Here's my summary of the key events over the weekend that affect New Zealand, with news there is a higher likelihood American interest rates will rise, sooner.
The weekend release of their non-farms payroll data shows a rebound in US jobs growth, one that has cooled talk of a US economic slowdown, and raised talk of more Fed hikes in 2016. The level of jobs growth far outstripped market expectations, but wage growth there slipped slightly.
In the coming week when the ECB, the Bank of Canada and of course the RBNZ are all reviewing rates and assessing monetary policy settings (not to mention the US Fed, the Bank of England, the Swiss, Japanese and Norwegians all next week), the shaky start to the year shows that financial markets are losing faith in the "healing powers" of central banks according to the Bank for International Settlements.
Its a tough job, one that politicians don't seem to want to do, even if the central bankers can't quite meet their objectives.
Also facing a tough situation is China which acknowledges a battle ahead to keep its economy growing by at least 6.5% over the next five years while creating more jobs and restructuring inefficient industries. Its a point Premier Li made as he opened China's annual rubber-stamping parliament on Saturday. And they are going to try to do all this while capping energy consumption.
The BIS also has a view on the falling levels of China's foreign currency reserves. They say the persistent capital outflows from China since mid-2014 were probably driven more by local companies paying down their dollar-denominated debt in anticipation a stronger American currency, than investors ditching Chinese assets.
In Australia, ANZ is being taken to court over interest rate rigging charges, which they deny. The Australian regulator ASIC has commenced civil penalty proceedings against them for interest rate manipulation conduct. ANZ also face a class action over the issue. ANZ is not the only bank in the gun over these practices.
In New York the benchmark UST 10yr yield rose on the stronger US jobs report and will start the week at 1.88%.
The oil price rose as well and is at US$36/barrel in the US while Brent is at US$39/barrel.
The gold price went the other way, falling to US$1,259/oz. But it wasn't lower for all precious metals; platinum rose US$30/oz to US960, and the semi-precious metals rose too.
The NZ dollar will start the week noticeably stronger at 68.2 US¢, at 91.7 AU¢, and at 62 euro cents. The TWI-5 index is just on 72.5 and approaching its highest level for the year.
If you want to catch up with all the local changes on Friday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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Real Time Tax Collections Show That US Economy Is Contracting
The annual rate of change in withholding tax collections through Thursday, March 3, adjusted for wage and salary inflation, has turned negative. This shows that the US economy is now contracting. Other categories of the now complete collections data for February support this conclusion.
Lee Adler
Jim Rogers agrees the US is heading for recession
http://www.bloomberg.com/news/articles/2016-03-04/jim-rogers-there-s-a-…
The U.S. trade deficit widened more than expected in January as a strong dollar and weak global demand helped to push exports to a more than five-and-a-half-year low, suggesting trade will continue to weigh on economic growth in the first quarter.
The Commerce Department said on Friday the trade gap increased 2.2 percent to $45.7 billion. December's trade deficit was revised up to $44.7 billion from the previously reported $43.4 billion. Exports have declined for four straight months. Read more
'Lower oil prices as well as increased domestic energy production are also helping to curb the import bill.'
The US imports around 7 million barrels a day. Should the recent upward trend in international oil prices continue, the US energy import bill will increase and put more pressure on the trade deficit, and put more pressure of American consumers, who have had the bonanza of low fuel prices for nearly two years.
On the other hand, should the recent trend in oil prices reverse, we will see yet more fracking companies hit the wall and declare bankruptcy.
Meanwhile, the most populous state remains locked in severe drought as the normal rainy season comes to an end.
http://droughtmonitor.unl.edu/
The US is in a self-made consumption predicament, from which there is no escape (as is NZ).
I dont think the price going a bit either way matters. What does matter is the oil companies hedgeing seems to be running out, which it seems has kept them afloat for 2~3years. The Q is now the tide is actually going out who's naked, or not.
PS that looks a very solid gain,
www.oil-price.net.
I thought the main US export was USD? Meaning an increasing trade deficit means USD flowing out around the world creating a postive effect on world trade. The US don't need exports, they are highly self sufficient, they do need a trade deficit to put USD into their debtors hands.
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