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US non-farm payrolls rise faster; Biden stimulus close; US trade balance worse; China sets 6% growth target; South Korea targets hydrogen; UST 10yr at 1.56%; oil up and gold low; NZ$1 = 71.5 USc; TWI-5 = 73.7

US non-farm payrolls rise faster; Biden stimulus close; US trade balance worse; China sets 6% growth target; South Korea targets hydrogen; UST 10yr at 1.56%; oil up and gold low; NZ$1 = 71.5 USc; TWI-5 = 73.7
Marokopa River falls, Waikato

Here's our summary of key economic events overnight that affect New Zealand, with news big official post-pandemic recovery strategies are underway in the world's two largest economies. Bond yields keep on rising.

But first, US non-farm payrolls rose a better than expected +329,000 in February, and private payrolls rose +465,000. (Much of that difference was the shedding of -69,000 public teaching jobs in the month although other public sector payrolls declined too.) This was a very good private sector result, aided because the January levels were revised up strongly, but it still leaves a loss of -9.5 mln jobs since the start of the pandemic a year ago.

Now the question is whether this is the start of a substantial recovery in American employment to make back the pandemic losses. The Biden stimulus plan is the 'hope'. Congress seems steeled to push it through despite opposition from the Trump Rump. It has passed in the House, now it awaits Senate approval and that will be very close. Debate is underway and a final vote is likely in this session. If passed, that will juice the American economy with US$1.9 tln in new funding, with a substantial proportion going directly to citizens. The plan is that this juice will result in a much faster recovery in their labour market as their Spring season arrives.

Not so good was the January US trade balance which came in at -US$68.2 bln and very much higher than a year ago. The goods and services deficit over the last twelve months is now -US$705.5 bln and a new record. That is -3.3% of US GDP. The annual goods deficit is up to -$934.2 bln and on its way to a -US$1 tln shortfall between exports and imports. (Their goods deficit with China actually shrank in January from December.) Their services surplus was +US$228.7 bln and slowly shrinking.

The US and the EU suspended its trade dispute that resulted in tit-for-tat tariffs on aircraft sales.

China has set an economic growth target of ‘above 6%’ for 2021, Premier Li Keqiang confirmed at the Chinese National People’s Congress (NPC) yesterday (Friday) in Beijing. If achieved, it will make the Chinese economy 75% as large as the US, and closing in.

And China is realising that high housing costs are affecting its grim demographic profile, causing couples to limit births due to housing affordability stress. Expect to see a huge surge in new affordable housing projects in the next five years.

There was some unusual bond trading on the Shenzhen Stock Exchange yesterday with China Development Bank bonds suddenly delivering sharply negative yields. And it may have been real trading, not just 'fat fingers'. The exchange issued a warning to traders to behave sensibly. But the negative yields remain.

In South Korea, one of their largest conglomerates will invest NZ$22 bln over five years to develop the domestic hydrogen energy industry. It is a move attracting attention in Japan, China and Europe.

In the European euro bond market, they haven't got the rising bond yield memo yet. Saudi Arabia has issued euro bonds at a negative interest rate - effectively being paid to borrow. They are the second sovereign to achieve that, the first being China in 2020.

In Australia, the NSW government is to end it’s COVID-19 eviction moratorium and there are concerns it could force low-income renters into homelessness if they are not given money so they can pay their rent.

In New York the S&P500 is up +1.6% in mid-day trade and snapping a three day losing streak. Still, they look like they will end the week down just marginally. That follows European markets which were generally down -0.8% overnight. Yesterday the very large Tokyo market fell -0.2% after a strong recovery at the end of their trading session. That left them with a minor weekly loss. Hong Kong retreated -0.5% on the day resulting in a very minor weekly gain. Shanghai closed virtually unchanged yesterday for a minor weekly loss. The ASX200 fell -0.7% yesterday while the NZX50 Capital Index was down 0.4% with a late sell-off. Both were essentially flat for the week.

The latest global compilation of COVID-19 data is here. The global tally is still rising and at a faster pace, now at 115,820,000 and up +489,000 in one day, so no letup globally - in fact turning higher again. Brazil is the new worry. Global deaths reported now exceed 2,573,000 and +9,000 since yesterday. Vaccinations in the first world are rising however and in the US a quarter have now had this protection. That is quelling their daily death rate (+2000) and the number of active cases there is down to 8,902,000 (-23,000 fewer in one day).

The UST 10yr yield is up another +2 bps at 1.56% taking the weekly rise to +12 bps. The US 2-10 rate curve is up sharply to 141 bps. Their 1-5 curve is also much steeper at +71 bps, while their 3m-10 year curve is steeper too at +153 bps. The Australian Govt 10 year yield is up +4 bps at 1.78%. The China Govt 10 year yield is unchanged at 3.28%. The New Zealand Govt 10 year yield is up +6 bps at 1.94% and for the week it has risen by +10 bps.

The price of gold starts today up by +US$1 from yesterday, now under US$1699/oz. In a week it has fallen -US$44/oz or -2.3%.

Oil prices are up again, this time by +US$1.50 at US$66/bbl in the US, while the international price is up more to just under US$69/bbl.

And the Kiwi dollar opens at 71.5 USc and more than -½c lower than this time yesterday and for a second consecutive day. Against the Australian dollar we are firmer at 93.2 AUc. Against the euro we are holding at 60 euro cents. That means our TWI-5 is down at 73.7 and only a minor slip in a week.

The bitcoin price is lower again, now down at US$48,892 and unchanged since this time yesterday. Since this time last week however, the bitcoin price has risen +5%. Volatility in the past 24 hours is still +/- 2.9%. 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 ».

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32 Comments

"Bond yields keep on rising."

Ok. Let's assume for one brief minute that 'they' did know what they were doing all along.
All this 'printed' money is going to be used to revitalise the global economy and in so doing the increase velocity of money (and the tax take) and repay the Public Debt.
What is the major impediment to that happening? The fact the 'the money' is substantially tied up in non-productive assets.
So should we look upon 'Bond yields keep on rising' as the mechanism to start unlocking the liquidity from 'safe haven' asset markets, and putting them to work in the real economy?
We know what that would mean, don't we!
So, back to reality ......... time to lower rates.....for the 19th time - "suddenly delivering sharply negative yields. And it may have been real trading"....whatever it is that must work, might work this time....

Stimulus. Humm. Sounds just like getting a 100K mortgage because the 50K income just ain't providing fun. Bound to end well.

“And China is realising that high housing costs are affecting its grim demographic profile, causing couples to limit births due to housing affordability stress. Expect to see a huge surge in new affordable housing projects in the next five years.“

Population decline could end China’s civilisation as we know it. When will Beijing wake up to the crisis?
https://www.scmp.com/comment/opinion/article/3123726/population-decline-...

Not a crisis Colin. Could be the best thing that happened for them.

Expect to see a huge surge in new affordable housing projects in the next five years.

Gotta love it.

Right across the planet, it's the same: Slow learners.

At least the Chinese understand this is the case. In New Zealand we still have the blinkers on even as the birth rate plunges, it's particularly acute in Wellington and Auckland of course where buying a house effectively rules out children for most: https://www.stats.govt.nz/news/new-zealands-birth-rate-lowest-on-record-...

Will not make a blind bit of difference to falling birth rates, as very few women will actually choose to give birth to enough children to increase population, if the choice is there and is respected.
Falling birth rates have more to do with women having freedom of choice, and yes, a few might choose to be the quintessential earth mothers. but most will choose fewer births, later starts to reproducing and those who chose to not to bother at all, as there are far more interesting things in life to do than being a parent.
This is choice meeting need, the planet needs far fewer of us and women can choose their own life paths. Win-win.

Women crave financial security when they consider starting a family because they know they will have to stop working (at least for a while). Secure, decent, affordable housing is at the top of the financial security list. There is actually nothing more interesting in life than being a parent. It's the most rewarding work any of us will ever do.

Not all women wish to be a parent, not all women wish to have more than a couple of children at most, not all women want to be reliant on the whim of another person for their security. Parenting is rewarding, so are many other things in life that drive people and what drives one will not drive another. As long as the choice is there, as it has been increasingly since the 60s birthrates WILL fall.

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I advocate for a falling population Squishy. But it's a tragedy if it's because New Zealanders can't find housing or have enough income.

Since the advent of birth control and women being able to make their own way in life birthrates have been falling. The ONLY way you will increase birthrates is denying any other options, end of story.

Nah. Families needing to have 2 working incomes to support average levels of existence.

If we could afford mortgages on 1x income, many more couples would have many more babies.

No, they would not. Ever since women have been able to choose how many kids they have they have had far fewer, we have come through times when you could do exactly what you say, and, hello, we had fewer kids, most of my cohort, no more than two, and only one income coming in. The difference between my parents' 8 and 11 siblings, is birth control. Women do NOT want to have numerous pregnancies and limit the number of kids they have, when they have the autonomy to do so. There is no argument against that, though for the kids that are born, being able to have at least one parent not having to work full time or at all, is a bonus.

Its a moot point really. We could have negative birth rates as govt policy is to just import other countries high birth rates once the floodgates open again. Yes we really do need more fast food and liquor store workers on minimum wage (sarc).

Not to worry - we just open the immigration spigot some more and presto! Problem solved.

“The concern isn’t that the 10-year is at 1.50%,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management. “It’s that it went from 1% to 1.50% in a handful of weeks, and what does that mean for the rest of 2021.”

Looks like NZ QE II may be inevitable.

That jobs report is scorching. In the post-War era US unemployment has averaged 5.8% so at 6.2% currently it's within months of being at a normal level. Inflation expectations are sitting at much the same level as pre-crisis, states are reopening their economies and the vaccine rollout is going very nicely now.

No wonder yields are surging, the economy is coming back nicely but monetary policy still has its foot to the floor.

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Nonsense. And propaganda.

Those jobs were once real - doing real making. They're now servicing or - increasingly - virtual. As indeed all 'finance work' is.

That change has been epic. But you - like economics as taught - don't see it. Or don't wan to?

bit of a tangent, but amongst all the turmoil that still exists, isn’t it nice to have a “quiet” White House rather than the cacophony of blaring and boasting with which the previous occupant dominated headlines, daily, globally.

Not for CNN it isn't; their rating went through the floor. So they bring out old Trump ghosts - which RNZ regurgitate innocently......

@Foxglove. The agitation came most from those with TDS. (Trump Derangement Syndrome) Check the signs. You might still have it.

It's quiet because now it is "always Winter, but never Christmas".

More confirmation yet again today as jobless claims remain above 700,000 for the 50th consecutive week, after decidedly weak payrolls indicated by ADP yesterday, and then the first set of estimates for February 2020 auto sales which totally defy both the recovery idea as well as the picture of consumer spending in retail sales.

Altogether, the economy is still improving but way too slowly and certainly not in some out-of-control inflationary manner. Oil prices are, in this sense, misleading as they aren’t reflecting full and honest recovery (what would oil prices be today if production was raised to early 2020 levels?) That incongruity is being corrected (not that you hear about any of this in the mainstream cheerleading) by this other divergence in inflation expectations (TIPS inversion), which remain anchored well outside any possible notion of “money printing” no matter how high commodities get squeezed.

In fact, thus far, the higher oil goes the more this correction stands out. Link

Not to worry Biden is going to open the borders to yet more cheap labour

I agree with the sentiment on future inflation expectations being too high, although that is the Feds preferred indicator.

Someone ought to explain this to Adrian. Perhaps a blackboard and chalk might help.

Even kindergarten-level portfolio managers understand that....having all your eggs in one basket, in one country, at the bottom of the South Pacific and in the middle of the seismic ring of fire is the opposite of risk diversification. It’s risk concentration.

If New Zealand property goes down the toilet one day, a lot of people are going to lose all the(ir) bloody stuff.

https://www.stuff.co.nz/business/opinion-analysis/300245223/the-issue-wi...

"A few years later I bought my first home. A three bedroom California bungalow in Strathmore for $135,000... A few years later I sold it for $165,000 and thought I’d done bloody well.
Last week that same house sold for $1.4 million. And to my untrained eye it looked substantively the same as when I sold it about 15 years ago"

Imagine if he didn't sell his first house and just rented it out… and that guy dares give investment advice… and some people actually listen to him… unbelievable.

I'm really bad in the kitchen, I burn everything I cook, now this is my cooking advice, you lot all listen to me LOL

There’s no point being good in the kitchen if the entire house is on fire (risking the death of all within regardless of cooking skills...) - which I think is the authors point. But I guess you could stand in the kitchen and gloat about how wonderful your roast smells, when in reality you should be calling 111 - but only to find out that the arsonist who set your house on fire is also the fireman (RBNZ)

So do you stand in the kitchen and tell people how good you are at cooking or do you try and save others from burning to death?

Many a true word spoken in jest - unfortunately, it has been known to happen...ie. a fireman firelighter.

What a difference changing one letter makes... ie. substituting the 'f' for fight with an 'L'. Especially if the miscreant is one and the same person.

used to play around like that with words with my children and grandchildren. bit of a quirky way to make them think and learn. one that I didn’t include though, a bit edgy, was manslaughter can be split into mans laughter.