US employment expands but inflation concerns also rise post-election; Canada eyes -50 bps rate cut; China mortgage rates fall; India central bank holds its rate; UST 10yr at 4.15%; gold and oil soft; NZ$1 = 58.3 USc; TWI = 68

Here's our summary of key economic events overnight that affect New Zealand with news US hiring has bounced back strongly - but so have inflation concerns

First up, the headlines say the US economy added +227,000 jobs in November, compared to upwardly revised +36,000 in October which was heavily influenced by Boeing strikes and the disruptions caused by Hurricanes Helene and Milton. The November rise was above market expectations of +200,000. Employment trended up in health care, leisure and hospitality, government, and social assistance while the retail trade lost jobs. Meanwhile, the jobless rate inched up to 4.2%.

Looking behind these headlines, total employer payrolls rose to 160.6 mln, a +525,000 rise from October and a +2.2 mln rise from a year ago. This is a significant swelling of employer payrolls. More broadly, their household survey has the employed workforce at 161.5 mln (which includes the unincorporated self employed). But that survey is not growing in 'actual' terms even if it is in seasonally-adjusted terms.

Average hourly pay is up +4.0% in November from a year ago. Average weekly earnings were up +3.7% as overtime worked slipped. These are better gains than expected.

This overall bullish labour market report was reinforced by the University of Michigan sentiment survey for December which rose for a fifth consecutive month to its highest level since April. Current conditions sentiment drove this. But rather than a sign of strength, this rise was primarily due to a perception that purchasing now would enable buyers to avoid future price increases. Consumers see inflation trouble ahead.

Canada also released employment data for November overnight. Their employment rose +54,000, almost all of it full-time jobs. But their jobless rate rose to 6.8% and a seven year high, as more people entered their labour market as their participation rate rose.

This probably means a -50 bps rate cut when the Canadian central bank next meets on Thursday NZT, taking it to 3.25%.

The widely-watched local PMI from Canada's Ivey Business School found a small rise in their expansion although not by as much as was expected. A modest but steady expansion is the best you can say about this.

In China, home loan interest rates are being driven down into the 3% range (depending on borrower financials) and there is talk that they may fall below that in coming months. There is widespread 'news talk' about how their housing market (and land sales to developers) are recovering, but the real evidence is yet to emerge.

We have noted this before, but it has suddenly got worse. The Indian rupee has fallen -0.8% in the past week, -1.6% over the past six months, extending falls that compounds the long-running decline that started 45 years ago, but has gotten particularly problematic now.

As expected, the Indian central bank kept its key repo rate at 6.5% for the 11th consecutive meeting in December. But they did cut the Cash Reserve Ratio by -50bps to 4%, the first reduction since April 2020, but basically aimed at boosting liquidity ahead of advance tax payments. That CRR cut was not expected. The rupee moved little after the central bank decision.

In Argentina, their central bank reduced its benchmark interest rate by -300 bps to 32% earlier yesterday as part of efforts to curb high inflation. This decision follows a -500 bps rate cut the previous month and marks the eighth reduction since President Javier Milei assumed office in December. The central bank policy rate is down from 126% in October 2023. Inflation in Argentina is down from a peak of 292% in April 2024 to 193% in October. Monthly inflation is however now running at an annualised rate of 32%. Many readers will remember Milei's election vow to dollarise the Argentine economy. That hasn't happened and probably won't now.

The OECD has released its latest update of its Economic Outlook. While it doesn't specifically cover New Zealand, it does point out in a release note that tensions are creating headwinds for international trade in both advanced and emerging markets, and it will probably get worse. They have a rather stunning chart about trade policy uncertainty, here.

The UST 10yr yield is now at just on 4.15%, down -5 bps from yesterday. A week ago it was at 4.18%. The key 2-10 yield curve is still positive but less so, now by +3 bps. Their 1-5 curve inversion is unchanged by -15 bps. And their 3 mth-10yr curve inversion is also little-changed, now at -34 bps. The Australian 10 year bond yield starts today at 4.29% and up +1 bp. The China 10 year bond rate is at 1.96% and -1 bp lower. The NZ Government 10 year bond rate is now at 4.46%, and up +4 bps from yesterday. A week ago it was at 4.47%.

Wall Street has opened its Friday session with the S&P500 little-changed again, up +0.1% and heading for a weekly +0.7% gain. But these are enough to claim a new all-time high. European markets were mixed overnight with London down -0.5% and Paris up +1.3%. Through all the political crisis, Paris is up +3.9% for the week. Tokyo ended its Friday session down -0.8% but up +2.3% for the week. Hong Kong was up +1.6% in Friday and up +2.2% for the week. Shanghai rose +1.0% on the day to be up +2.3% as well. Singapore was down -0.7% yesterday. The ASX200 ended its Friday session down -0.6% for a weekly dip of -0.2%. And the NZX50 fell -0.7% on Friday for a rather painful -2.0% weekly retreat.

The Fear & Greed Index ends the week in the 'neutral' zone and only a minor shift from the 'greed' zone where it was last week.

The price of gold will start today at US$2634/oz and down -US$3 from this time yesterday, and down -US$25 in a week.

Oil prices are -US$2 lower at US$67.50/bbl in the US while the international Brent price is now just under US$71.50/bbl. A week ago these prices were US$68.50 and US$72.50 respectively, so down a -US$1 since then.

The Kiwi dollar starts today at 58.3 USc and down -40 bps from this time yesterday and down almost -1 from this time last week. Against the Aussie we up +20 bps at 91.4 AUc. Against the euro we have dropped -40 bps to 55.6 euro cents. That all means our TWI-5 starts today at just on 68 to be down -30 bps from yesterday and down -60 bps in a week. We are approaching a six month low, primarily driven by the surging USD.

The bitcoin price starts today at US$101,044 and up +0.2% from this time yesterday. Volatility over the past 24 hours has been very high at +/- 4.3%. At one point it reached US$101,690, at another back at $96,747. A week ago this price was US$97,063.

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