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US awaits non-farm payrolls report with strong PMI results; China, India and Japan post lame expansions; China reaches out to join TPP; UST 10yr slips to 1.62%; gold slumps and oil firm; NZ$1 = 71.3 USc; TWI-5 = 73.2

US awaits non-farm payrolls report with strong PMI results; China, India and Japan post lame expansions; China reaches out to join TPP; UST 10yr slips to 1.62%; gold slumps and oil firm; NZ$1 = 71.3 USc; TWI-5 = 73.2

Here's our summary of key economic events overnight that affect New Zealand with news the old-normal service seems to be been resumed with the giant American economy regaining its role as the engine of global growth.

In the US, the number of recorded job layoffs in May is now down to about -25,000 among large reporting companies and very much back to pre-pandemic levels.

The level of initial jobless claims came in lower than expected, but only slightly so. There are now 3.5 mln people on these benefits, still more than pre-pandemic, but far far less than a year ago when there were 19 mln people dependent on them.

Tomorrow we get the official non-farm payrolls report for May and it is expected to show a modest improvement (+650,000) from the unexpectedly weak April result (+266,000). Today we got the precursor ADP Employment Report and it came in much better than expected with a +978,000 rise in jobs with gains across the board, except in the IT industry. Half those overall gains were in the hospitality sector.

The two large PMI surveys reported their May data for the large services sector and both describe booming conditions. The ISM one and the Markit one have the expansion pegged at its strongest since these surveys were started.

These results feed into a global PMI and that shows the international economy expanding across all sectors at a 15 year high.

But in China, their services sector isn't contributing much to that global expansion. In India things are dire as their pandemic bites hard, both in manufacturing and services.

It is the US that is the global engine now, supported by the EU but not Japan. South Korea and Taiwan are however.

And so is Australia. In addition, Australia recorded a strong trade surplus of +AU$8.0 bln in April (for both goods and services), due to an increase in exports and a decrease in imports. The export strength was on the back of rises in commodity and rural exports. Services exports increased, partly due to the trans-Tasman travel bubble, which opened in mid-April. This April result is the third highest surplus in their history, and better than expected for the month.

Today is the anniversary of the 1989 Tiananmen Square massacre in Beijing. It is no longer being marked in Hong Kong with a vigil as Chinese authorities crack down worldwide on remembrances of the brutal crushing of a student protest. Beijing has used those 32 years to rewrite history. But one photo and thousands of records at the time can never erase the crime.

Meanwhile, China has reportedly reached out recently to both New Zealand and Singapore to try and find a way to join the TPP. Of equal interest is whether the US will attempt to revive its interest in joining the trade zone it initiated.

Wall Street opened today's session sharply lower but all but -0.2% of those losses have been recovered on the S&P500. European markets closed mixed with Frankfurt up +0.2% but London down -0.6%. The others were in between. Yesterday, Tokyo closed yesterday +0.4% higher, Hong Kong closed a sharp -1.1% lower and Shanghai closed down another -0.4%. The ASX200 ended its session up +0.6% and a new record high, but the NZX50 Capital Index ended down a minor -0.1%.

The latest global compilation of COVID-19 data is here. The global tally is still rising, now 171,794,000 people have been infected at some point, up +471,000 in one day. Global deaths reported now exceed 3,694,000 and up +9,000 in one day. Vaccinations in the world are still rising but at a slower pace, now up to over 2 bln. In the US half of their population (51.4%) have had at least one dose. More than 40% of Americans have been fully vaccinated (138.1 mln people). The number of active cases there has fallen to 5,558,000 with fewer new infections than recoveries recently and steady progress. We are retiring this daily COVID update next week, and will replace it with the occasional newsworthy events relating to the pandemic. The pandemic is far from over globally, but it has now become normalised from a news perspective.

The UST 10yr yield starts today up +3 bps at 1.62%. The US 2-10 rate curve is a little steeper at +147 bps. Their 1-5 curve is at +79 bps and also steeper, while their 3m-10 year curve is steeper at +162 bps The Australian Govt ten year benchmark rate is little-changed at 1.63%. The China Govt ten year bond is unchanged at 3.11%. However, the New Zealand Govt ten year is up +1 bp at 1.80%.

The price of gold starts today at US$1872/oz, a sharp -US$36 drop from this time yesterday. Silver prices fell even harder, down -2.6% in a day.

Oil prices start today unchanged at yesterday's higher US$68.50/bbl in the US, while the international Brent price is still at US$71/bbl, and holding at a two year high.

The Kiwi dollar opens today at 71.3 USc and a full -1c drop overnight. About half of this is greenback strength and about half a flight from commodity currencies. Against the Australian dollar we are down marginally to 93.2 AUc. But against the euro we are almost -½c lower at 58.8 euro cents. That means our TWI-5 starts today at 73.2 but this is only back to where it was two weeks ago.

The bitcoin price is now at US$38,813 and another +2.1% rise from this time yesterday. Volatility in the past 24 hours has still been high again at +/- 3.0%.

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

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57 Comments

Read on BBC website the CCP has instructed China to embark on an international charm offensive. As the saying goes, good luck with that.

Sorry about the lab leak and pandemic lads, can I interest you in some plastic tat built with slave labor?

yeah nah.

Don't knock it I get useful business related tat off E-Bay all the time and its delivered to my front door for a total cost that's less than the courier delivery across town in NZ and its coming all the way from China and its tracked. Personally I don't know how they do it, go into a PostShop here and try sending something tiny the other way and they want $90 for a tracked delivery for anything of value. Shipped while we just sit here and wonder why they are going to rule the world.

Bought a wallet for $5 NZD delivered off ali-express about 7 or 8 years ago. Still going strong, very minor wear and tear. Beats the $20 - $30 wallets bought locally that fall apart after 6 months

State subsidised freight. Local firms can't compete with that.

“Global Food Prices Surge to Near Decade High, UN Says”

Probably nothing important.

https://www.bloomberg.com/news/articles/2021-06-03/global-food-prices-su...

20
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Not good. This could raise our CPI & force US to raise interest rates. This wouldn't bode well for property. We should probably do the sensible thing & take food products out of our CPI.

Its just temporary, so lets ignore it

Yes prices always settle back down after a bit of inflation..just check history.

11
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Another 3 printed dollars for every 10 chasing the same bushel of wheat = economic recovery. :/

Continuing my local watch. My scoop of chips is up $0.40 or 11%. Pretty consistent with my haircut. My morning beverage, my rates, my .... I'm sure they will come down again.... just look through.... Steel and asphalt price increases must have stung that cycling bridge estimate something terrible.

That could catch on...the “scoop of chip index.” Real inflation measured at the gill plate of the economy.

I measure the $10 pack at my local.
2 Fish, 1 hotdog, 1 potato fritter and a scoop of chips.

2010 $10
2017 $12
2021 $13

16
up

Lots of fake news coming out of the USA. Are there just not as many people unemployed anymore because basically they get the benefit cut off after like 6 months ? Just like NZ you can fudge the figures anyway you want to portray a rosy outlook. Meanwhile in the real world you have more and more people in the que for free food handouts. I see more and more people on the streets and I get asked for loose change at the gas station because people cannot afford to put petrol in their car but hey its all good out there right ?

No, all restaurant wait staff, cleaners etc. were made redundant due to COVID19 restrictions. Now they are getting there jobs back as the country opens up. Further all the COVID19 lockdown unemployment support packages are being removed so the people on these packages have to work

https://www.cnbc.com/2021/05/13/more-than-1-million-will-lose-unemployme...

Not from what I hear. The out of work benefit due to Covid is higher than the minimum wage of USD$7.25 an hour so they don't want to go back to work. Its a mess over there.

LOL - you quoted cnbc

LOL - It was on Aljazeera and a quote from Biden pretty much backs it up when he said nobody can live on USD$7.25 an hour anywhere in the USA, in fact they cannot live on $11 either that's why they are trying to push the minimum wage to $15 an hour. The minimum wage anywhere needs to be significantly higher than the benefit or people don't want to work.

12
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Our economy is living through the later stages of a rockstar's career.

With the easy come easy go success of a few hits that haven't aged well (decent living standards and pay), the royalty checks (exports) no longer cover the expensive lifestyle, pumping drugs into your veins to extend the failing career a bit longer (RBNZ's monetary easing), making enemies in a fit of desperation (Five Eyes, Manus Island) - Rockstar indeed!

Well if NZ is so insistent for the sake of international grandstanding & dogooding, on bringing in a handful of refugees, Australia should then pass a law that no residency in that country via NZ, unless you have spent 25 years in NZ. Couldn’t really blame them for doing that in its own right anyway.

"pandemic normalised form news point of view"
From a Western financial point of view rather.
Cases and death rate still rising in Africa and S America and India, or massively under-counted.
China slowing because its market are still under cosh of CV19.
EU less than 35% vaccinated.
Peru just added 110,000 dead to its estimated total, nearly tripling it in the process.

Today is the anniversary of the 1989 Tiananmen Square massacre in Beijing

The Myth of Tiananmen And the price of a passive press

Interesting counter to the accepted narrative

CV19 cases last 7 days:

N. America: - 21%
Africa: +12%
S America; +4%
Oceania - 19%
EU - 12%

Worldometer laughably citing reported total of 1994 for Africa for last 7d.
However, it is beyond doubt that most deaths have occurred in Western countries, so continuing whingeing about need to send vaccines to Africa is a bit misplaced. Worst problem is S America and v little said about sending them any help, outside of Brazil

I'm not sure going to the Kremlin for your news will get you an unbias point of view.

I would expect the Kremlin to be a reliable source for what their Ministers are saying - would you prefer to get it from Fox Entertainment.

Earlier on Thursday, Russian Finance Minister Anton Siluanov said that Russia will completely abandon the US dollar and will reduce the pound sterling share in the National Wealth Fund’s structure.

And? Russia is a small economy, smaller than the state of California.

Of course USA appears to be booming..basically they have implemented UBI and also mortgage payment freeze are still in effect.

Of course its still booming, that's the temporary sugar hit when you pump trillions of free dollars into the economy. Also they have to keep pumping the narrative that they are still ahead of China when it comes to the economy. We all know better, America is essentially bankrupt and they are running on borrowed time.

So is china

At least they make things to consume

Another fantastic day for the meme stocks proving that the stock market is all just a meaningless game.

To quote the WallStreetBets motto on short sellers:
"We can stay retarded longer than they can stay solvent."

Classic

To be fair if you cumulatively look at those stocks short sellers are down circa $5bn just today (real dollars that is, not New Zealand Pesos.)

Yet another National weirdo....can someone familiar with their candidate selection process explain how they can be so wrong so often?
A decent and viable opposition party is required to make our system work properly.

15
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Who said he was a wrong fit for the party?

Seems to be that if you don’t fit anywhere else, that’s the place for you alright. Mind you, National do not own this problem entirely either.

Yep. A decent and viable government is required to make our system work properly

Labour President Nigel Haworth has resigned over his handling of sexual assault allegations.

Haworth offered his resignation to Ardern after she read correspondence to the party confirming that the complaints were very serious.

Ardern made her displeasure with Haworth clear, saying "mistakes were made".

https://i.stuff.co.nz/national/politics/115710495/labour-party-president...

Some more context on this:
https://www.stuff.co.nz/national/politics/118302464/labour-party-inquiry...

Make your own decision on why he was forced to resign.

"giant American economy regaining its role as the engine of global growth."

Have you read any of the links I've put up over the years David?

That 'growth' was nothing more than the exponentially-increasing 'consumption of parts of the planet'- if we could have de-coupled we'd all be infinitely rich doing nothing; no need for dairy, tourism, coffee..... The US has offshored much that was physical.

Since about 1970, but inescapably obviously since 2008, the global economy - and specifically the US one, is adding more debt than it claims in GDP (setting aside the flaws in that measure). That's WITHOUT addressing Entropy (which is where Bollard's Commission will come unstuck) or Ultimate Depletion (which is where Economics comes unstuck).

https://surplusenergyeconomics.wordpress.com/
Each dollar of “growth” was bought with close to $3 of net new debt.

Can you rebut that statement?

And please, it is no 'engine'. That is taking a real physics term, and pretending it applies to economics. Engines take energy, do work with it, have upper thermodynamic limits to their efficiencies, leave the energy more entropic, exuding low-grade heat. I guess you could call the physical part of the 'US 'economy' that - but their non-physical outranks their physical, severalfold. That's no engine, it's a collection of forward bets. According to that link (rebuttal invited) there is more bet than underwrite.

Do you really call that growth?

better worded as
"giant American economy regaining its role as the engine of global CONSUMPTION."

What surprised me when we visited Tiananmen Square was that you're not allowed to sit down. No seats, and no sitting on the ground.

nothing to see here?

No sitting - bad Feng Shui - yin/yang is disturbed

Why would you want to sit down there? There is also no seats in red square, I never saw anyone getting the urge to sit down there.

You missed the point - why are you not allowed to sit down? Squares are built for people to mingle and relax are they not?

Nope, not those squares. They are built for you to come pay homage to the greatness of the Dear Leaders.

Roger that - heading off now to Te Ngākau Civic Square Wellington to pay my respects to Muldoon, then pop into the Town Hall closed, so will pop into Library (closed), so dang it the council building to complain about all the closed buildings - but its closed. Oh well plenty of good craft beer then..it is.

Ah yes, Robbo. We should have preserved him in Carbonite and made a Mausoleum for future generations to marvel at. Enjoy your brew.

Mrs The Point, that's because they can't sit down.

"Australia recorded a strong trade surplus of +AU$8.0 bln in April" - it is exactly how the CCP bully rolls. You will be rewarded when you front up against them.

Printing and distributing money...is this the only solution with no exit policy

https://www.reuters.com/business/finance/tsunami-cash-is-driving-rates-e...

May be a time will come when fed will be so desperate that will give interest on money borrowed to spend to run the economy.

New wierd world with no accountability and everyone just following the herd.

Biden economic forecast is for 2 boom years and then 8 to follow with under 2% growth