US non-farm payrolls in big miss; Canada too; US productivity jumps; China's service sector gets momentum; China exports surge; RBA can't find wage growth; UST 10yr at 1.58%; oil stable and gold up; NZ$1 = 72.8 USc; TWI-5 = 74.2

Here's our summary of key economic events overnight that affect New Zealand with news the global economy may be expanding fast, but labour markets seem to be lagging.

There was a big surprise in the US labour market data released overnight for April. They added just +266,000 new jobs in the month, a surprisingly low number that is far below the +978,000 that analysts had expected, and a sharp drop from March’s pace. Their jobless rate shifted up to 6.1% when a 5.8% rate was expected. Their participation rate however rose to 61.7% as more people moved into their labour market. It is a result being looked at sceptically, especially given all the other indicators that show a strong recovery. Neither the equity nor bond markets reacted to the miss (and it is a big miss), and the US dollar dipped only marginally.

Another labour market metric helped ease the shock - US labour productivity rose sharply in Q1-2021. Essentially output (+8.4%) rose much faster than labour hours (+2.9%) or wages (+5.1%). The level of output per hour is the highest ever recorded, and the year-on-year gain is the fastest since 2004.

The growth of consumer debt in the US was modest in March. It rose +US$26 bln and about what was expected. That is +7.1% higher than a year ago, but that is distorted somewhat by the pandemic. Compared to March 2019, it is up just +0.9%. However, this March data does end a string of declines, indicating consumers feel more comfortable taking on slightly more consumer debt now. Consumer debt (credit cards and personal loans is almost US$4.2 tln or about 17% of nominal US GDP. (For perspective, the New Zealand level is about 5%. We may be underweight on this item compared to them, but we make it up and more with housing debt.)

And we should note that the US Fed balance sheet is no longer being expanded. It's not tapering either, but Fed QE is now just at the level either additions are expiring. They are not priming the pump anymore.

But the US Treasury is. Over the past week they have raised +US$44.1 bln in bond issues.

Interestingly, the April jobs data in Canada wasn't flash either, with a shrinkage in employment and one that was more than expected. Perhaps the unusually strong, unexpectedly strong March data weighs here, averaging out a reasonable gain over the two months. Lockdown uncertainties may be another reason. Whatever the reasons, they have a jobless rate of 8.1% now and that is still distressingly high.

In China, a private survey of their services sector brought some better news for them, and better than the official survey. Their services sector is expanding more vigorously than the tame levels we have seen recently. This is more like other international results, and China's service sector is reporting steeper increase in activity amid strongest upturn in sales for five months. A quicker rise in employment is helping to ease capacity pressures. And like other surveys, these improvements come at the same time costs are rising much faster than we have seen for months, even years.

Chinese exports rose an impressively sharp +9.5% in April from March and are up +31% year-on-year. That is better than expected; the world is buying. Their imports fell -2.8%, and one reason is they are finding it hard to buy semiconductor chips. They are also not buying coal. In fact coal imports dropped -20% in April from March and -30% less than a year ago. They ran a +US$28.1 bln surplus with the US in April, and not down noticeably from previous months as American demand recovers strongly. This same data records a strong trade deficit with New Zealand, and a -US$9.6 bln deficit with Australia in April - despite their political tensions.

In Australia, the RBA issued its Statement on Monetary Policy yesterday. They are watching the large bulge in household bank accounts, wondering how those households will use them when the fear of the pandemic eases. Those collective decisions will determine how the central bank reacts with monetary policy changes as they try to find the new 'normal', and more importantly, when. They are expecting a jump in inflation to 3.25% in Q2-2021 but then moderating quickly. They see economic growth up +9.25% in Q2-2021, but with a positive echo later to +4.75% in by December and +4% this time next year. But despite all this positivity they are not expecting pay packets to grow as quickly, and probably not until 2024.

And it is worth noting, even though it isn't 'new', commodity prices for copper, aluminium, nickel, zinc, iron ore and coal all rose overnight.

Despite the US payroll miss, on Wall Street the S&P500 is up +0.7% in midday trade - yet another all-time high and for the week it is up +1.1%. Overnight, European markets were up across the board, averaging a +0.8% gain. Shanghai ended yesterday down another -0.7% in a late selloff to end the week with a -0.8% net loss after their holiday break. Hong Kong traded -0.1% lower yesterday for a weekly dip of -0.4%. Tokyo was up a minor +0.1% yesterday for a weekly gain of +1.9%. The ASX200 was up +0.3% yesterday, finishing the week with a +0.8% rise. The NZX50 Capital Index gave back another -0.2% yesterday for an unchanged week.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now 156,306,000 people have been infected at some point, up 881,000 in one day, still largely driven by rises in India and Brazil. Global deaths reported now exceed 3,261,000 and up +14,000 in one day. Vaccinations in the world are also rising fast, now up to 1.238 bln (+23 mln), and in the US almost half of their population (45.5%) have had at least one dose as they keep up their fast rollout. Now one third have been fully vaccinated (110.4 mln people). The number of active cases there has fallen to 6,675,000 with -24,000 fewer new infections than recoveries in the past day and very slow progress.

The UST 10yr yield starts today at 1.58% and up +2 bps overnight. The bond markets are not screaming 'inflation'. The US 2-10 rate curve is just marginally steeper at +143 bps. Their 1-5 curve is flatter at +72 bps, but their 3m-10 year curve at marginally steeper at +157 bps. The Australian Govt ten year benchmark rate is up +2 bps at 1.64%. The China Govt ten year bond is unchanged at 3.17%. And the New Zealand Govt ten year is up +1 bp at 1.74%.

The price of gold starts today at US$1830/oz and that is up another +US$15 since this time yesterday to its highest since mid-February. Over the past week gold has risen +US$63/oz or +3.4%.

Oil prices are marginally softer today at just under US$65/bbl in the US, while the international Brent price is still at US$68/bbl. US drillers are not rushing to add new wells, as the latest rig count data shows (+2 in a week).

The Kiwi dollar opens today at 72.8 USc and another +½c firmer again since this time yesterday. Against the Australian dollar we are softer at 92.8 AUc as the Aussie makes bigger gains. Against the euro we are still at 59.9 euro cents. That means our TWI-5 is marginally firmer overall at 74.2.

The bitcoin price is now at US$58,954 and +3.5% higher than this time yesterday. Volatility in the past 24 hours has been a high +/- 3.1%. The bitcoin rate is charted in the exchange rate set below. And for those following the joke-crypto Dogecoin, it has risen +12% in the past 24 hours and now has an overall 'valuation' of US$82 bln! (Update: Now US$90.1 bln !!)

The easiest place to stay up with event risk today is by following our Economic Calendar here ».