US job growth underwhelms; US slaps Canada; US truck orders zoom; Canada jobs improve; China risks rise, QE jumps; Venezuela infects bond yields; UST 10yr yield at 2.33%; oil up and gold down; NZ$1 = 69.1 US¢, TWI-5 = 72.5

Here's my summary of the key events over the weekend that affect New Zealand with news there are emerging threats to junk bond yields.

First however, in the US the non-farm payroll report was better than for September, but markets were underwhelmed. 261,000 new jobs were added in October, less than the 313,000 expected, and the unemployment rate edged down to just 4.1%, in fact a 17 year low. Wages are up +2.4% but those gains are slowing. In fact, that was the slowest gain in more than 18 months.

And Trump has confirmed that Jerome ("Jay") Powell will replace Janet Yellen at the end of her term at the US Fed chair.

The US has leveled new duties on Canadian softwood lumber and is threatening Canadian milk imports. It's an NZ$8 bln annual trade. Canada said it will take the US to the WTO over the matter. Both countries are also trying to 'renegotiate' the NAFTA Agreement.

Orders for heavy-duty commercial trucks in North America soared in October, reaching the highest level in nearly three years. Trucking companies last month ordered 36,200 big rigs. That was up +60% from September, and a +160% gain from a year ago, when truck orders plummeted.

North of the border, Canada produced a bumper jobs report, and it is seeing wages growing more positively, up +2.4% year-on-year. The combined impact however was to draw more people back into their labour force and in fact their jobless rate rose marginally to 6.3%

In China, their financial system is getting significantly more vulnerable due to high leverage, according to central bank governor. Risks are growing he said, including some that are "hidden, complex, sudden, contagious and hazardous," even as he claimed the overall health of the financial system remains good. The government should also open up financial markets by relaxing capital controls and reducing restrictions on non-Chinese financial institutions that want to operate on the mainland, he said.

China added more than NZ$100 bln to the liquidity of its banking system in October, according to official data. That means it has now built up liquidity support to just a whisker shy of a massive NZ$1 tln - this is China's version of quantitative easing.

An interesting, and potentially worrying, situation is developing in Venezuela. They have signaled they need to 'restructure' their US$150 bln foreign debt. Investors until now had just assumed they would keep on making interest payments, partly because the country is being backed by Russia and China. But the US has it under embargo and the IMF is unhappy, so markets now are realising a 'restructure' is unlikely, especially as China and Russia will move to reinforce their priority. Default is looming. Junk bond yields are rising fast for the debt of other emerging economies. And that is threatening places like Turkey. The main investors likely to be hurt are large hedge funds who drank the Kook-aid. The losses could be steep for them. And their pain could be felt in corporate junk bond credit markets which have had a surprising rally recently. Something to watch closely. Graeme Hart will be.

In New York, the UST 10yr yield ended last week lower at 2.33%.

The price of crude oil is noticeably higher, up more than +US$1, now just under US$55.50 / barrel, while the Brent benchmark is just over US$62.

The price of gold is down to US$1,268 oz.

The Kiwi dollar is little changed today. We are now at just under 69.1 US¢. And on the cross rates we are at 90.2 AU¢, and against the euro at 59.5 euro cents. That puts the TWI-5 index just on 72.5.

If you want to catch up with all the 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 ».