Non-farm payrolls disappoint, but US car sales show some improvement; Japan factory demand rises; China's holiday traffic disappoints; Aussie retail sales dip; UST 10y at 0.69%; oil and gold down; NZ$1 = 66.3 USc; TWI-5 = 69.7

Non-farm payrolls disappoint, but US car sales show some improvement; Japan factory demand rises; China's holiday traffic disappoints; Aussie retail sales dip; UST 10y at 0.69%; oil and gold down; NZ$1 = 66.3 USc; TWI-5 = 69.7
Lighthouse at Puysegur Point, Preservation Inlet, Fiordland. Photo by Roger Harris

Here's our summary of key economic events overnight that affect New Zealand, with news the economic bounce-back might be running out of momentum in both the US and China.

First, US jobs growth slowed more than expected in September, coming in much less than expected. A weak extension to their bounce back of +850,000 was expected but in the end the increase posted was just +661,000. Remember, +1.5 mln jobs were created in August. That leaves the pandemic job loss since February at -11.4 mln. More layoffs turned permanent, adding to signs that the American economy faces a long slog to fully recover. And those now permanently jobless is rising faster. Their participation rate fell to a very low 61.3% indicating huge numbers have moved out of their workforce and are no longer looking for employment.

But these realities isn't showing up yet in monthly changes in consumer sentiment surveys, even if the latest one is down year-on-year by almost -14%. Sentiment is low, but not getting worse.

And cheap credit, and demand for larger SUVs and pickup trucks has driven a faster-than-expected bounce-back for the American car industry. Sales ran at 15.7 mln per year in September, up from a sales rate of an annual sales rate 15.2 mln vehicles in the year to March. Unemployment isn't affecting this market yet. New-car shoppers are putting down more money and taking advantage of very low interest rates to upsize either to bigger vehicles or vehicles with more options. It can't last if the jobs numbers worsen however.

A changed and more realistic President (on the pandemic impact) might enable a proper fiscal relief package to get passed by Congress soon. But you never know - it is hard for know-it-all personalities to admit they have been wildly wrong.

In Japan, a major steelmaker there is to restart an idled furnaced line in response to rising orders from the domestic car and consumer electronics industries. This is the type of positive signal Japan's economy needs.

China might be on holiday, but it is pressing the enforcement of its security laws - in Britain. It says protesters in London are breaking its laws and wants them arrested.

And in China itself, an index monitoring their "new economy" continues to fall away. While it might be the fastest-growing part of their economy, these firms are now struggling with lower investment, employment and innovation as the broad rebound from the pandemic slows in the Middle Kingdom.

Meanwhile, domestic travel is heavy this year. But it is still more than a quarter lower than the same period last year, and spending is lagging even more. (And of course, international travel is but a shadow of last year during this holiday break.)

In Australia they released retail sales data for August yesterday. Sales were down by a -4.0% annual rate from July, but were up +5.4% from the same month in 2019, broadly as expected as the Victorian lockdown took its toll.

A new report says that New Zealand is the sixth best place to retire in, in the world, unchanged from 2019. Top is Iceland, followed by Switzerland. We were beaten out of fifth only just, by the Netherlands. Australia ranks #7, Canada #8, and the USA #16. Holding us high are the 'finances' and 'quality of life' components.

Wall Street is ending the week lower with the S&P500 down -0.9% in afternoon trade. But they are heading for a weekly gain of +1.9% and a rise in market capitalisation of about +US$½ tln. European markets were mixed again amid only small movements. Shanghai is closed for its week's long holiday, Hong Kong is closed for just two days. Tokyo traded again yesterday after its unusual shutdown and was also down -0.7% for a weekly dip of -0.8%. The ASX200 closed sharply lower, down -1.4% and compounding their retreat to a weekly loss of -2.9%. Meanwhile, the NZX50 Capital Index was flat on Friday, but ending the week with a marginal gain.

The latest global compilation of COVID-19 data is here. The global tally is 34,429,000 and up +349,000 in one day. The European resurgence is gathering steam again, like the one in the US. Global deaths reported now exceed 1,025,000 (+9000) but clearly many are going unreported.

The largest number of reported cases globally are still in the US, which is up +60,000 overnight to 7,523,000 and of course some of those are in the White House. The number of active cases are stable at 2,553,000 so many more new cases than recoveries and they are going backwards now. Their death total is just over 213,000 and still rising at +1000 per day. At 643/million population, it is the worst western death rate bar Belgium and Spain.

In Australia, there have now been 27,113 COVID-19 cases reported, and that is only +17 more cases than yesterday. Deaths are up to 890 (+2). Their recovery rate is still at 91%.

The UST 10yr yield is relatively firmer today, up +2 bps to 0.69% and recovering all of yesterday's fall. Their 2-10 rate curve is unchanged at +56 bps, their 1-5 curve is also unchanged at +16 bps, while their 3m-10 year curve is marginally firmer at just under +61 bps. The Australian Govt 10 year yield is unchanged at 0.87%. The China Govt 10 year yield is also unchanged at 3.16%. The New Zealand Govt 10 year yield is down -2 bps to under 0.51%.

The price of gold is just a little lower this morning at US$1905/oz and a -US$4 dip. Silver is down similarly.

Oil prices are also weaker again today, down by another -US$1 to just under US$37/bbl in the US, while the international price is down to just on US$39/bbl. It is a sharp enough fall that is surely likely to end the minor rise in US rigs in action.

The Kiwi dollar starts today softer, now at 66.3 USc and taking the rise for the week down to +88 bps. Against the Australian dollar we have hardly moved and are now at 92.6 AUc. Against the euro we unchanged at 56.6 euro cents. And that means our TWI-5 has held at 69.7.

The bitcoin price is marginally firmer this morning, now at US$10,535. 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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15 Comments

Well it will be interesting to see what impact the US election will have on the global outlook. And to what extent Trump will go to to win the vote, is he faking it or is he not?
NYT article: Trump Tests Positive for the Coronavirus. The president’s result came after he spent months playing down the severity of the outbreak that has killed more than 207,000 in the United States and hours after insisting that “the end of the pandemic is in sight.” https://www.nytimes.com/2020/10/02/us/politics/trump-covid.html

Trump has now been taken to Hospital.

https://www.bbc.com/news/world-us-canada-54396670

All part of the faking it performance since the Republican's are losing badly in the polls, they are trying to gain sympathy votes.

New car deal being offered in our old neighbourhood New Jersey If you have a vehicle 3 years old or less, trade up to a new model and dealer will cover difference for 3 years at no interest. Not sure what happens after that?!

"A groundbreaking new study points to a cheap, safe, effective way of tackling Covid

... the use of Vitamin D reduced a patient’s risk of needing intensive care 25-fold. Two patients who did not receive Vitamin D died. And while the sample is too small to conclude that Vitamin D abolishes the risk of death in Covid patients, it is nonetheless an astonishing result, and corresponds with Prof Backman’s assertion that correcting vitamin deficiency might cut mortality by half. The Government should now act on this latest evidence."

https://www.telegraph.co.uk/news/2020/09/26/correcting-britains-vitamin-...

Thos 11.4 million unemployed Americans, and rising? What are they going to do? Anything! And to do so they will work for less pay than their competitor workers.
That is going to happen everywhere.
The Unemployed are going to compete with the only tool they have left - that rate of pay they will work for.

It's difficult not to be reminded of the Antonine Plague of 165 AD that crippled the Roman Empire. The exact nature of the virus that struck down as many as one-third of the Empire's residents is unknown. One would have guessed the populace achieved "herd immunity" after the first wave devastated the Empire, but that's not what happened. The plague continued until 180 AD, and recurred a decade later, continuing to sow misery and economic costs. Emperor Verus fell ill and died in 169 AD.
What's different now is the extreme fragility of America's financial and social orders. The apparent strength of the economy rests on increasing extremes of financialization and its fruit; soaring wealth/power inequality.
Things change. We can't freeze change in its tracks, we can only respond: either competently and effectively, fully aware of our limitations and the risks of relying on debt to paper over our weaknesses, or clinging on to delusions of magical thinking, misguided faith in failed leadership and institutions and seeing debt and money created out of thin air as our saviour rather than the source of our downfall.

(CH Smith)

Friends for dinner last night, he was telling me he picked up his first swagman yesterday, guy with a dog going around district doing odd jobs staying in shearer quarters. Had a brain injury a few years back ,on disability benefit but able to work for food and enjoying the community, competing with Woofers.

looks like we should do a deal with queensland for open borders they are running the same strategy as NZ elimination
Queensland Premier Annastacia Palaszczuk also stood firm on health advice that 28 days would need to pass without mystery community transmission before her state could include all of NSW.
Tasmania has announced that it will reopen its border to all Queensland, South Australian Western Australia, the Northern Territory and the ACT from October 26.
New Zealanders will be allowed to visit NSW and the Northern Territory from October 16. The arrangement is not currently reciprocated.

Mate just sent me this, not sure where it come from

Importance of new US Supreme Court appointment by Republican Senate

Hi
This may be of interest .
>
> The republican Senate is dancing on Guinsbergs grave as they have the votes to
> Appoint her replacement before the election ,making conservative Supreme Court justices 6 to liberal3.
>
> This is a big blow to the liberals as the Senate has also spent the last four years filling three quarters of the vacancies on the next 2 lower courts ( appeal and district courts)with young conservative justices appointed for life.
> “Conservative” meaning they strictly follow the constitution , which the liberals have to over ride to implement what they call “policies “.(defunding and disarming police departments being the latest )
>
> This successful strategy ,organised by senate leader Mcconnell , will have a greater and long lasting impact on the country , irrespective of which parties hold the Congress , Senate , and Presidency as they are lifetime appointments.
>
> This should mean that we have passed the peak of liberal lunacy in the US which has also lead the international wave washing up on all European shores ( and statues ! )

European markets were mixed again amid only small movements.

Just to put things into perspective: Without dividends, European stocks' return since 2000 would be negative. https://bloomberg.com/news/articles/
Link

Trump may benefit politically and be more likely to win the election as a result of him contracting the coronavirus. E.g. Reagan won after being shot.
https://theconversation.com/donald-trump-has-covid-19-how-might-this-aff...

Indeed, what does not kill him will likely make him stronger. It's going to be very interesting to see what happens.

It's conceivable but unlikely. I've been keeping an eye on the Betfair market (currently suspended since Trump went to Hospital) - his implied chance of winning the election dropped from ~45% before he tested positive, to around 35% after testing positive, and briefly trading at 25% after the Hospital announcement. Safe to say your view is an outlier, but time will tell.

https://www.betfair.com.au/exchange/plus/politics/market/1.128151441

Incidentally - Mike Pence has moved from a 0.25% chance of winning to a 3-4% chance.

Totally agree MortgageBelt. It all seems far too convenient and a desperate move to win sympathy votes and as you pointed out the Republican's have experienced this before. Trump has blatantly lied about his health before, His longtime New York doctor, Dr Bornstein, admitted a few years ago that Trump dictated his perfect ‘doctor’s letter’ during the 2016 campaign. So why on earth would anyone believe him now??

Angelo Codevilla chronicles the continuing American Revolution - the whole series of articles is worth a look. He is not optimistic. That series: