US nonfarm payrolls rise; US service sector expands more slowly; ditto China; China FDI in rare retreat; Aussie retail sales volumes weak; UST 10yr 4.56%; gold up and oil down sharply; NZ$1 = 59.9 USc; TWI-5 = 69.3

Here's our summary of key economic events overnight that affect New Zealand, with news equities and bonds rallied strongly after the tame headline US labour market data.

Apparently this bolsters the case for an end to the US Fed's inflation-fighting rate hike program.

The headline news is that total US nonfarm payroll employment increased by +150,000 in October, and the unemployment rate was little-changed at 3.9%. That was lower than the expected +180,000 gain for October. But as regular readers know, we look behind these seasonally adjusted numbers to the actual survey data. That shows that employer payrolls actually rose +1,066,000 in October from September to a record high 156 mln at the end of the month. And that was on top of the impressive +526,000 gain in September. But wait, there is more. Including the unincorporated self-employed, the employed workforce in the US is now 161.7 mln. But the self-employed portion of the workforce isn't growing much at all now. All the surge is on company payrolls. None of this indicates that the US labour market is 'cooling' as most headlines suggest.

The US needs payroll growth of +70,000/month to keep up with its working aged population, so by any interpretation, their labour markets are tightening. American inflation might well be easing and the Fed may well stand pat now, but it is unlikely to be because of its labour market track. More on tight global labour markets here.

(Interestingly, when we get New Zealand seasonally adjusted labour force data, the variances are usually small from the actual survey data. Why they should be so large in the US is a mystery to me.)

Meanwhile the widely-watched ISM services PMI reports an easing to its lowest level in five months. Still an expansion, but less so. However, new order levels rose much faster and suggests that future levels in the services PMI will rise. (New export orders were weak however.) The internationally-benchmarked Markit services PMI reported an expansion too, but that was even softer than the ISM one.

In Canada, their unemployment rate rose to 5.7% in October from 5.5% in the previous month, the highest since January 2022 and above market expectations of 5.6%. The result was in line with the Bank of Canada’s warning that its aggressive rate-hiking cycle has had a notable impact, slowing down the Canadian economy, prompting softer labour market conditions, although the unemployment rate remained below pre-pandemic averages. The number of jobless individuals rose by 40,300 to 1,229,400 in the period. Employment rose by +17,500 and well less than expected. And part-time employment rose by +20,800 while full-time jobs fell -3,300. So what payroll growth they did get was weak.

In China, their private services PMI expanded marginally in October, but little-changed from September. Business activity across their service sector is still subdued with a further slowdown in new order growth, which was the weakest in 2023 so far. The Caixin services PMI records an expansion score of 50.4. The official services PMI records a score of 50.6. Expansions yes, but very minor ones. (New Zealand's last services index was at 50.7. In Australia, a very weak 47.9, quite the contraction.)

And staying in China, they released their balance of payments data overnight. That showed outflows of foreign direct investment in the country have exceeded inflows for the first time since 1998. FDI came to -US$12 bln in the quarter, with more withdrawals and downsizing than new investments for factory construction and other purposes.

And the brutal price war going on in China for EV market share just went up a notch with BYD cutting already very low prices by another -10%. It is supposedly a 'temporary' cut. Major shareholder Warren Buffett is probably not happy with the management move.

Meanwhile, the CCP is embedding Xi Thought into the management of all their key financial regulators. Technocrats out, party officials in. What could possibly go wrong?

In Australia, retail sales rose a very minor +0.9% in September from August, up +2.0% from a year ago in value terms. But that belies a weak background. Retail sales volumes are down -1.7% compared to the September quarter last year. And volumes are lower despite a period of strong population growth. On a per capita basis, retail volumes are down -4.0% compared to this time last year, the largest 12-month fall in the history of their tracking, starting more than 40 years ago.

The iron ore price rose to its highest since march yesterday on the expectation that the recent Beijing financed stimulus will result in more traditional infrastructure projects there to combat the economic slowdown. (Coal prices keep falling however.)

Meanwhile, the Australian prime minister is due in Beijing today to meet President Xi. Interestingly, he holds important cards for China, so it is likely to be more a meeting of equals than is usual. Xi will also be testing reactions ahead of his expected meetings with US President Biden in the US in a little over a week.

In financial markets,traders are pricing a rising chance that the RBA will raise interest rates on Tuesday, a two-thirds chance. But they also see an almost 100% chance of a December 5 rate hike if it doesn't happen on Tuesday. This is all quite the reverse of how the rest of the world assesses the chance of rate hikes elsewhere.

The UST 10yr yield is down another sharpish -11 bps from this time yesterday, now at 4.56% as bond markets rally further. It has had a global flow-through. But their key 2-10 yield curve is slightly less inverted today, now by -28 bps. Their 1-5 curve is inverted by -80 bps and that is more inverted. Their 3 mth-10yr curve inversion is also more too, now by -85 bps. The Australian 10 year bond yield is now at 4.66% and down -7 bps from yesterday. The China 10 year bond rate is down -1 bp at 2.68%. The NZ Government 10 year bond rate is another very sharp -24 bps lower at 5.35%. A week ago this rate was 5.56%.

Wall Street is in its Friday trading with the S&P500 up +1.1% and a weekly gain of a massive +5.4%. That boosts the year-to-date gain to +14.5%. Overnight, European markets were mixed with London down -0.4% and Frankfurt up +0.3%. Yesterday Tokyo ended its Friday session up another +1.1% for a weekly rise of +4.0%. Hong Kong ended up +2.5% and up +2.6% for the week. But Shanghai rose only +0.7% which was also its weekly gain. The ASX200 ended its Friday session up another +1.1% to be +3.1% ahead for the week, up +0.5% for all of 2023 so far. The NZX50 ended up +0.7% and a rare +3.3% gain for the week. But for all of 2023 the NZX50 is still down -4.0%.

The Fear & Greed index we follow is still on the 'fear' side but only just, so less fearful than this time last week. Or the two weeks before.

The price of gold will start today at US$1991/oz and up +US$9/oz from this time yesterday. A week ago, this price was US$1986/oz.

Oil prices have fallen a sharpish -US$2 to just over US$80/bbl in the US. The international Brent price is down at just over US$84.50/bbl. A week ago these prices were US$84.50 and US$88.50/bbl respectively.

The Kiwi dollar starts today sharply higher at 59.9 USc and up more than +1c from yesterday. A week ago it was at 58.2 USc. Against the Aussie we are firmer at 92 AUc. Against the euro we are almost +½c firmer at 55.8 euro cents. That all means our TWI-5 starts today +60 bps higher than yesterday at just under at 69.3. That is +110 bps higher than a week ago.

The bitcoin price starts today at US$34,417 and -0.5% lower than this time yesterday. A week ago it was at US$33,654, so a +2.3% rise since then. Volatility over the past 24 hours has been low at just on +/- 0.5%.

In case you missed it yesterday, FTX founder Sam Bankman-Fried was found guilty yesterday (Friday NZT) of defrauding customers of his now-bankrupt cryptocurrency exchange in one of the biggest financial frauds on record. The jury came to a very quick decision. A sentence has yet to be handed down. SBF has been in jail since August after the judge revoked his bail, having concluded he likely tampered with witnesses.

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