Here's our summary of key economic events overnight that affect New Zealand, with news the focus is on the credibility of American government data.
In a surprising announcement, the US Administration is reporting that "nonfarm payroll employment rose by +2.5 million in May, and the unemployment rate declined to 13.3%". Markets were anticipating further deterioration of -8 mln jobs and a 20% jobless rate. Apparently, no one noticed a jobs hiring spree in May and a minor rise in their participation rate - until today. The private sector monitoring of the same labour market, and the rising layoff levels are apparently 'fake news'. The "greatest comeback in American history" didn't see any improvement for Black or Latino Americans however, intensifying the dubiousness of the reported data.
To be fair, the US Agency responsible for the May payrolls data have cautioned that data-collection issues that have plagued them throughout the crisis continued in May.
But Wall Street ignored those caveats and jumped higher anyway on the news with the S&P500 up +2.6% so far and heading for a weekly rise of +5%.
But the US Fed didn't get the message. It reported that consumer debt fell a remarkable -20% annual rate.
Across the northern border, they too reported labour market data that was more optimistic than expected but the effect was within normal statistical tolerances. Employment grew marginally in May from April.
Back in the US, China is apparently canceling purchases of US farm commodities.
But China's recovery seems to on track. New personal loan lending, including credit card loans and consumer loans, shows signs of improvement in May. In particular, home mortgage loans in some regions have recovered to pre-coronavirus levels.
Not only are iron ore prices rising on rising demand, but so are copper prices.
China however is advising its citizens not to travel to Australia, in an escalation of the trade and security tiff between them. Beijing says the risks of "discrimination and violence" against its citizens is high at present. That will restrain the flow of students at Australian universities. But there is some [minor?] evidence that those who were aiming for American, British or Australian universities may transfer their focus to New Zealand now.
Singapore is reporting that retail sales fell a remarkable -40% in April as their lockdown bit. In May they are reporting that Singapore banks attracted rising deposits from protest-hit Hong Kong. Record inflows follow unrest in their rival.
Meanwhile in Japan, they are reporting the largest decline in household spending since 2001 when their data on this started.
Bond yields are rising fast over the past week. It seems investors are moving back into equities as the mood lifts about restarting major economies. If it lasts, this will have an unfortunate impact on government budgets that have mushroomed recently to battle the economic impacts of the pandemic. Sharply higher liabilities combined with interest rates that have almost doubled from very low levels will eat into tax revenues very fast. Yes, central banks can create new money to buy increasing amounts of government debt, but obviously they can't do that forever. And if market push bond interest rates higher, the taxpayer will need to shoulder an increasing load just to make the interest payments
The latest compilation of Covid-19 data is here. The global tally is now 6,703,700 which is up +130,000 in a day, still rising at a faster pace than recently.
Now, just over 28% of all cases globally are in the US, which is up +23,000 since this time yesterday to 1,885,200. This is a similar rate of increase and the spread isn't abating. US deaths are now exceed 109,000. The shift of infections and deaths to Texas, California and Florida is deeply worrying.
Global deaths now exceed 388,000. Sweden's herd immunity strategy has cost them 4639 lives so far and that is on an upward trend. The different strategies in neighbours Norway (238), Denmark (586) and Finland (322) is very clear at this point, and all those are probably higher than they need to be because of the Swedish contagion.
In Australia, there have been 7251 cases (+11 since yesterday), 102 deaths (unchanged) and a recovery rate of just over 92% (unchanged). 21 people are in hospital there (-2) with 2 in ICU (-2). There are now 466 active cases in Australia (-8).
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 fourteen days with zero new cases.
The iron ore price is ignoring official Chinese warnings about a frenzy and is higher yet again today, and on high volumes of trades. Thermal coal prices are being ignored by buyers, dropping to ten year lows. Mines are shutting.
The UST 10yr yield is up again, today up another +8 bps at 0.89%. For the full week, it is up a remarkable +26 bps as investors start pricing risk back into American Government debt - in fact, long term debt from all governments. Their 2-10 curve has steepened further to +69 bps. Their 1-5 curve is also steeper at +29 bps, and their 3m-10yr curve is now up at +77 bps. The Aussie Govt 10yr yield is up another +6 bps to 1.14%. The China Govt 10yr is up too, by another +3 bps to 2.88%. And the NZ Govt 10 yr yield is also firmer, up +6 bps to 0.99%.
The gold price has started a yo-yo ride in the past few days with large falls then rises. Today reverses yesterday's recovery, and more. It is down -US$40 to US$1,681/oz.
Oil prices are sharply higher today. The US crude price is up about +US$2 to just on US$39.50/bbl. The Brent price is up to just over US$42/bbl.
And the Kiwi dollar has risen further. We are now just on 65.1 USc, another +½c gain and the last time we were this high was at the end of January. On the cross rates we are to 93.4 AUc and a one month high. Against the euro we have are up almost +1c to 57.7 euro cents. That means our TWI-5 has moved up to 69.9.
Bitcoin is lower than this time yesterday, down by a minor -¾% to US$9,743. 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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