Here's our summary of key economic events overnight that affect New Zealand, with news economic reality has been shoved in financial market faces and they have recoiled with sharp risk aversion moves.
Today, the market shock trigger has been the release of the July US labour market report. At the headline level, they only rose by +73,000 when +110,000 was expected. But worse, the June data was revised sharply lower to just +14,000 from the original +147,000. Their jobless rate edged higher to 4.2%. This is a huge miss and there have been sharp financial market reactions.
Those are the seasonally adjusted numbers. The actual numbers are much worse, down -1,066,000 in July from June. To be fair much of that actual shrinkage is seasonal, but at 159.3 mln people employed, that is lower than in November 2024 when Trump won office.
Trump's response? He has ordered that the head of the BLS, who compile this data, be fired.
But with this July stumble in their labour market, it will be no surprise to know that the ISM factory PMI shows the same sharp retreat. In June this PMI was contracting with a 49.0 index level. It was expected to improve to a smaller contraction of 49.5. (An index level of 50 is the fulcrum between expansion and contraction.) But it went the other way, deepening its contraction to 48.0. Driving the retreat were new orders and order backlogs contracting, along with input costs increasing and exports falling. Overall, this is reporting their factory sector is contracting faster. (The internationally benchmarked S&P Global/Markit factory PMI version also reported a sharp drop info contraction in July, also largely on stagnating new order levels.)
In China, like the official China factory PMIs had signaled, the independent Caixin PMI also signaled that their factory sector went backwards in July too. The Caixin survey isn't as negative as the official survey, but it now shows the overall sector in contraction. The Caixin survey tends to account better for mid-sized private manufacturers whereas the official survey includes the very large state-owned enterprises.
China recognises the need to do more to stimulate internal consumption, and they are now committed to using subsidies as a key tool. Essentially they are subsidising trade-in prices to generate sales of new items. The target is to raise this subsidy level to ¥300 bln in 2025. On Friday they announced another ¥69 bln in ultra-long special treasury bonds will be issued for this purpose, the fourth tranche in the program.
Another policy action announced yesterday involves their war on "involution", which they take to mean excessive or irresponsible competition involving a general race to the bottom. It was a feature of their housing crisis, and is a big worry for their car manufacturing industry. Top-down pressure to rein in this sort of behaviour is intense now. In fact, BYD is now indicating their production levels will be lower in future.
However in Japan, Toyota has told suppliers that it aims to boost 2025 global production to about 10 million vehicles, underpinned by strong sales of hybrids despite concerns over the impact of American tariffs. (In the US, carmaker Ford is noting that tariffs are not helping them.)
In India, the growth of factory orders and production strengthened in July, driving their factory PMI up to an impressive 59.1, although that was a touch less than the result expected. Indian factories are easily the star of the show on a global basis.
The EU released its July inflation data on Friday, and there were no surprises there with inflation stable at 2.0% in the Euro area. The overall level is still being restrained by falls in energy costs.
Australian producer prices rose 3.4% over the past year to June, down from a 3.7% rate in the year to March, and down from a 4.8% rate in the year to June 2024. Cost pressures are still high, but they are easing, even if slowly.
The UST 10yr yield is now at 4.21%, down -15 bps from Thursday, down -18 bps for the week. The key 2-10 yield curve is sharply steeper at +51 bps. Their 1-5 curve is now less inverted, now by -12 bps. And their 3 mth-10yr curve is much more inverted, now by -15 bps. The Australian 10 year bond yield starts today also at 4.22% and down -5 bps from Friday, down -14 bps for the week. The China 10 year bond rate is down -3 bps at 1.71%. The NZ Government 10 year bond rate starts today at just over 4.56% and up +2 bps from Friday, but down -8 bps from a week ago.
Wall Street is sharply lower, down -1.6% in Friday trade, down an even sharper -2.5% for the week and now well back from its recent all-time highs. And that is despite earnings reports still being positive. Overnight European markets were all lower by -2.5% except London which fell -0.7%. Tokyo was down -0.7% yesterday for a weekly -1.7% retreat. Hong Kong fell another -1.1% to be down -3.7% for the week and Shanghai fell -0.4% for a -1.0% weekly fall. Singapore slipped -0.5%. The ASX200 fell -0.9% on Friday taking their retreat to only -0.1%. And the NZX50 fell -0.7%, also down -1.0% for the week.
The Fear & Greed index has moved back to 'neutral' and now well back from the 'extreme greed' zone where it was a week ago.
The price of gold will start today at US$3,347/oz, up +US$54 from yesterday, up +US$9 from a week ago.
American oil prices have slipped back another -US$1.50 at just on US$67.50/bbl with the international Brent price is down -US$2 at just on US$69.50/bbl. A week ago these prices were US$65 and US$68.50/bbl.
The Kiwi dollar is at 59 USc and up +10 bps from yesterday but down more than -1c from a week ago. Over all of July the fall was -180 bps. Against the Aussie we are down -20 bps at 91.5 AUc. Against the euro we are down -½c at 51.5 euro cents. That all means our TWI-5 starts today at just on 67.1, down -30 bps from yesterday down -60 bps for the week
The bitcoin price started today at US$113,218 and down -3.8% from this time yesterday, down -2.7% from a week ago. Volatility over the past 24 hours has been modest at +/-1.7%.
Daily exchange rates
Select chart tabs
The easiest place to stay up with event risk is by following our Economic Calendar here ».
25 Comments
Trump orders head of BLS be fired for poor employment data. Should that not be the person responsible? Or should it not be “the buck stops here”?
I have known the employment numbers have overstated the numbers for about a year. This revision isn't unusual. It was mentioned in the all in podcast about how wrong they are with there numbers.
Aren't they being fired for the revisions lower for previous months? They were quite large misses, although, historically, they have been before.
So funny
https://www.zerohedge.com/political/no-one-can-be-wrong-trump-fires-lab…
very George Orwell
Being a messenger was a hazardous vocation in Roman times too.
I was speaking to a Toyota salesman yesterday, he thinks a Rav 4 PHEV with 150km battery range should be available by the end of the year. (If any RAV4 owners are interested).
https://global.toyota/en/newsroom/toyota/42758168.html?padid=ag478_from_popular
If anyone is still wondering how the mainstream media lost so much respect then this article may be useful. Can the media and the US intelligence agencies get any worse? Yes ZH is right leaning however I expect the details will be correct. Most of the contrived ‘Russiagate’ narrative became clear to anyone willing to follow a range of media sources. Unfortunately the lack of a trust worthy media is (one reason) why Trump got elected. [Apologies if someone has already covered this]
At a press conference just one week ago, Director of National Intelligence (DNI) Tulsi Gabbard said that the Obama administration promoted a “contrived narrative” that Russia interfered in the 2016 election.
Gabbard stated, “There is irrefutable evidence that details how President Obama and his national security team directed the creation of an intelligence community assessment that they knew was false. They knew it would promote this contrived narrative that Russia interfered in the 2016 election to help President Trump win, selling it to the American people as though it were true it wasn’t.”
Independent journalist Matt Taibbi has suggested that mainstream media has left itself few options because it cannot cover the most recent disclosures without making major admissions to its own part in the hoax.
ZH is right leading but if they had a scandal on either side th=ey would bust it open, they are truth seekers, the truth about wuhan flu was exposed within weeks by ZH.before it was even renamed, then they got banned... Trump gave them white house press passes.
No need to panic re US data, the rust belt is awakening as we speak. MAGA factories abound.
AFAIK there has been a massive surge in construction of manufacturing facilities in the US as part of their re-shoring ambitions.
But the inception of those was a while ago now. Little to no new projects have been greenlit since the tariff war. Seems there's little risk appetite in a game where the rules are changing daily.
Sounds like indigenous US auto companies are toast. They'll switch to armaments.
Whole things a slow moving car crash.
Maybe the Chinese window to take Taiwan by force is closing.....
Mate went to China not long back, said the technology over there is insane, makes us look very backwards. In the US they still use cheques.
Once Trump brings back low level manufacturing at the expense of everything else, maybe they will be the third world country with China being the technology powerhouse.
They were doing well under Biden, but gambled it all on Trump because the middle class was really struggling with a median wage of only $100k NZ. Greed at its finest.
Then it surely is a tragedy that those in the Biden administration that were implementing the doing well, were not sufficiently savvy to recognise and /or admit that Biden was already was well past his best before date and that Harris remained as unelectable as she had been, in the preliminaries four years earlier. That was a downright failure, and it handed the election to Trump on a plate.
I don’t think Trump was elected because Kamala was unelectable. Trump himself should be unelectable.
Trump was elected because the US have become too comfy. They expect to have the absolute best standard of living without any effort. Instead of trying to upskill themselves to compete with the Chinese, they elected a guy who said they can just tariff their way back to greatness. Good luck with that.
Tend to agree myself that Trump “should be “ unelectable” but he isn’t and he has proven that he isn’t twice. Harris though was identified as such by the second of the primaries leading up to the 2020 election and hastily dropped out. That she got on the ticket with Biden was purely a whatever it takes strategy, that is coloured hispanic female, but that in itself hardly either overcame or even allayed the negatives that were seen as so obvious not so long beforehand. The US was hardly comfy prior to Trump’s return otherwise his loud campaigning on such as the cost of living and immigration, the border etc would not have impacted. Biden in the first tv debate was revealed as verging on non compos mentis and Harris with all her baggage, word salads and worse, a born loser and resultantly the whole Democratic campaign was beaten before it even started. Poor going on abysmal candidates don’t win elections and, in that regard, you would be hard pressed to locate in all of American history any two that would outscore either Biden or Harris.
NZ Labour will suffer the same fate unless they gut hippie soon . So who is the union man ?
Andrew Little the Second?
If I had to pick I'd say McNulty is currently the lead candidate to replace Hipkins (who else?) but my guess is if it doesn't change this year it won't before the election.
FG, if you steer a wreck then you can expect a crash. But if you choose a fraud, you can expect a fall or much worse. God help America!
The real consideration here though is that the incumbent side needlessly and negligently weakened itself to the point of handing the election to their opponents on a plate. On that count they are latently party, to what then follows.
Democrats did their best and may have made mistakes, they arent co-conspirators.
Kamala spelt out what a trump presidency would mean and unfortunately was right. She didnt back the man, if you did then own up and take it.
Biden had been rejected progressively by the Democrats themselves since 1988 and even Obama didn’t endorse him, as his VP, for a run in 2016. The run up to the 2020 election saw Biden virtually call it quits after New Hampshire. Then it was suddenly realised that none of those who remained were actually electable and he was resurrected. And to be fair to the man he won it for them. For whatever it is worth, to me the return of Trump in 2024 is of no satisfaction but the Democrats full well knew the threat, they had already witnessed four years of it. In the face of that to persist with Biden, in his obvious mental decline, and then replace him too late, and then at that with a dead duck candidate, was shockingly irresponsible management and in so doing they let down the nation. If you don’t accept that then have a read of what James Carville has to say about it.
I lived in China for years, go back all the time to see wifes family and travel.
We are so far behind China now, we are starting to look like a backward economy with Bretheren type technology. It's quite laughable.
Last time I was in China, I arrived, had my dual SIM phone. Put in Chinese SIM, then paid around $30 for enormous amounts of data for a month (which I never ran out, but you use it a lot). OK, cool, what's next? All payments are done using your phone, scanning QR codes. In the 2 major apps (WeChat and Alipay), you can do... well almost everything. We ordered an electric car to take us to the hotel... all paid in app. On the way, in the distance we spied a nuclear power station being built. Cool. At one stage we counted the cranes... I was with my father who is in construction, he basically said "Out that window, is double the amount of tall cranes in Aus/NZ combined" (there were like 50 odd). OK, next day, off to a restaurant for lunch, translate and order from within the app and it arrives all paid for. Cool, we then booked train tickets for the high speed train for the next destination within the app, took the incredibly efficient subway to the train station, where we waited in a huge flash train station with thousands of others. Got on the amazing and comfortable high speed train and was quickly up to 300kmph taking us around 900km in 4 hours. Glad we didn't drive. Got off, thought it would be a blast to take some bikes, so used the app to hire some bikes to cycle around the city a bit. All separated cycle lanes, very courteous drivers (China has laws like other countries that say the person in the larger vehicle is always responsible for crashes), very fun to get around. Left the bikes at a station nearby our hotel, checked in electronically and we were all sorted again.
It helps that I speak some Chinese, but you pretty much don't need to these days, the translation options coming online are almost seemless. Meanwhile... where is our National payment app that we are supposed to have? Oh... it might have some availability this year (https://www.digital.govt.nz/digital-government/programmes-and-projects/…). FFS, we are already a decade behind here and still we haven't got our act together.
There's so many things China has done right that we could learn from, but we still treat them poorly. They regulate their internet, social media and gaming, which means no Western style influencers, porn is hard to find, some cool gaming features (like if you are a certain age, you literally cannot use the games, if you are on for more than 2 hours, you are kicked off if you are a certain age, if its near study times, there are restrictions etc). Sure, they also regulate their real media, but people do know what's going on there. They are building more green power than the rest of the world combined and are likely going to be the only major country who will achieve or exceed their 2030 climate agreements.
We aren't "being left behind", we are already left behind. We would need some seriously aggressive digital infrastructure building to get close to where China is now, but in the 10 years it will take to build that, China would have leaped ahead 20-30 of our years.
The price of gold will start today at US$3,347/oz, up +US$54 from yesterday, up +US$9 from a week ago.
Up 2.2% in last trading session while JPYUSD up 2.2% as well.
Probably nothing.
if US data follows through here then stocks are cooked
short NZDJPY here at 87.50 s with a 89 and pips stop or use an option as a stop.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.