markets. Yesterday, both Hong Kong closed up +1.6% to finish the week unchanged. Shanghai was still closed for their National Day holidays. But Tokyo ended down -0.3% yesterday and was down an ugly -3.5% for the week. And the ASX200 ended up +0.4% in its Friday trade but down -1.3% for the week. And the NZX50 was down -0.2% yesterday for an unchanged week.

The Fear & Greed Index we follow eased off the 'extreme fear' position yesterday (and this time last week) to 'just' record a 'fear' setting today.

The price of gold will start today at just on US$1829/oz and +US$12 from yesterday. But that is down -US$21 from a week ago.

Oil prices have slipped slightly to be just under US$82/bbl in the US. The international Brent price is just on US$84/bbl. These are five-week lows and are -US$8 lower in a week.

The Kiwi dollar starts today at 60 USc and up more than +¼c from yesterday but is little-changed from a week ago. Against the Aussie we are marginally firmer, now at 93.8 AUc although up +½c in a week. Against the euro we have also firmed marginally to 56.6 euro cents. That all means our TWI-5 starts today at just over 70 but little-changed in a week.

The bitcoin price has moved up from yesterday, and it is now at US$27,897 and That is up +1.5% from then. From a week ago it is up +4.0%. Volatility over the past 24 hours has been modest at just on +/-1.6%.

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