US jobs report mixed; US-China talks rocky; China gets rare current account deficit; Swiss not keen; Argentina hikes again; UST 10yr 2.95%; oil up, gold unchanged; NZ$1 = 70.2 USc; TWI-5 = 72.7

Here's our summary of key events overnight that affect New Zealand, with news China's current account has slipped into deficit.

But first, the American non-farm payrolls report was a very mixed set of data. The headline jobless rate dipped to a very low 3.9%. That is the lowest rate in more than 17 years. But the number of new jobs created came in far lower than expected at +164,000 (although higher than March's +135,000). What is troubling is that their participation rate was unchanged at a low 62.8%. Average weekly earnings rose +2.9%. The American tax cuts came into effect in January, but this data shows they have had little impact on hiring or wages and certainly are not pulling more people back into their workforce.

Wall Street is shrugging off the weakness and is up by nearly +1.5% at the weekly close. That was essentially driven by the out-sized earnings results from Apple. (This is contrast to Asian and Australian markets which ended yesterday in the red.)

In Beijing, senior American officials ("the Avengers") have wrapped up talks with Chinese officials over trade issues and seem to have made little progress. Each side is dug in, demanding large concessions from the other, according to unofficial leaks. In fact, these talks may set the situation back and show the lack of diplomatic nous in sending hardliners into negotiations. It is more about who can shout loudest, rather than compromises seeking any win/win.

This comes as China posted its first current account deficit in years. It was a quarterly deficit of -US$28.2 bln, the first since the second quarter of 2001. Some analysts are saying this signals a long-term shift where current account deficits become the norm for China.

Yesterday we reported that there is an upcoming referendum in Switzerland on changing the way Swiss banks operate. Today, a poll shows that the idea has gained little support so far among Swiss voters.

Argentina surprised markets again with another sharp rise in their official interest rates. This time they hiked them by 6.25% to 40%. That is the third rise in a week taking the adjustment up +1275 bps from 27.25%. Inflation is high at +25% pa, but their currency was being hammered, exacerbating their inflation. This latest move returned some confidence to the struggling peso. And it was accompanied by some serious fiscal restraint, the first sign runaway government spending is being capped.

The UST 10yr yield is now at 2.95% and up +bp overnight (although the same as it was this time last week). The Chinese 10yr is up to 3.66% (+2 bps) while the New Zealand equivalent is at 2.91% (unchanged).

The VIX is basically unchanged from this time last week with the index is now just under 15, and still elevated. The average index level over the past year is 12. The Fear & Greed index is also unchanged and near neutral but just on the "fear" side.

Gold markets are now closed at US$1,314/oz in New York. That is unchanged since this time yesterday. Updated data from the World Gold Council shows weak demand in the first quarter of 2018 with demand weak across the board and supply slipping but not as fast. In fact, in the year to March, supply exceeded demand by the largest amount in 15 years. The overhang is killing any upside; all risks are to the downside.

Oil prices have jumped more than +US$1.50 in the US to just over US$69.50 and the Brent benchmark is now just under US$75/bbl. Recent rising prices has seen a jump in the number of oil rigs in operation, especially in the US.

The Kiwi dollar is ending the week down at 70.2 USc and another retreat over the week; it was 70.9 at this time last week, so another fall of more than -½c. On the cross rates we are at 93.1 AUc and 58.7 euro cents. That puts the TWI-5 at 72.7.

Bitcoin is however at US$9,625 and that is a net gain of +7.1% over the week.

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