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US jobs growth timid; Congress moves on big stimulus; US trade balance worse; Canada jobs shrink; Singapore retail declines; south China in drought; UST 10yr at 1.16%; oil up and gold recovers; NZ$1 = 71.9 USc; TWI-5 = 73.7

US jobs growth timid; Congress moves on big stimulus; US trade balance worse; Canada jobs shrink; Singapore retail declines; south China in drought; UST 10yr at 1.16%; oil up and gold recovers; NZ$1 = 71.9 USc; TWI-5 = 73.7
Organ pipes, Otago Peninsula

Here's our summary of key economic events overnight that affect New Zealand, with news the US struggled to add jobs in January.

The January non-farm payrolls report was a lackluster affair, coming in with a +49,000 increase in jobs and almost exactly as expected. Much is being made of the fall in the jobless rate to 6.3% from 6.7% but that is partly because their participation rate slipped to just 61.4%. There are still 7 mln people looking for work. If there is a silver lining in this data is that for those in jobs, average hourly earnings are up +5.4% year-on-year although that is probably 'boosted' by the fall-off by the lower-paid.

The new policymakers in Washington are worried. The data bolstered the case for the Biden US$1.9 tln pandemic stimulus plan. And their Senate voted 51-50, after Vice President Kamala Harris broke her first tie, to adopt the budget blueprint for the Biden plan.

Data for the comprehensive American trade balance covering both goods and services to December was also released overnight and that recorded a -US$679 bln deficit for the year, -US$916 bln as a deficit on merchandise trade and a surplus of +US$237 bln in services trade. Exports of goods fell -13.2%, exports of services fell -20%. Imports of goods fell -6.6%, imports of services fell -22%. Their 2020 goods trade balance with China ended in deficit by -US$311 bln and that was relatively small US$34 bln improvement compared to 2019 and much of that coming from food exports late in the year.

Canada reported January jobs data as well and it wasn't very good either; worse in fact. They shed -213,000 jobs when a -50,000 decrease was expected. Their jobless rate jumped to a worrying 9.4%. Their participation rate fell too, to 64.7%. They too are having issues with holding on to low-paid positions and you can see th effect when the average earnings went up +5.9% in 2020.

India's central bank reviewed its policy settings but made no changes, keeping its accommodative settings.

Singapore reported December retail sales overnight and they were very weak, dropping on both a month-on-month basis and a year-on-year basis.

China's food security issues are not easing. In fact they are approaching emergency levels in the South. Rainfall since the end of 2020 in regions south of the Yangtze River was 50-80% less than usual and distributed very unevenly. Now authorities have imposed emergency restrictions on industrial water use. You will recall, this is the area we reported severe and threatening flooding in July last year.

China is again warning its citizens not to study in Australia due to 'great risks' like the pandemic and racial discrimination. This is being seen as just part of Beijing's attempt to get Canberra to toe its policy line.

Australian retailers might be high on their 'trusted' list, but retail sales hit a bump in the road in December according to official data. Retail sales volumes rose +2.5% in the December quarter but turnover fell -4.1% in December from November. That trimmed the previously reported stellar gains to +9.6% year-on-year.

Turnover of housing might be about to zoom higher in NSW, if a plan by their government to abolish Stamp Duty gets over the line. Property sales could surge by an extra 100,000 transactions each year in the State according to official estimates. Real estate activity is already very strong in Australia so adding that sort of demand without adding supply will come with obvious impacts.

Wall Street is posting another rise today with the S&P500 up +0.4% in early afternoon trade, and rising. It is at yet another all-time high, looking to add an impressive +4.6% this week alone and an equally impressive +US$1.5 tln in capitalisation. Since the start of the year, the S&P500 has added +$US1.1 tln in capitalisation so all of it this week. (Since their presidential election the gain has been a massive +US$5.7 tln in capitalisation.) Overnight European markets were mixed with good gains in Paris and Brussels but small retreats in Frankfurt and London. Yesterday, the very large Tokyo market rose +1.5%, Hong Kong was up +0.6% and Shanghai retreated again, down -0.2%. The ASX200 rose +1.1% yesterday while the NZX50 Capital Index rose +0.5%. And that meant the ASX200 closed the week with a +3.5% gain while the NZX50 Capital index recorded a -0.6% weekly loss.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now at 105,000,000 and up +427,000 in one day. It is still very grim everywhere except in our region. Global deaths reported now exceed 2,289,000 and +15,000 since yesterday.

More countries (82) have started their vaccination programs. And although 119.5 mln doses have been given so far (+14 mln more overnight), nowhere has the tide turned on infections - except perhaps in Israel and the USA. However, there is clear evidence the vaccines are working to reduce or even eliminate deaths for those who have taken it.

The largest number of reported cases globally are still in the US, which rose +122,000 overnight for their tally to reach 27,284,000. The US remains the global epicentre of the virus. The number of active cases fell overnight and is now just on 9,782,000 and -8,000 less in one day, so more recoveries than new infections. Their death total is up to 468,000 however (+6000). The US now has a COVID death rate of 1408/mln, and that compares to the disastrous UK level (1634) where deaths are also still rising fast (111,000, +1000 overnight).

In Australia, their community control is impressive. Their all-time cases reported is now 28,842 and only +4 more cases overnight, all from new arrivals and all in managed isolation. 55 of these cases are 'active' (+3). Reported deaths are unchanged at 909.

The UST 10yr yield is up another +2 bps at just over 1.16%. Their 2-10 rate curve is steeper at 103 bps, their 1-5 curve is up at +39 bps, while their 3m-10 year curve is also steeper at +112 bps. The Australian Govt 10 year yield is unchanged at 1.23%. The China Govt 10 year yield is also holding at 3.25%, while the New Zealand Govt 10 year yield is holding as well at 1.38%.

The price of gold will start today with a +US$21 partial bounce-back at US$1811/oz. Silver has rallied a bit more.

Oil prices are slightly higher at just over US$56.50/bbl in the US, while the international price is now just over US$59/bbl.

And the Kiwi dollar will open today having risen back to 71.9 USc. Against the Australian dollar we are also softer at 94 AUc. Against the euro we are still just under at 59.8 euro cents. That means our TWI-5 is up marginally to 73.7.

The bitcoin price has risen overnight by +2.4% to US$37,858. Volatility has been lower at +/- 2.3%. 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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20 Comments

"Their (Canada) jobless rate jumped to a worrying 9.4%."
Although at some costs, we need to appreciate that NZ at 4.9% unemployment - as well as having a relatively Covid-free lifestyle - there is some positives in Government and RBNZ actions.

Higher (10.7%) in Alberta and there is talk about secession;

https://calgaryherald.com/opinion/columnists/opinion-with-a-separation-v...

15
up

I just caught up with Jenée's article of late yesterday afternoon re "The Official Advice to Grant Robertson ignored". What can I say? What a disgrace Robertson and Labour have turned out to be. Worse. They've turned out to be exactly the same as every other political 'leader' we've been duped into voting for over the last 40 odd years.
When courage and foresight were needed; not just to win an election but to implement the policies outlined to do so, Robertson and Co have proven to be dreadfully lacking.

In modern social-capitalist systems, the core stabilizer of the system is the wage-earning middle class which provides the stable workforce driving production and the stable pool of consumers needed to consume enough to soak up the production of goods and services at a profit to producers.

Without a stable, dominant middle class, capital has few opportunities to invest in productive capacity. Without a stable, dominant middle class, the economy stagnates and is prone to collapse. (CH Smith)

Crushing the Middle Class - how every one defines it - with ever more debt undermines the very fabric of our economy and society. What is it that our politicians; especially the so-called champions of the Working (Middle) Class, The Labour Party, do not understand?

What should we do in an economy where wages won't rise to stimulate more economic activity (consumption if you like), eventually leading to a virtuous circle where wages do rise as a result ?
Answer: Lower the today's cost of what those wages can buy.
Shovelling more debt - tomorrow's income repayments ( no matter the % cost of that debt) - into today's price rises is not only self-defeating, it's destructive.
How do we know? Japan.

Lower the cost of what those wages can buy.

Virtually impossible when falling interest rates raise the discounted present value of future cash flows associated with assets and liabilities.

Some basic discussion ignored by central bank sponsored economists.

Keep posting that link Audaxes until everyone gets this part:

The present value of the quasi-cash-flow of depreciation quotas is also increased
by the rate cut. This penalizes entrepreneurs, the owners of the material factors of
production: plant and equipment. The depreciation quota of a given factor of
production is the amount periodically paid into the depreciation fund to cover
losses through wear and tear. These recurring payments constitute a quasi-cashflow the present value of which is obtained through discounting. The depreciation schedule will not be met, however, because the rate at which discounting takes
place is now lower, thanks to the rate cut. As a consequence, worn or obsolete
capital is not renewed.

That is all public works is it not? Roads, bridges, hospitals, schools, dams, power networks etc. The money won't be there to finance the rebuilding, or even maintenance.

That burgeoning of debt has been encouraged though by the OCR being cut, cut and cut again. As I commented on Jenée’s column, even Dr Cullen was concerned enough to point out that once 2% was reached any further stimulus was hardly likely to eventuate. But if, and I mean IF, the RBNZ is independently responsible for the OCR then the government itself is not accountable for this factor?

Even The People ‘Printing’ The ‘Money’ Aren’t Seeing It

In fact, the ECB (and Eurosystem staff) has been downgrading its inflation forecasts all along; which simply raises the uncomfortable question, what is it the ECB has actually been doing all this time? If these projections are what Economists working for the central bank and the central government actually believe of QE’s effectiveness, why are so many in the media and around the world so convinced of some huge inflationary blitz for these same QE’s?

As of December’s forecasts, Eurosystem staff downgraded 2020 estimates to just 0.2%, kept 2021 figured for only 1.0% (even knowing what these January numbers would look like) before dropping 2022 down to a paltry 1.1% from the 1.3% the models had been thinking for two years down the road when bank reserves reach, what, €4.5 trillion? Five? More?

Trillions in bank reserves, and the first “official” forecast for 2023 (not pictured above) is…1.4%. So much for excessive “money printing” – and this from the very people doing it!

https://www.smh.com.au/world/asia/confidential-review-told-unsw-to-foste...
Do NZ or Australian institutions consider wider ethical issues before entering into partnerships or contracts with Chinese institutions (which are tightly observed and co-managed by the CCP).
.
“Human rights abuses, the social credit system and associated rise of a surveillance state, suppression of the Uighurs in Xinjiang, cyber intrusions, militarisation of the South China Sea – these behaviours and more serve only to strengthen the arm of those who view China as a threat to be feared and contained,”

Do NZ or Australian institutions consider wider ethical issues before entering into partnerships or contracts with Chinese institutions (which are tightly observed and co-managed by the CCP).

UK Government Humiliated over Chagos Islands Again
UK Rejects International Court of Justice Opinion on the Chagos Islands
Just £12,000 of £40m fund for displaced Chagos islanders has been spent

“Human rights abuses, the social credit system and associated rise of a surveillance state, suppression of the Uighurs in Xinjiang, cyber intrusions, militarisation of the South China Sea

US occupation of Germany to continue indefinitely.
Link

Relevance Audaxes? To Chinas behaviour and influence within NZ?

Your words - "Do NZ or Australian institutions consider wider ethical issues before entering into partnerships or contracts..."

Who would we trade with if the above consideration is the barrier to trade and commerce relationships with other nations?

China is at the worse end of the totalitarian/human rights spectrum.
And - trade is one thing: the buying & selling of products & services between countries, but entering into a close partnership is another thing.

German pragmatism in play : Dialogue with Moscow should continue despite disagreements — Merkel

Nonetheless, US nonsense escalates despite obvious hypocriscy.

MSM changing their tune on the US election now their man is in. It wasn't rigged - it was just "fortified" for your own good. "Democracy" by the ruling cabal.

"That’s why the participants want the secret history of the 2020 election told, even though it sounds like a paranoid fever dream–a well-funded cabal of powerful people, ranging across industries and ideologies, working together behind the scenes to influence perceptions, change rules and laws, steer media
and control the flow of information. They were not rigging the election; they were fortifying it. And they believe the public needs to understand the system’s fragility in order to ensure that democracy in America endures."
https://time.com/5936036/secret-2020-election-campaign/

Maybe the US now has a pseudo-democracy?
With Google, Facebook, Twitter, Wall St, MSM, Washington, etc all enforcing the Democrat view/vote.

If your party is struggling for funds it must be tempting to sell a few list MPs to the highest bidder. Bizarre $50 million handouts to the media industry and Bob's your uncle.

The three central banks of the US, EU and Japan — FED, ECB and BOJ — printed $8 trillion out of thin air last year.

China (PBOC) has been extremely prudent ($0.6 trillion)

How will this affect geoeconomics in the coming years?
Link