Here's our summary of key economic events overnight that affect New Zealand, with news that good American labour market data, even if there were some downward revisions to prior months, will bolster the Fed in its view it doesn't have to rush to trim official interest rate signals. Next Wednesday's US CPI data will now be important.
First, at the headline level, the American economy added +275,000 jobs in February, beating forecasts of +200,000 and higher than a downwardly revised +229,000 in January. But their unemployment rate ticked up as more people joined their labour force, and wage growth slowed.
Behind the headline numbers (and looking at actual rather than seasonally adjusted numbers), employer payrolls rose by +1.1 mln to 156.5 mln people now employed. That is +2.7 mln more than a year ago. The household survey, which includes self-employed people, rose +665,000 from the prior month to 160.3 mln, and up +602,000 from a year ago. The shift from self-employment to payroll employment continues.
American consumer debt rose by nearly +US$20 bln in January, following a +US$1.6 bln rise in the previous month and way above market expectation of a +US$9 bln rise. Revolving credit, like credit cards, increased by +7.6% on an annualised basis from the previous month. Non-revolving credit, typically auto and student loans, rose by +3.6% on the same basis).
According to the USDA's March World Agricultural Supply and Demand Estimates, the Chinese might be back buying soybean in larger volumes, suggesting the Chinese are struggling with expanding their local output. The same report reveals American beef imports are rising. And that American milk production is slowing.
Canada also released labour force data overnight. They added +40,700 jobs in February, following a +37,300 rise in January. This was double the forecasted +20,000 increase. February brought a notable bounceback (and more) of full-time positions, up + 70,600, while part-time jobs decreased by -29,900..
Across the Pacific, Japanese household spending fell more sharply than expected and continuing a run of retreats, this one the largest in six months. Japanese policy makers might be a bit worried about this latest data trend.
Taiwanese exports are still expanding on a year-on-year basis, although not as fast in February as they recorded in January. After a longish run of decreases, this is the fifth month in the past six where exports have risen.
Later today, all eyes will be on the February data for Chinese CPI inflation (and their PPI data too). Analysts are expecting a turnaround from the recent deflation.
Meanwhile China's Ministry of Finance data shows that interest on debt obligations are rising fast for the Chinese government - in fact a jump of +7.8% in interest payments this year is a bigger relative rise than for their defence spending (+7.2%). If, as some expect, Beijing suffers a ratings downgrade this year from "A1", that cost will only grow.
German industrial production rose +1.0% in January (in 'real' terms) from December but that still leaves it -5.5% lower than the same month a year ago.
Here is an update on the cocoa price - it rose another +7.1% last week. That makes the increase in 2024 alone +65.6%. For chocolate lovers that will hurt. And climate hits on both olive oil and coffee production are seeing these two also delivering sharp price rises as well. But overall, global food prices are not high or creating food inflation concerns. In fact, desperate grain sellers like Russia and Ukraine are helping keep cereal prices down at a level they first reached in 2007.
The UST 10yr yield starts today at 4.09% and down -3 bps from yesterday. That is down -9 bps from a week ago. The key 2-10 yield curve inversion is marginally less at -40 bps. And their 1-5 curve inversion is a little deeper at -88 bps. Their 3 mth-10yr curve inversion is also a little deeper at -130 bps. The Australian 10 year bond yield is now at 3.99% and down -3 bps. The China 10 year bond rate is now at 2.31%, up +1 bps but still near its all-time low. The NZ Government 10 year bond rate is down -4 bps at 4.69%. A week ago it was at 4.82%.
Wall Street has opened its Friday session with a -0.1% dip on the S&P500 and it it closes here, it will be up +0.3% for the week. Overnight European markets were +/-0.1% on average, except London which fell -0.4%. Yesterday Tokyo ended up +0.2% on the day to end its week down -1.3%. Hong Kong rose +0.8% yesterday to end its week down -1.7%. But Shanghai ended up +0.6% (day and week). Singapore was up +0.4%. The ASX200 ended its Friday session up +1.1% for a weekly gain of +1.3%, while the NZX50 was up +1.0% yesterday for a weekly rise of +1.5%.
The Fear & Greed index has eased back slightly to just the "greed" level.
The price of gold will start today up another +US$30/oz at US$2186/oz and another new record high. Most of today's gain has come in the past 2-3 hours. And that is a +4.9% riser for the week.
Oil prices are down another -US$1 at just over US$77.50/bbl in the US while the international Brent price is now just on US$81.50/bbl. Both are -US$2 lower than a week ago.
The Kiwi dollar starts today at just on 61.8 USc and marginally higher than this time yesterday. But it is up +¾c in a week.. Against the Aussie we are still at 93.2 AUc. Against the euro we have firmed slightly to 56.5 euro cents. That all means our TWI-5 starts today at just on 70.5 and unchanged from yesterday but up +20 bps in a week.
The bitcoin price starts today at US$68,834 and up +2.1% from this time yesterday. That means for the week it is up +11%. Volatility over the past 24 hours has been moderate at +/- 2.9%.
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34 Comments
Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K, a 124K revision, which was the biggest one-month negative revision in two years!
Indeed the US jobs reports don't add up, huge subsequent downward revisions
Economy added 272k jobs in Feb '24; Unemployment Rate hit 3.9% —
I'd look forward to the weekly article each Saturday, easy to follow and good comparisons
I just saw advert for duplex in te kauwhata $649000. F**K OFF I DONT THINK SO
Or a 4 bedroom on 600sqm, enquiries over $987.... not a surprise its been on market since august, what a joke
Meanwhile China's Ministry of Finance data shows that interest on debt obligations are rising fast for the Chinese government - in fact a jump of +7.8% in interest payments this year is a bigger relative rise than for their defence spending (+7.2%).
...as a share of GDP, China's military budget has actually never been lower, standing at a meagre 1.6% of GDP. This is: - Less than half that of the U.S. (3.5%) - Less than the world average (2.2%) - Less than the minimum required for NATO members (2%) So the increase in China's military expenditures in entirely due to the increase in GDP. There is no "buildup" - it's non existent - and in fact the contrary is true: China's military, as a share of its economy, is actually shrinking! Link
I'm not really a portfolio collector in the traditional sense.
But I spose if you had to, it's plant and machinery, production facilities, bit of agriculture, that sort of thing. Less susceptible to market trends, although also not privy to some sort of exponential value growth either.
Not so much into a trade able like gold or BTC, but also don't really buy much of BTCs value proposition - although I don't think much of that story still underpins BTCs market value anymore, for the bigger players.
I'm with Warren.
It's interesting that visually Bitcoin is depicted with gold. See the photo. Presumably to give it the aura of substance. Trying a bit hard methinks.
Of course gold is valued in public perception much the same way as Bitcoin.(mainly). But it's been that way for many thousands of years, so more reliable.
Gold is not based on perception, its a physical resource and its used in every single semiconductor so it has incredible industrial value. The only time Bitcoin and Gold come close is on a USB flash drive.
I know you're trying to sound profound but Bitcoin has nothing to do with semiconductors and / or USB sticks.
It's interesting that visually Bitcoin is depicted with gold. See the photo. Presumably to give it the aura of substance.
Gold and BTC share similar properties:
- Scarcity which make it a better store of value than currency
- Durability - resistant to fraud and counterfeiting
- Fungibility - each bitcoin or gold unit is interchangeable with any other
- Not controlled by any central authority, government, or institution (decentralization)
Little Britain:
A glaring omission from the Budget was any increase in defence spending. Despite a major war in Europe and UK promises to defend Ukraine whatever it takes, the Chancellor had just a passing reference to the conflict and its consequences.
Spending on defence would stay at 2 per cent of GDP and rise to 2.5 per cent when economic conditions allowed. Judging by the forecasts for growth and debt, that will not be any time soon.
Jeremy Hunt also said our Armed Forces remain the best funded in Europe among major countries, but that will shortly no longer be true. By next year, Germany’s defence spending will outpace the UK’s for the first time since 1981, according to projections from the International Institute for Strategic Studies (IISS).
The funding for defence, not just here but in France and elsewhere on the Continent, does not match the urgency of the political warnings about the threat posed by Russia. Either those warnings are being exaggerated or we are underprepared. Link
its more of an insurance policy rather then investment, but one that seems to hold its value will.....
Depends on how you define an investment. If investments were all about the "best return", Granny Herald would have been pushing Bitcoin. But no. All they really push is the property ponzi and urban myths surrounding equities. Remember last 2 bull runs in gold have been spectacular. We're possibly in a bull run now starting in 2014.
Does that mean that people should own gold? Not necessarily. However, we shouldn't make our decisions based purely on reaction. If that were the reality, we'd all be piling into Nvidia and ratty.
An overview of the Bank Term Funding Program (expiring in 5 days) that you should understand.
BTFP is “temporary” - a one year long Federal Reserve program -, created in Q1 of 2023 to cover all uninsured deposits in US banks (anything over $250k). This is basically stealth QE disguised as a backstop for banks, after 3 banks had failed in Q1 of 2023.
If BTFP would have been enacted a week before then no banks would have went under. Long story short, there are many more distressed banks still operating only by the skin of their teeth because of this new program feeding them liquidity. If the Fed did not create this program, then distressed banks would have been forced to sell worthless low interest bearing treasuries (that are losing huge money on their balance sheets) while the Fed hiked interest rates in an attempt to quell the inflation fire that they started by printing trillions out thin air at 0% from 2020-2022.
The Fed would have to be buyer of last resort to buy these treasuries since other countries worldwide are showing zero interest in purchasing worthless, low interest bearing US government debt. The Fed has raised rates from near 0.00%, 2 years ago, to 5.50% now to combat inflation that hit a 40-year high last year. That has undercut bond prices, including those for older-vintage Treasuries held widely by banks, which proved to be a major factor in Silicon Valley Bank's inability to raise funds and contributed to its demise.
Once BTFP expires, the worry is others will certainly follow suit. BTFP has been an additional source of liquidity that has eliminated an institution's need to quickly sell those securities in times of stress.
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