US jobs market rockets higher; US factory orders rise; US consumers bullish; IMF sees China growth waning; China property sales dive; world food prices fall; UST 10yr 4.04%; gold and oil drop; NZ$1 = 60.7 USc; TWI-5 = 70

Here's our summary of key economic events overnight that affect New Zealand, with news the US economy added many more jobs in January than expected. Equity markets rose on the news, the US dollar strengthened, and bond yields rose on the view that the Fed may not cot rates as soon as they expected if the US economy is in a stimulatory phase.

At the headline level, American payroll employment rose +355,000 in January and that is almost double the expected +180,000 rise the market was expecting. It is the second consecutive very strong result.

Behind this result we see that on an actual basis employer payrolls are +2.9 mln higher than a year ago at 155.6 mln at the end of January, maintaining the "about +2%" annual growth pace they have had since July, which is an eased pace from the "about 2.5+%" pace earlier.

Looking more broadly, the household survey the increase isn't as fast. There are now just under 160 mln people employed, the difference from the payrolls report being the unincorporated self-employed. It is quite clear more people are transitioning into company payrolls now so the overall growth isn't quite as strong as the payrolls data suggests.

Average weekly earnings, which had been rising at about a +4% page in 2023, slipped to +3% from a year ago in January. However markets focussed on average hourly earnings which rose more than they expected, up +4.5% in a year. But they are looking at the wrong data - the broader average weekly data is what they should be looking at because that encompases working hours.

After a strong rise in November, American factory orders rose only modestly in December from a month ago to be +1.4% higher than year ago levels. There is northing encouraging about that although the January PMIs suggested the pace picked up in the next month.

Consumers in this market are clearly feeling better. The University of Michigan sentiment survey reported a big improvement and its highest level in 2½ years. They called the change a "surge".

Investors are not keen on holding investments in American regional banks with big loan portfolios in commercial property. The selloff over the past few days has been brutal. We noted this yesterday. Today, markets stabilised at the lower levels and so far no institution has gone insolvent.

The IMF has been reviewing China's economic prospects are it sees growth slowing relentlessly. GDP will slip to +4.6% in 2024 they say and keep retreating to 3.4% by 2028. The IMF sees them stuck paying the price for low quality development in the past and now demographics limits their ability to up their game in a meaningful way. The seeds for this growth retreat were planted years ago.

And China’s real estate market is having a rough start to the year, with January new property sales plunging to a monthly low not seen in five years, despite government measures to boost the ailing sector as it grapples with a liquidity crisis. New property sales were down -34% year-on-year and -48% from December.

In Wellington, the Chinese embassy has rebuked the newly elected government for flirting with the AUKUS security group. It issued a none-too-subtle warning that further steps toward our joining could undermine trade with our largest export market. The rebuke has been distributed widely in the Chinese media, globally.

In Australia, mortgage approvals rose almost +12% over all of 2023 but ended the year on an unexpectedly soft note with a -4% monthly fall. And that December month data ties into housing market figures on prices and turnover that shows their residential real estate market momentum has slowed and that affordability pressures are starting to bite.

And staying in Australia, the port dispute between Dubai-owned port operator DP World and the MUA union has resulted in a big win for port workers. They won a +23% rise over four years (with background help from the Canberra government), ending a dispute that has tied up some of their largest ports for months. Port charges are expected to rise significantly as a result.

The FAO World Food Price Index fell for a sixth consecutive month in January, a fresh low since February 2021. Prices of cereals were down notably as global wheat export prices declined amid strong competition among exporters and arrival of recently harvested supplies in Australia and South America both a which have had excellent growing conditions. Also, meat prices fell and dairy prices were stable. Overall global food prices are back to levels that held between 2007 and 2014. Food is 'cheap' in inflation-adjusted terms, worldwide.

The UST 10yr yield starts today at 4.04% and a sudden +17 bps jump from this time yesterday as bond markets are taken by surprise by the implications of a strong US labour market. But that is still -11 bps lower than a week ago. The key 2-10 yield curve inversion is little-changed at -35 bps. Their 1-5 curve inversion is less deep, now by -83 bps. And their 3 mth-10yr curve inversion is much less at -134 bps. The Australian 10 year bond yield is now at 4.09% and back up a sharp +16 bps from yesterday. The China 10 year bond rate is down -1 bp at 2.44% and still near a new twenty year low. The NZ Government 10 year bond rate is down -2 bps at 4.62%. A week ago it was at 4.75% so a -13 bps retreat from then.

Wall Street has opened its Friday trade up +1.2% on the S&P500 to a new record high, heading for a +1.4% gain for the week. Overnight, European markets were bookended by London's -0.1% fall and Frankfurt's +0.4% rise. Yesterday Tokyo ended its Friday session up +0.4% for a net rise of +1.0% for the week. But Hong Kong fell -0.2% for a weekly loss of -3.2%. Shanghai fell -1.5% yesterday for a very sharp -6.2% loss for the week. The ASX200 ended its Friday session recovering +1.5% on the day to be +1.9% ahead for the week. But the NZX50 ended up just +0.1% yesterday for a modest +0.6% weekly rise.

The Fear & Greed index has eased back from its extreme level a week ago into the "greed" range.

The price of gold will start today down -US$27/oz from yesterday at just on US$2036/oz. But that is +US$20 higher than week ago levels.

However oil prices are sharply lower, down -US$4 to just over US$72.50/bbl in the US while the international Brent price is now just on US$77.50/bbl. A week ago these prices were US$77/bbl and US$82/bbl so an even bigger fall from then.

The Kiwi dollar starts today at just on 60.7 and more than -½c lower than this time yesterday. It -¼c lower than a week ago. Against the Aussie we are down -20 bps at 93.2 AUc. Against the euro we are -30 bps softer at 56.2 euro cents. That all means our TWI-5 starts today at just on 70 and down -30 bps from yesterday to essentially matching week ago levels.

The bitcoin price starts today firmer. It is now at US$43,217 and up +1.4% from this time yesterday and up +3.1% from this time last week. Volatility over the past 24 hours has been low-to-modest at just on +/- 1.0%.

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