Here's our summary of key economic events overnight that affect New Zealand, with news the reflation trade regained some momentum today, and that is getting the equity market's attention.
But first, there is another non-farm payrolls report out tomorrow night (NZT) and the precursor ADP Employment Report was released today suggesting it will be a lackluster affair. The ADP report came in with a much smaller jobs gain that analysts expected, and much smaller than for January. Only +117,000 more jobs are reported in this advance report. Analysts are currently expecting US non-farm payrolls to grow by a tepid +180,000 in February after the very weak +49,000 in January. In any case, for a labour market as large as the US, these general levels are close to a stall.
At the end of February, there was a sharp and across-the-board rise in mortgage interest rates in the US and taking their benchmark 30yr fixed rate to just on 3% plus points. This rate is suddenly back to where it was six months ago. Still, mortgage applications rose last week.
There were two services PMI surveys out overnight. The internationally-benchmarked one reported a strong expansion in February, and at a slightly better level than for January. The financial and healthcare sectors are leading the way. The widely-watched local one wasn't as positive reporting a notable pullback. This one said it saw a sharp pullback in new orders in February.
The US Fed released its own set of surveys for its regions in the form of the February Beige Book.
In China, the Caixin services PMI is showing the same limp expansion that their factory sector is experiencing. The steam has gone out of the Chinese economy and it is growing at a rather modest level now, quite a come-down from the 2020 COVID bounce back. When the 2021 growth data reaches the headlines, we will all need to remember it will be off a very low base in 2020. This will be true for every economy, not just China.
China has always taken food security very seriously. And this is a challenge for Beijing to manage when tastes go up-market and more 'Western'. According to a recent report, the per capita consumption of meat has reached 55 kgs, a +10% rise in just four years. It is a colossal demand rise. That is 20 mln tonnes of extra meat required every year, and rising. And this rising demand comes just as one major red meat producer Australia is reducing its production of meat products. It seems likely New Zealand will be reducing output too if the Climate Change Commission recommendations are adopted. That will force demand to other producers like Brazil where the climate consequences could be severe.
China is having yet another of its central set piece conferences designed to reinforce the power of General Secretary Xi, this one to enact a new five year plan. It is a chance to show off. But hot topics are the quick demographic changes, and their fast rising debt levels.
In Hong Kong retail sales remain in a severe tailspin, down -13.6% in January compared to the same month in 2020, and you may recall there were down more than -21% back then too as the Wuhan virus crisis and protests bit together. So from January 2019, their retail sales have shrunk by almost one third. That is truly a massive reduction. Hong Kong is shriveling, and that is probably an outcome Beijing isn't unhappy about as it brings its population to heal.
In the international airline industry 2021 is starting off worse than 2020 ended and that is saying a lot. Even as vaccination programs gather pace, new COVID variants are leading governments to increase travel restrictions. And that means international passenger air travel is still running almost -85% lower in January than the previous 'normal' (January 2019). It is very grim indeed in the airline industry.
But global international air cargo traffic is actually back to 'normal' (on the same 2019 basis) with January up +1.2%. This market features more demand than capacity, so prices are high. Capacity being removed for the once-lucrative and now-dead passenger market is causing a reduction in available freight capacity, and in fact the Asia-Pacific region is being hit harder than other regions over this impact.
In the UK, the collapse of the investment house Greensill Capital is having broad implications for many companies and many jobs. And that includes an Australian steel mill. Greensill's woes became especially serious when it couldn't get any insurer to cover it.
On Wall Street, they are still marking time today with the S&P500 down another minor -0.3% in mid-day trade. That follows European markets which gained +0.5% overnight. Yesterday the very large Tokyo market also rose +0.5%, while Hong Kong jumped an impressive +2.7% and Shanghai jumped +2.0%. The ASX200 rose 0.8% yesterday while the NZX50 Capital Index was up a mere +0.1%.
The latest global compilation of COVID-19 data is here. The global tally is still rising and at a faster pace, now at 114,912,000 and up +293,000 in one day, so no letup globally. Global deaths reported now exceed 2,553,000 and +10,000 since yesterday.
More countries (128) are into their vaccination programs. About 268.6 mln doses have been given so far (+24.3 mln). New Zealand is very much a laggard. China, for example, expects to have 40% of their citizens vaccinated by June.
The largest number of reported cases globally are still in the US, which rose +57,000 over the past day for their tally to reach 29,378,000. The number of active cases fell overnight and is now just on 8,943,000 and -32,000 fewer in a day, so many more recoveries that new infections again. Their death total is rising slower, now at 529,000 (+1000).
The UST 10yr yield is back up +5 bps at 1.47% and extending the yo-yoing pattern of the past few days. The US 2-10 rate curve is steeper at 133 bps. Their 1-5 curve is steeper still at +65 bps, while their 3m-10 year curve is also steeper at +144 bps. The Australian Govt 10 year yield is up +5 bps at 1.75% following the RBA statement. The China Govt 10 year yield is up +1 bp at 3.28% and an island of stability. The New Zealand Govt 10 year yield is also pretty stable, down just -1 bp at 1.75%.
The price of gold starts today lower by -US$17 from yesterday at US$1718/oz, still languishing at a nine month low.
Oil prices are marginally firmer at US$61.50/bbl in the US, while the international price is just over US$64/bbl.
And the Kiwi dollar opens at 72.6 USc and slightly lower this time yesterday. Against the Australian dollar we are lower at 93 AUc. Against the euro we are little-changed at 60.2 euro cents. That means our TWI-5 is back at 74.1.
The bitcoin price is now up at US$51,185 and a gain of +6.9% since this time yesterday. Volatility in the past 24 hours is very high again at +/- 5.9%. 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 ».