US data extends its weak run; eyes on US jobs report; Japan holds rate; Aussie trade balance average; container freight rates fall; UST 10yr at 4.23%; gold drops sharply and oil stays down; NZ$1 = 59 USc; TWI-5 = 67.4

Here's our summary of key economic events overnight that affect New Zealand, with news the gold price is tumbling today, ending its recent spectacular rise.

But first, American initial jobless claims rose to 223,600 last week, more than expected. There are now 1.907 mln people on these benefits, +153,000 more than at this time last year, a rose of +8.7%.

But job cuts announced in April came in less than you might have thought at 105,400, certainly less than for March. But they are +62% higher than year-ago levels.

The widely-watched ISM manufacturing PMI for April slipped into a deeper contraction than in March, although slightly less so than expected. Output shrank more sharply and prices rose faster. Meanwhile, new orders declined at a slower pace although new export orders fell steeply. This survey was quite a bit more negative than the S&P Global/Markit version we noted yesterday.

One sector that has lost much of its momentum is the US construction industry. It atrophied somewhat in March, again.

The expectation is that tomorrow's US non-farm payrolls report will deliver a rise of +130,000, about half the levels they had at the back end of 2024. But there may be downside risks to this estimate. A very weak result will put the Fed in a real bind, having to choose between rescuing jobs in a faltering economy, or pushing back on rising inflation. The last time they had serious stagflation was in the late 1970s, and then the Fed chose fighting inflation over preserving jobs and growth. It caused social unrest, but it beat inflation, and ended stagflation's curse - until now. But fifty years later, few people understand that curse and it's corrosive effects.

Across the Pacific, the Bank of Japan held its key interest rate steady yesterday as the new American tariff policy casts a shadow over the Japanese economy. The central bank kept its policy rate at 0.5% during its first board meeting since Washington announced a wave of "reciprocal" tariffs in early April. The yen fell. The BOJ also stood pat at its March meeting following a +25 bps hike in January.

And don't forget, China is on holiday, until Tuesday. So data releases there are sparse. It may be a good time for some of them to take a break; outbound export shipments to the US are reportedly down -50%. Despite that, there are signs the US is desperate to get trade talks going but Beijing is playing hard to engage.

Australia reported a merchandise trade surplus of +AU$10.8 bln in March. This was a good improvement from the relatively low +AU$8.4 bln in March 2024, but similar to the average March in the prior five years (+AU$10.6 bln). (Australia usually reports seasonally adjusted values, and are much lower than the actual values this year, for some reason.)

The Aussie federal election is in its final day now. Pundits seem to think the incumbent government will be returned but with a reduced majority, maybe even requiring a coalition partner. We will know soon enough.

Yesterday, the OECD released its 2024 update on taxing wages, essentially measuring the tax wedge. The tax wedge is essentially the difference between what an employer pays an employee after tax, and the total cost to the employer after all the labour-based taxes and fees are included. It is measuring how much governments collect from the labour force and is a measure of inefficiency. Bracket creep is once force making tax wedges higher. New Zealand always scores near the lowest tax wedge of the OECD countries. In 2022 our tax wedge was 20.1%, in 2022 it was 21.1% and last year it was 20.8%. So stable. In Australia it is 29.8%, in the UK 29.4% and the US is 30.1%. Japan is 32.6%, France 47.2% and Germany 47.9%. So tax wedges are a major issue in other countries.

Global container freight rates fell -3% last week from the prior week to be -23% lower than year ago levels. Bulk freight rates were little-changed.

The UST 10yr yield is now at 4.23%, up +5 bps from this time yesterday. The key 2-10 yield curve is now at +53 bps. Their 1-5 curve is still inverted by -12 bps. And their 3 mth-10yr curve is now inverted less, by -8 bps. The Australian 10 year bond yield starts today at 4.22% and up +3 bps from yesterday. The China 10 year bond rate is unchanged at 1.62% due to their holiday. The NZ Government 10 year bond rate is up +2 bps at 4.46%.

Wall Street is up +1.2% in Thursday trade on the S&P500. Overnight, European markets were all up but less. Yesterday Tokyo rose +1.1% in Thursday trade. Hong Kong and Shanghai were closed for their May Day holiday. Singapore was too. The ASX200 ended its Thursday up +0.2% but the NZX50 ended by surging +2.1%.

The price of gold will start today at US$3214/oz, and down -US$95 from yesterday.

Oil prices are holding lower at just on US$58.50/bbl in the US and the international Brent price is now just under US$61.50/bbl. These remain four year lows, down to level last seen in April 2021.

The Kiwi dollar is now at 59 USc, down -40 bps from yesterday at this time. Against the Aussie we are down -20 bps at 92.6 AUc. Against the euro we are little-changed at 52.3 euro cents. That all means our TWI-5 starts today just on 67.4 and down -10 bps.

The bitcoin price starts today up +2.8% from yesterday at US$96,810. Volatility over the past 24 hours has been modest at +/- 1.9%.

This briefing is taking a few days off for a short break. We will resume on Tuesday, May 5, 2025.

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