OECD agrees tax reform; China services recover but floods pose new risks; US jobs growth better than it looks; RBA warns on cyber risk and housing risk; UST 10yr 1.61%, oil firm and gold stable; NZ$1 = 69.3 USc; TWI-5 = 73

Here's our summary of key economic events over the weekend that affect New Zealand with news China's services sector is stirring again despite some bumps in the road.

But first, the OECD has achieved its big reform of how and where multinational companies will be taxed; their BEPS reform. It is an agreement between 136 countries, and brings a reluctant US on board. The deal included a 15% minimum rate for corporations and the main parameters of how much profits of multinationals would be taxed in more countries: 25% of profits over a 10% margin. The bottom line is it should see countries collect around US$ 150 bln in new revenues annually. That will be massive for many countries, and will be felt in the largest corporate boardrooms. In the US, anti-tax Republicans are already lining up to try and neuter it.

And the UN-FAO released its September food price data showing another rise in overall prices globally. In nominal terms prices are approaching their highest ever levels achieved first in September 2011. In real terms, they are the highest since 1974 when droughts, an oil crisis and raging inflation all conspired to hit food at the same time.

China is still getting its share of adverse weather. 1.75 mln people have been affected by days of flooding and landslides in the normally arid northern Chinese province of Shanxi and these will have a national impact. 120,000 people have been evacuated and more than 17,000 buildings had collapsed. This in turn has affected important national supplies of coal and other minerals. About 60 coal mines, 372 non-coal mines and 14 chemical factories had been forced to close.

Staying in China, their services sector is expanding again, and at a moderate pace, and bouncing back from a weak August. At least, that is according to the private Caixin services PMI released over the weekend. Still, it can't hide the general softer trend evident in 2021. And their 'Golden Week' travel activity is down -40% from last year, suppressing service sector enthusiasm in October.

However Taiwanese exports impressed again, rising +29% above year-ago levels when a +25% gain was expected. These are now +37% higher than for September 2019. It is a standout export success story.

In the US, the expected +500,000 gain to their non-farm payrolls didn't eventuate for September. The headline number was only a +194,000 gain, the smallest rise in 2021 and a big miss.

However we may be the only one noting this, but we need to be extra careful of following the herd and using these seasonally adjusted numbers, when perhaps the pandemic twists are screwing around with seasonal adjustment mechanisms.

The actual data is far more positive and more consistent with the falling jobless claims data. There are now actually 147.7 mln people employed in the US as at the end of September, up +654,000 from the end of August, and up +5.7 mln from a year ago. That paints quite a different picture than the seasonally adjusted monthly +194,000 gain. The same distortion happened in August (actual = +492,000 whereas the s.a. result was +366,000. Actual employment is what is important. By this data, US hiring is actually rising, not slowing.

Either way, over the longer term there were 151 mln people employed in the US in February 2020 before the pandemic. They are still underwater with -3.3 mln net jobs lost as at September 2021. They still have a long way to go, even if recent gains are actually more than most media are reporting.

Markets sense the under-reporting and still think the Fed will push ahead with its tapering, undeterred.

In Canada they reported very positive employment data for September, with a gain of +157,000, and topping both estimates and for August. It is the inverse story in Canada when you look past seasonal adjustment however. They actually only added +8,300 jobs from August. But from the pre-pandemic benchmark of February 2020, their current employment levels are ahead by an impressive +376,100.

In Australia, their central bank issued its latest update to its Financial Stability Review. One aspect stands out: it thinks it is only a matter of time before a large bank is crippled by a cyber attack and "the defences of a significant financial institution will be breached". (p 39). They are also directly concerned about the "risk of excessive borrowing due to low interest rates and rising house prices".

Staying in Australia, the explosion of Delta cases in Victoria has risen to 1965 cases reported there yesterday in a relentless rise. There are now 17,199 active cases in the state. In NSW there were another 478 new community cases reported yesterday with another 361 not assigned to known clusters. They now have 6,926 active locally acquired cases which is lower, but they had 5 deaths yesterday, now featuring younger patients. Queensland is still reporting zero new cases. The ACT has 30 new cases, including babies. Overall in Australia, more than 61% of eligible Aussies are fully vaccinated, plus 20% have now had one shot so far.

The UST 10yr yield opens today at just over 1.61% and up another +1 bps from this time Saturday and a +13 bps rise in a week taking it to its highest in 20 weeks. The US 2-10 rate curve is steeper at +129 bps. Their 1-5 curve is also steeper at +95 bps, while their 3m-10 year curve is much steeper at +159 bps. The Australian Govt ten year benchmark rate is +10 bps firmer at 1.67%. The China Govt ten year bond up by +3 bps at 2.92%. And the New Zealand Govt ten year is also up sharply, by almost +6 bps at 2.06%.

The price of gold will start today little-changed again at US$1757/oz. Over the past week, the gold price has also changed very little.

And oil prices are up +US$1 to just over US$79/bbl in the US, while the international Brent price is unchanged at US$82/bbl.

The Kiwi dollar opens today unchanged at just on 69.3 USc. Against the Australian dollar we are also unchanged at 94.8 AUc. Against the euro we marginally softer at 59.9 euro cents. That means our TWI-5 starts today unchanged at just on 73, and right in the middle of the 72-74 range of the past eleven months. It is also unchanged over the past week.

The bitcoin price is higher again than this time Saturday, up +1.7% to be now at US$55,269. A week ago it was at US$47,496 so it has risen more than +16% in the past seven days. Volatility in the past 24 hours has been modest at just over +/-1.8%.

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