US jobs data revised down sharply; US PMIs dip; China's yuan depreciates; Indonesia in surprise second cut; ECB readies stimulus; ASIC eyes CFD restrictions; UST 10yr yield at 1.61%; oil unchanged and gold down; NZ$1 = 63.7 USc; TWI-5 = 69

US jobs data revised down sharply; US PMIs dip; China's yuan depreciates; Indonesia in surprise second cut; ECB readies stimulus; ASIC eyes CFD restrictions; UST 10yr yield at 1.61%; oil unchanged and gold down; NZ$1 = 63.7 USc; TWI-5 = 69

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Here's our summary of key events overnight that affect New Zealand, with news key international data is decidedly 'mixed' and that is being positive about it.

Firstly, the US Labor Department has revised down the non-farm payrolls jobs created in the US economy in 2018 and early 2019 by half a million. The jobs growth in the period was unremarkable compared with the previous period, according to the updated data and undermining the 'great economy' story.

The US August PMI showed factories contracting for the first time in ten years, led by yet another fall in new orders. Their services sector also slowed sharply, and although still expanding that is only marginal now, down from the moderate growth in July.

This data was backed up by the regional Kansas City Fed activity index where the decline deepened.

But at Jackson Hole, a few regional Fed leaders are coming out against more FOMC rate cuts, directly pushing back at aggressive US Administration haranguing. Powell will give his views tonight.

China’s currency has weakened to its lowest level against the US dollar since March 2008, falling for six consecutive days, as uncertainty over trade tensions with the US persists. In fact, it seems that Beijing is intervening to prevent it falling much faster.

In Japan, the latest PMIs show a decided upturn in August, with factories contracting only marginally now, but a strong rebound in their services sector.

In Indonesia, in a surprise move their central bank cut its benchmark seven-day reverse repo rate by -25 bps to 5.5%, the second rate cut in two months - after slashing it for the first time in nearly two years in July.

In Europe, these same PMI readings show little change with contracting factories and expanding services. Overall there is a small expansion but they are bouncing around at a six year low.

EU consumer confidence remains negative, but stable in August.

The ECB is clearly worried about this overall funk. The minutes of their last meeting reveal they are looking at rate cuts and asset purchases in an effort to arrest their economic slowdown.

In Australia, their August PMIs are raising eyebrows. Their factory one is broadly stable (at 51.3) even if it is recording only a very slow expansion. But their services PMI has made a sudden turn down, and is in fact contracting (at 49.2 and down from 52.3 in July). Australia may be the only economy where the factory PMI is more positive than their service sector PMI.

And staying in Australia, regulator ASIC is proposing to ban the issue, sale and distribution of binary options and heavily restrict the sale of contracts for difference (CFDs) to retail clients. It calls them "highly speculative products" and have characteristics "akin to gambling" (see page 7). Last year these products lost "investors" about AU$0.5 bln. (See page 20).

And the New South Wales state migration department “has noticed a significant increase in applications” from Hong Kong in recent months, it said in a letter to agents this week.

The UST 10yr yield is up +1 bps at 1.61%. Their 2-10 curve is now completely flat at +0 bps and their negative 1-5 curve is wider at -30 bps. Their 3m-10yr curve is wider, out at a negative -44 bps. The Aussie Govt 10yr is also up +2 bps at 0.95%. The China Govt 10yr is up +2 bps as well at 3.08%, while the NZ Govt 10 yr is up +3 bps to 1.12%.

Gold is softer, down -US$4 and now at US$1,500/oz.

US oil prices are little-changed today, still just on US$55.50/bbl. The Brent benchmark is unchanged at US$60.

The Kiwi dollar is considerably weaker against the US dollar and now just below 63.7 USc and a new 43 month low. That drops the devaluation since the beginning of July down to more than -5%. On the cross rates we are lower at 94.3 AUc. Against the euro we are also down at 57.5 euro cents. The TWI-5 has now fallen to just on 69 and a ten month low.

Bitcoin is now at US$10,154 and that is marginally higher than this time yesterday. But in-between it did drop all the way down to US$9,762 before recovering. The bitcoin rate is charted in the exchange rate set below.

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

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17 Comments

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The USD is charging.

10
up

Oh what a surprise, the EXACT opposite of Roger Kerr's predictions on NZD.

So completely normal then. Great thing about RK, what ever he says do the exact opposite.

The Q is now not so much has Trump successfully killed the US and global economy asthe odds are very high he already has. The Q of importance now is how big will the downturn be. Mild? fat chance. Severe? looking good. 2nd Great Depression scale? quite possible. Why? because Trump cant see a recession happening (he is still denying it). His administration is not making any plans to avoid or deal with it and his camp followers are so few, ear bashed into doing what he says and in-competent (I mean Larry Ludlow?) that when it does start to go badly there is no one I can see who can step up and mitigate it. Better pray its self-healing and Trump doesnt get in the way. Not good odds I reckon.

I'm not so sure. I think the Trump administration are well aware things couldn't carry on. Whether they understand there is no global fix to the problem, is a harder question.

https://www.zerohedge.com/news/2019-08-21/white-house-preps-gop-elite-mi...

This isn't about picking a fight with China - this is about there not being enough planet left, or alternatively, about there being far too many inhabitants. The US is a giant comsumer of parts of the planet, China wants to be too, and the supply is being overwhelmed (the proof is the dreg-like nature of what's left - fracking and tar-sands and ever-more 'overburden' needing removed per ton extracted. Even Greenland can't alter the doubling-time problem now :)

It has to end in war, and if the US wants to win it better go soon.

"this is about there not being enough planet left", really ? Man occupies at most 3% of the land mass, too much you think.

"being far too many inhabitants", well all I can say is Jacinda and the govt will allow you soon to do the right thing.

You can technically fit ~50 cows into a suburban backyard. If you can spatially fit them in, then why aren't urban dwellers farming them too? I just can't work it out...

If everyone stood up, the whole world's population could fit on Stewart Island.

Going to war against Greenland seems the better option. Even odds of winning that one bearing in mind that the US lost against Canada once.

Come on, "because Trump cant see a recession happening", he will know exactly what is happening.

Are you going to blame Trump for $21 Trillion in debt as well ?

"His administration is not making any plans to avoid or deal with it", so tax cuts and trying to build industry up again are doing nothing. Trying to get better trade deals is doing nothing?

"Do. Or do not. There is no try"

Yoda

You can't blame him for the last $20T but you can blame him for the rapidly accelerating growth of debt (cut taxes & increase spending) and possibly much of the next $20T. Wasn't he just talking about more tax cuts earlier this week?

13
up

Yuan goes lower, so does Kiwi.
Note that when revisions occur to USA data (and elsewhere) in a down cycle, the revisions are down and continue to be so til cycle bottoms (and vice versa on up cycle.) So, expect more (and greater) revisions. Hence, the hoopla re tax cuts has been overdone in USA. Whiplash effect of non-renewal now en route. Meanwhile, EU and UK and Japan on GDP growth lower than 1% or even negative. NZ looking vulnerable. Notice Australian data continuing to indicate decline and attempts to pump up mortgage debt not working in more than a dead cat bounce fashion. The is because of switch of 40% of mortgages to capital and interest, from interest only. The process starts this year and continues next. This revolving of debt (and consequent increase in payments) is sucking consumer demand from the economy. Things will get v interesting when bank equity falls a lot due to that equity resting on DEBT (ie the 65% of equity resting on mortgages on houses dropping in value.) The emperors new clothes of 2008-19 debt splurge are about to be seen for what they are: an illusion of prosperity resting on China debt and Australian mining.

The jobs growth in the period was unremarkable compared with the previous period, according to the updated data and undermining the 'great economy' story.

In other words, almost one-fifth of payrolls we thought had been added during this purportedly robust labor market very likely never happened. What that means is more distortions in the narrative about the economy – everyone heard the payroll reports as they were released (Robust! Strong! Blowout!) and hardly anyone (outside of bonds) will have heard the recalculations (the last year or so may have been as bad as 2017, perhaps even worse more recently).

Link

There's the solution to Auckland's high end lacklustre property sales.

We should grab some of that action. No more pussy footing around with foreigners buying facade companies just make it a dutch auction. Unknown quota of permanent residency visas starting at $50m each and reducing by $1m per day. My guess we could sell 1,000 at an average of $10m. All infrastructure financing problems solved by Xmas.