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Fed sees healthy US economy; ADP payroll data disappoints; US trade deficit widens; CDS spreads narrow; UST 10yr 2.60%; NZ$1 = US$0.841, TWI = 78.6

Fed sees healthy US economy; ADP payroll data disappoints; US trade deficit widens; CDS spreads narrow; UST 10yr 2.60%; NZ$1 = US$0.841, TWI = 78.6
5th Jun 14, 7:17am by David Chaston

Here's my summary of the key news overnight in 90 seconds at 9 am, including news mostly from the US and it's mostly good.

The influential Federal Reserve Beige Book survey is out this morning and it paints a healthy picture. They say the American economy expanded at a modest to moderate pace in May as car sales led household spending, and their labour market improved. Basically, they have stopped saying the 'weather' is inhibiting expansion.

But the level of the labour market improvement may not have been as high as some expected. This weekend the key NFP reports are released and today the pre-cursor ADP payroll report was out and that showed employment increased by 'only;' 179,000, well down on the 215,000 expansion in April.

Meanwhile labour costs are increasing quite quickly now in the US.

And their US trade deficit increased in April from March and back to the level it was in April 2012. Basically it signals that Americans are buying more stuff from the rest of the world. Their exports grew 3% but their imports grew 5%.

Markets have taken this set of data today as positive. Equities are hitting new records on Wall Street, UST 10 yr yields are up to 2.60% today, the oil price is now down slightly  - despite a mid session flirt with $104/barrel - and the gold price is unchanged.

Credit default swap spreads are at new six year lows in the US and Europe and those for Australasian investment grade paper are their lowest in four years, and a third of what they were in October 2011. Narrowing spreads mean cheaper money.

On the exchange rate, we start today noticeably lower again. The NZ dollar is currently at 84.1 USc, at 90.8 AUc and that is the first time it has been below 91 AUc in six months - and the TWI is now at 78.6.

If you want to catch up with all the changes from Friday, we have an update here.

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

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11 Comments

by  King of the whiners  |  5th Jun 14, 9:50am 1401918643

Looks like the myth of Saudi America is starting to run smack bang into cold reality - the IEA has issued a new report on energy production and they are no longer singing the tune they were a few years ago:

''But the IEA says U.S. production will start to lose steam around 2020, and that would put more bargaining power back in the hands of OPEC countries, such as Saudi Arabia.

This is quite interesting, given that in 2012, the IEA forecast that the U.S. would overtake Saudia Arabia in oil production by 2020, and would be a net oil exporter by 2030. The International Energy Agency (I.E.A.) is a watchdog organization considered the world’s leading energy analyzing institution. This new stance coincides with a similar about-face from the U.S. government’s EIA (Energy Information Administration), which suddenly downgraded its assessment of the Montery Shale “tight oil” fields by 96%.''

http://www.resilience.org/stories/2014-06-04/new-energy-report-from-i-e…

This isn't even the half of it, but as regular readers will know, some of us have been saying this for rather a long time......

 

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by  PeakEverything  |  5th Jun 14, 10:32am 1401921173

Hold on there King, I think I will wait and see what profile copy and pastes in reply before I get to worried.

 

I love how David always has good news stats from the recovering US economy almost daily.  The only thing missing is a sustained economic recovery of course.

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by  Plutocracy  |  5th Jun 14, 1:26pm 1401931604

Hasn't the 'US recovery' been just about to start everyday for last 5 years!? You can lead a horse to water...



Profile will probably reassure us that 'reserves' are now sky-high (of course missing the point that 'rate of production' is the key metric) due to the IEA recently adding the hydrocarbons on Titan to the list of proved reserves.

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by  PeakEverything  |  5th Jun 14, 10:37am 1401921433

I was thinking it would be a good idea for one Friday a month we all have to argue the opposite of our current thinking.  It might help both sides get a better understanding of the complex issues at play.  Heck we might learn something for once.  

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by  Andrewj  |  5th Jun 14, 11:12am 1401923570

Ok im in. I think we have a few hundred years of compounding growth left. If China has seen compounding growth at over %8 a year since the mid 70's why the hell should we not expect the same.

 I see no reason we should gpo the way of the Ottoman Empire

 

18th Century: A Nation in Decline

During the last few years of the 17th century, military defeat became endemic for the Ottoman Empire. In 1699 Peace of Karlowitz handed the provinces of Hungary and Transylvania over to Austria. This left only Macedonia and the, already revolting, Balkans in the hands of the Ottomans in Europe. The rest of the century would be dominated by war. Both Russian and Austria attempted to push their way into Ottoman dominated lands. Venice occasionally came into conflict also. They already ragged empire was being run every which way.

Even as the military was being stretched to the limits, internally the Ottoman Empire was no better. Failure to modernize held back improvements and progress and increased unemployment andunrest. During the late 17th and early 18th century, the Ottoman Empire had actually seen a short period of economic prosperity. This resulted in a huge population growth and thus endemicunemployment and famine. The resources of the empire simply could not support the new needs of the empire.

Ottoman trade declined as European routes increasingly bypassed the Middle East. They could not compete industrially as they had not completed mechanization, their economic system was still inguild form and European goods cost less. The European mercantilist approach of buying unfinished goods from the Ottoman Empire and selling finished goods that were cheaper even when shipped across the Mediterranean effectively destroyed any growth in the economy.

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by  Gummy Bear Hero  |  5th Jun 14, 2:54pm 1401936853

John Banks has been found guilty of electioneering fraud ... convicted ... wham bam , guilty ..

 

... the judge says he believes Kim & Mona Dotcom to be credible witnesses , and that Banksy did knowingly accept donations from them ...

 

Question : Is he now chucked out of parliament , and if so , is there a bi-election in Epsom before the next general election ?

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by  Gummy Bear Hero  |  5th Jun 14, 3:02pm 1401937344

... can't recall the last time an MP was actually convicted of summit ..... More than a few deserve to be ... but being self-serving , lazy , stoopid , and greedy doesn't get them convicted these days , more the pity ...

 

At least the system doesn't allow ACT to slide their new man into Banksy's chair without throwing it back to the electorate first ...

 

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by  Gummy Bear Hero  |  5th Jun 14, 3:30pm 1401939046

JK must've anticipated this when he set out the election date !

 

... until then , he'll have to go cap in hand to the Maori Party everytime he wants some legislation passed in the house ...

 

You're so right , this is bloody big news !

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by  Gummy Bear Hero  |  5th Jun 14, 3:42pm 1401939736

.. as you say , he can limp along as an MP until the actual sentencing ... and then , if he gets anything less than a 2 year prison sentence , he's still able to cling to his seat ...

 

Don't think his vote counts in the house , but  ..

 

JK will need the cousies to help him out ...

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by  PeakEverything  |  5th Jun 14, 3:28pm 1401938881

Old Banksie deciding to stay on....

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