Here's my summary of the key news over the weekend in 90 seconds at 9 am, including news of fast falling spreads.
But first, the American jobs report came in largely as expected with the good growth most observers were predicting. 217,000 new jobs were added and more people entered the workforce. The unemployment rate was unchanged as was the participation rate. There was also no change in part time workers, but the number of job loses fell. So, although there was no real improvement in the quality of the labour market, the relatively high level of new jobs created in May was seen as a confirming positive that the US economy is in full recovery mode. Markets reacted accordingly. Employment levels are now higher than pre GFC.
In China, their exports gained steam in May thanks to firmer global demand, data showed yesterday, but an unexpected fall in imports signaled weaker domestic demand that could continue to weigh on their economy.
Their trade surplus exceeded US$36 bln in May.
The ECB announcements on Friday, while not involving direct QE - yet - will see a huge expansion of support for the bond markets. These have rallied strongly driving EU yields much lower. A surge in liquidity is expected to flow from the negative deposit interest rate that the ECB implemented. Anything that moves will get a bid.
At the end of last week in wholesale markets there was also a very dramatic fall in credit default swap spreads across the board. For the US and Europe they are now back down to levels last seen in 2007. For Australia's banks they are at 2010 levels. These narrowing of spreads means that our banks will be able to borrow new wholesale money off finer margins.
In a somewhat relate shift, stock market risk volatility also declined to levels last seen in 2007 pre GFC as well.
In New York, yields on benchmark UST 10 yr bonds rose to 2.60%, gold jumped $10 to $1,252/oz and oil price remained hovering in the US$102-103/bbl range. Stocks rose across the board with the S&P500 nearing the 2000 mark on its index.
For New Zealand, these changes mean the cost of wholesale money for our mortgage market will stay inexpensive, despite what the RBNZ will announce on Thursday.
On the exchange rate the NZD was largely unaffected. It starts the week at 85.0 USc, at 91.0 AUc and the TWI is at 79.2. Its a public holiday in Australia today.
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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