Here's our summary of key economic events overnight that affect New Zealand with news that a confusing mix of data and official comments leaves market unsure of their direction. And through it all, the NZD is rising and NZ interest rates are too.
We get the US non-farm payrolls report for August on Saturday (NZT) and a gain of +880,000 is expected. Today, the pre-cursor ADP Employment Report was released showing a gain of only +330,000 which is less than half the expected +700,000 result. Analysts may be revising their non-farm payroll forecasts now. And the ADP result has taken the wind out of Wall Street today.
That was a disappointing indicator. But not disappointing was the ISM Services PMI, which roared higher to an all-time high, driven by expanding activity, tight hiring conditions, and prices rising by almost their fastest on record. (The alternative Markit Services PMI remains high too, but not as strong as the ISM report.) However, one aspect that stands out in these services PMIs is that supply shortages are getting worse, not easing.
In China and in something of a surprise, the private Caixin Services PMI reported a strong bounce for July, better than the official version.
But in southern China, limits are being placed on the industrial use of electricity as supply shortages broaden during their summer peak.
EU retail sales were up strongly in June, a more impressive result than it may seem because it is a big gain over the sharply rebounded June 2020 result. It is the type of gain that is unusual in the EU. However, it was Germany that provided most of this impetus - generally the rest turned in pretty lackluster results.
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It might be interesting to keep an eye out for an interest rate decision later this morning in Brazil. A jump of a full +100 bps is anticipated there as inflation spirals higher.
After rising for twelve consecutive months, the global food price index fell in June, with a significant retreat in the vegetable oils category. Meat and dairy prices maintained their high levels. Overall prices are +34% higher than a year ago. Meat is +16% higher and dairy prices are +22% higher.
But the world is facing a wheat shortage. Lower output in Russia, drought in North America, floods in China, and now disappointing EU forecasts leave only Australia in a good position. Prices are rising fast but are not at the extreme levels we had in 2008.
Falling fast is the iron ore price. The downward momentum is gathering steam with prices down almost -20% in just over two weeks. The Chinese outbreak of the COVID delta variant is worrying traders because of its potential to stall the recovery in a key engine room of the global economy.
There were 233 new community cases in NSW yesterday with another 130 not assigned to known clusters, so still going backwards there. However Victoria is reporting zero new cases. Queensland is reporting 19 new cases so starting to grow there. Brisbane's snap lockdown has been extended.
On Wall Street, the S&P500 is lower today by -0.4% in timid early trading. Overnight, European markets were up +0.5% on average, led by Frankfurt which was up +0.9%, and lagged by London which was up less than +0.3%. Yesterday the very large Tokyo market fell -0.2%, Both Hong Kong and Shanghai each rose +0.9%. The ASX200 rose +0.4% while the NZX50 Capital Index rose by +0.8%.
The UST 10yr yield starts today at 1.18% and little-changed overnight. The US 2-10 rate curve is to now at just on +100 bps and unchanged. but their 1-5 curve is steeper at +61 bps, while their 3m-10 year curve is little-changed at +114 bps. The Australian Govt ten year benchmark rate starts today at 1.14% and down -2 bps. The China Govt ten year bond is at 2.86% and up +1 bp. The New Zealand Govt ten year is now at 1.62% and up a sharp +8 bps.
The price of gold is now just on US$1814/oz and up by +US$4 from where we were yesterday.
Oil prices have taken another hit overnight and are down by -US$2 today so in the US they are now just over US$68/bbl, while the international Brent price is just over US$70.50/bbl.
The Kiwi dollar opens today just on 70.5 USc and up since this time yesterday from strong labour market data. Against the Australian dollar we are up +70 bps at 95.5 AUc. Against the euro we are up at 59.6 euro cents. That means our TWI-5 starts today at 73.4 and a five week high.
The bitcoin price is now at US$39,639 and up +3.6% from this time yesterday. Volatility in the past 24 hours has been moderate at +/- 2.7%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».