US hit by larges jobs miss, shrinking factories; Ford says tariffs an own goal; China PMIs weaken, drives more subsidy support; India factories star; UST 10yr at 4.21%; gold firms and oil falls; NZ$1 = 59 USc; TWI-5 = 67.1

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%.

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