Here's our summary of key economic events overnight that affect New Zealand, with news the disconnect between equity market sentiment and economic data seems to be getting wider.
But first, we get the American labour market report for May on Saturday (NZT), and today the pre-cursor ADP Employment Report was released. It reported -2.8 mln jobs were lost in May, vastly less than expected (-9 mln) and vastly fewer than in April (-19.6 mln). Analysts are expecting the American non-farm payroll report to show job losses in May of -8 mln but this could be at the top end.
The giant American service sector contracted sharply again in May, but not quite as sharply as for April. New order levels are still shrinking, but again not quite as dramatically as in the previous month. The ISM Report wasn't as sharply negative as expected, but the internationally benchmarked Markit one was. But essentially they both tell the same story of a building service sector contraction.
On the manufacturing front, the official factory order data for May shows a worse situation than for April.
But the less-than-expected jobless signals, and less-than-expected services PMI falls is being magically translated into positive signals on Wall Street. The S&P500 is up +1.3% so far today. And that follows European markets which were all up more than +3% (except London). Yesterday, the ASX200 was up +1.8% and the NZX50 Capital Index was up +0.8%. Following these markets, Shanghai was unchanged but both Hong Kong and Tokyo rose about +1.4% each. Equity markets have priced in a full recovery, as though the pandemic is over and a fleeting historical bump in the road.
Interestingly, China has said it is considering applying to join the Trans Pacific Partnership (CPTPP). It would be a powerful boost to the trade group that the US rejected. But it would require China to sign up to much higher labour and environmental standards than their watered-down RCEP group permits. The Chinese comments drew immediate scepticism about the motives.
China's private sector services PMI review has reported a rather remarkable improvement in May, far better than the official version. It now sees China's service sector expanding at its fastest clip in more than a year. Notably, both business activity and new orders expanded at the quickest rates since late 2010. It was a result that wasn't expected even by Chinese analysts.
But quite the opposite is going on in India which reported another very grim service sector PMI as their country remains locked down.
The Aussies reported Q1-2020 GDP yesterday and it was down -0.3% in the quarter. Their Government says Q2-2020 will be much worse, so "we are in recession today". It is Australia's first recession in almost 30 years. One reason analysts are almost certain Q2-2020 will be weak can be seen in their May services PMI which is still contracting at a very sharp rate.
The latest compilation of Covid-19 data is here. The global tally is now 6,438,300 which is up +113,000 in a day, rising at a faster pace than recently.
Now, just under 29% of all cases globally are in the US, which is up +20,000 since this time yesterday to 1,840,400. This is a similar rate of increase and the spread isn't abating. It is moving west and Arizona has seen a sharp rise recently. US deaths are now exceed 107,000. Global deaths now exceed 382,000.
Sweden is having second thoughts on its strategy, but it isn't changing tack. And Israel closed 15 schools overnight as it rushed to contain a renewed coronavirus outbreak that threatens to shut the rest, weeks after restarting lessons.
In Australia, there have been 7229 cases (+8 since yesterday), 102 deaths (unchanged) and a recovery rate of just under 92% (unchanged). 25 people are in hospital there (-1) with 5 in ICU (+1). There are now 487 active cases in Australia (-7).
There were zero cases again yesterday in New Zealand, so now only one person is left with it in the whole country. We are now at twelve days with zero new cases.
The UST 10yr yield is up sharply, up +8 bps today at 0.76%. Their 2-10 curve has steepened to +57 bps. Their 1-5 curve is also steeper at +20 bps, and their 3m-10yr curve is now at +64 bps. The Aussie Govt 10yr yield is up +9 bps to 1.01%. The China Govt 10yr is up further too, by another +5 bps to 2.83%. And the NZ Govt 10 yr yield is also firmer, up +5 bps to 0.91%.
The gold price is lower again today, down -US$26 to just on US$1,700/oz.
Oil prices are unchanged today. The US crude price is still just over US$36.50/bbl. The Brent price is still just on US$39.50/bbl.
The Kiwi dollar is still rising. We are now just on 64.3 USc which is another +¾c gain and now a fifteen week high. On the cross rates we are up +½c to 92.7 AUc. Against the euro we are also firmer too at 57.2 euro cents. That means our TWI-5 is up to just on 69.1.
Bitcoin is still unchanged from this time yesterday at US$9,577. 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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