US jobs data positive; services PMIs modest; US trade balance slips; Singapore readies currency change; equities rise; airfreight shrinks; UST 10yr yield at 1.65%; oil and gold up; NZ$1 = 64.7 USc; TWI-5 = 70.3

US jobs data positive; services PMIs modest; US trade balance slips; Singapore readies currency change; equities rise; airfreight shrinks; UST 10yr yield at 1.65%; oil and gold up; NZ$1 = 64.7 USc; TWI-5 = 70.3
Waitangi treaty grounds

Here's our summary of key economic events overnight that affect New Zealand, with news equity markets are assuming China has an effective quarantine on their virus emergency.

But firstly for our readers outside New Zealand, today is Waitangi Day and a public holiday in all of New Zealand.

Elsewhere, there is an American non-farm payrolls report out this Saturday (NZT) and today the precursor ADP employment report was released, and it showed strong jobs gains. Most (81%) of these gains were in their service sector. If this holds, it will be the largest monthly gain since December 2014. But we should note that last month the ADP Report signaled a +202,000 gain that wasn't reflected in the non-farm payrolls report (+145,000).

The widely-watched ISM services PMI was also released overnight for January and that was little-changed with a moderate expansion (55.5). The internationally-benchmarked Markit services PMI for the US was also out and puts their expansion a little lower (53.3) although that is a recovery.

The US trade balance in goods and services was released too, for December and the full calendar year, and as usual, it revealed data that was both 'worse' than the prior month and a bigger deficit than analysts were expecting. Same old evidence tariffs just don't work. Their deficit with China for trade in both goods and services was -US$26 bln in December alone and US$346 bln for all of 2019. Both were only relatively minor declines on prior periods although they did constrain the calendar year deficit somewhat even if the December result was worse overall.

Signals from Singapore reveal they are getting ready to devalue their currency in response to the trade hit they are taking from the Chinese coronavirus. This comes after Hong Kong revealed its economy contracted sharply in 2019.

The number of cases the coronavirus is still rising, approaching 25,000 and the death till is approaching 500. But most are still in Hubei Province and it is becoming clear that the Chinese strategy is to sacrifice that province to save the rest of China, and the world. It is fearsomely ugly at ground zero with a complete shutdown.

As tough as it is on the people of Wuhan and surrounding cities, global equity markets approve, and are moving back up.

In mid-day trade, the S&P500 is up +0.9% today, following European markets that were up as much as +1.5% (Frankfurt) or as low as +0.6% (London). Yesterday, Tokyo ended up +1.0%, Hong Kong was up +0.6%, and Shanghai was up +1.3%. Locally, the ASX200 rose +0.4% while the NZX50 Capital Index was up +0.8%.

Globally, the world economy made a solid start to 2020 as output, new orders and employment rise at faster rates, and this was despite the onset of the Chinese virus.

It will need to because trade is under pressure and February won't be an improvement. International airfreight ended 2019 with a -3.3% contraction and for the full year the Asia-Pacific region shrank -6.4%.

In Australia, the regulator RBA is considering requiring banks and credit card companies to offer a least-cost option to merchants for tap-on-go payments, like Eftpos. More than AU$500 bln in juicy fees are at risk, both for banks and especially Visa and Mastercard. The credit card companies pay virtually no tax on these fat revenues.

And staying in Australia, their chief central banker has acknowledged what has been an open secret for some time: low interest rates and easy money are incentivising investors to take on risk and driving equity and property valuations to extremes - in other words, a problem he was a part in making.

The UST 10yr yield will start at just under 1.65% and another strong +5 bps recovery a day. Their 2-10 curve is higher at +20 bps. But their 1-5 curve is still negative at -3 bps. Their 3m-10yr curve is positive, now +10 bps. The Aussie Govt 10yr is up further as welly, up +9 bps to 1.09%. The China Govt 10yr now at 2.89% and a +2 bps gain. And the NZ Govt 10 yr has moved up as well and will open at 1.33% and that is an +11 bps rise overnight.

Gold has risen today, up +US$6 to US$1,558/oz.

US oil prices are up about +US$1 today at just on US$51.50/bbl. The Brent benchmark is also up to just over US$55.50/bbl.

The Kiwi dollar is little-changed this morning at 64.7 USc. On the cross rates we are lower at just under 96 AUc. Against the euro we are still firmish at 58.8 euro cents. The net of these shifts leaves our TWI-5 just on 70.3.

Bitcoin is rising today, up nearly +4% at US$9,550. 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 ».

Our exchange rate chart is here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Interesting from Australia News
Image deleted from Tencent sparks doubt about official virus tally.

"China energy executives braced for 25% fall in domestic oil demand." 3-4 mbpd this month alone.
For perishable goods like NZ log exports this is not going to be pretty.

Globally, the world economy made a solid start to 2020 as output, new orders and employment rise at faster rates, and this was despite the onset of the Chinese virus.

What the bond market was warning everyone about in 2018 was that the boom wasn’t actually booming, thus the (liquidity) risks of something going wrong before it did (assuming it ever could have) were getting too high. By November 2018, it was too late; the landmine. Curve collapse and inversions (plural) were the signals.

What the bond market has been warning everyone about late in 2019 is that the turnaround had better actually turn the economy around at some point. In actual fact, not just in opinionated descriptions reprinted in the media as weighty fact. Even those sentiment numbers that suggest the possibility can’t manage to do so without serious questions. Link

"In actual fact, not just in opinionated descriptions reprinted in the media as weighty fact".

Ain't that the truth. All news items lauding 'growth', should be accompanied by the concurrent increase in debt, plus the relevant resource-state (reduction of stock, over-use of renewal capability, or over-filling of sinks beyond their absorption-per-time capability.

It would be red ink since 2005-8, and arguably since about 1970.

Arguably a decade earlier than that PDK when the population growth rate turned negative. For someone really good at pattern recognition and logic, even earlier, realising that exponential growth rates would not last forever. Funny thing is I read the same principle in a book on business, they just called the curve the Sigmoid effect. Most business wait until a decline in sales, failing to realise the inflection point on the way up where the positive growth rate turns to negative is the point at which to act. Even those that believe in the growth mantra can't even get that right.

Repo, Sponsored Repo, And Bank Reserves

The Federal Reserve is raising the level of public reserves which everyone can see (rather the whole point) without any mention of what must be going on with private reserves most people cannot because they don’t know a single thing about them… The visible level of public reserves had been falling but throughout the prior year and a half there were any number of warning signs that the hidden level of private reserves wasn’t picking up the slack as had been expected.

In summary, we don't know and we'll have to wait and find out. Is that supposed to be reassuring? Arey are you trying to be a voice of reason? If so it isn't working.

There is a time tested method for dispelling mistruths, and that is to provide full and frank information. In this instance this would include what statistics are being recorded, and what isn't. The methods used in Wuhan would be disclosed to medical professionals around the world so that peer review of the methods could take place. Unless we know this is being done professionally we won't have any idea if it is bad until you and your family have it.

I will listen to medical experts any day over unqualified fear mongers.

You sound tired.. time for a nap?

Very tired of the nonsense you and your doomsday mates spout :)

Yep, why has the government not taken the lead. The original link is to an Auckland academic.
Benchmark to government voice would be helpful.
You know, project management, comms etc....

Especially as it appears many governments are taking unprecedented actions now.
It's the comms bit that is missing, the comms to match the actions.

Nancy is awesome! Business Insider article: 'A manifesto of mistruths': Nancy Pelosi became a viral meme after the House speaker tore up the president's State of the Union speech.

It's a poor reflection on her, not him.

Not the way most people are viewing it, she's a hero. :)

CJ, could it be more, she is talking to her base. Its been a tuff time.
Trump is still president president and loving it.

Nancy has had to front:
Muller, failed. Russia collusion.
Impeachment failed.
Brett Kavanaugh, failed. supreme court nominated
Iowa counting failed.
Bernie being busted away.

It's a moment the Democrats needed, she delivered a moment to rally round.
Yes a hero: the central figure in an event, period, or movement

Peak Prosperity guy

Nancy Pelosi has backbone and you know it, a lot more then those frightened old republicans.


Trump acquitted.
Big ups to Romney who voted for Trump'z removal.
For a highly religious bunch, those Republicans sure do place morals below survival.

Yep the Republican's have certainly proved themselves to be spineless and corrupt, time for them to go. The US isn't even doing that well under Trump. BBC article: State of the Union 2020: Donald Trump claims fact-checked.

He's got the highest economic approval rating of any US President of the last 20 years.

But hey, keep celebrating Nancy Pelosi becoming a viral meme like it's some sort of achievement.

I don't think Trump has done anything - the American people have.

So why have 63% of American people approved of his handling of the economy?

I think you misunderstand my comment. It is not Trump who has suffered, done the hard work etc - it is the American people. You can argue that that the current prosperity started @2010 when the US started to drag itself out of the GFC - that it is a long term process not attributable to Trump alone. Trump may just be living on the results of the previous administrations work. What Trump has done is tax reform (which is traditional Republican policy and nothing innovative). The one concern is that this has increased borrowing which will have to be paid back by future generations (if ever). In that respect he could be compared to China - pump the system with money and ignore the consequences.

You said, "I don't think has done anything", to which I challenged. You replied "What Trump has done is tax reform (which is traditional Republican policy and nothing innovative)."

Has he or has he not done anything? If he hasn't, what is your second comment all about? If he has, what is your first comment all about?

As I clarify in my second comment I point out that it is the American people who have suffered and done the hard work to drag the US economy out of the mess it was in - not Trump. Trump is not responsible for the current state of the US economy - the American people are - they did the work. Again I think you misunderstand my comment.

Masher, the win in round 2.

Why? How about presenting an argument.

It was a partisan beat up to begin with. Based on Iowa, Biden is a goner - so even the Registered Dem voters clearly see it for what it was.

Pelosi should also be very worried, she looked like a petulant child.

Most voters are sick of the us v them, they just want what is best for America.

Phillip Lowe (RBA) confirms his belief in the relationship between the manufactured Aussie housing bubble and consumption:

I certainly understand that having interest rates at very low levels has unsettled some people. But I don't accept the idea that this is what is driving weak consumption. There is something deeper going on. While the Reserve Bank's decisions reminded people of what is going on, Australians were already adjusting their spending to the reality of a combination of subdued wages growth, the fall in housing prices and high debt levels. Consumer confidence and monetary policy were both responding to this reality.

It certainly remains the case that a further reduction in interest rates would help with the balance sheet adjustment by households with existing debt, which should help bring forward the day that consumption strengthens

2008 crisis: only lesson to learn is to restrict bank credit creation to transactions contributing to the real economy (GDP; asset transactions not part of it), avoiding asset bubbles & banking crises.

The only lesson that IS presently being learned is nobody learned the lesson Link

Nancy, great meme material.
One joke going round, she was tearing up Iowa caucas papers, the ones she found objectionable. Bad luck Bernie, second timer.

She hasn't got the cattle, AOC plus gang on one side, House managers & botched impeachment on the other, with the trainwreck Iowa caucas counting. Great that she distracted attention off all of that, especially the AOC & candidate quality stuff.

President Donald Trump has been cleared in his impeachment trial, ending a congressional bid to oust him from office that bitterly divided the US.

ABC's coverage of yesterday.

"Corrupting an election to keep oneself in office is perhaps the most abusive and destructive violation of one's oath of office that I can imagine."
- Sen. Mitt Romney

... imagined, alleged? Not proven.
Trump is still president.

Who do you think will be the Democrat opponent in the election this year?.

The Dems don't appear to have anyone apart from Mayor Pete but his lack of experience could tell against him.
Sanders,Biden and Warren represent what Trump wants to get rid of,not that he has been able to do it.
Warren critizises wealthy Americans and yet has spent over 700k of her election Budget on private jets.
Biden and Sanders are yesterdays men.
Possibly the major problem with the Dems is that there are pro and anti Clinton people still sniffing around.
They need a clean out and they need it now or 2020 is over.
They need to DRAIN THE SWAMP.