Here's our summary of key events overnight that affect New Zealand, with news American rate hikes seem even more certain now.
Firstly, American employers added +250,000 jobs in October and above expectations, although that did not reduce its already low unemployment rate of 3.7%. Their key participation rate moved little and sits at just 62.9%. However for skilled hiring, the signs of a strengthening labour market delivered workers pay raises of +3.1%, the best in nearly a decade. Taking some gloss off the jobs result however was that September data was revised down by -16,000 to a low +118,000 in the month. Between September and October, the average rise is +184,000 and a quite ordinary result, about the same as the average in 2017 (+182,000).
The higher than expected rise in wages brings forward the Fed's likely rate hikes and adds to their likely count. Wall Street fell -0.8% on the news while the UST10 year yield rose to back over 3.20%. The oil price fell.
The September American trade deficit has come in at -US$54.0 bln of which the Goods deficit was -US$77.2 bln and the Services surplus was +US$23.2 bln. That puts the overall annual deficit at -US$593 bln. They recorded their goods deficit with China at -US$37.4 bln and topping -US$400 bln for the year. Given the US economy's size, that represents less than -2%. The US goods and services annual trade deficit against all countries represents -2.9% of GDP. This tiny portion (and it excludes the investment surplus the US runs) has been transformed into a huge partisan issue for the economically illiterate.
North of the border, Canada also reported better than expected jobs numbers. But they came with a sting. In the 12 months to October, the number of employed people grew by +206,000 or +1.1%, with the bulk of the gains in full-time work (+173,000). Over the same period, total hours worked rose by +0.7%. But the October data showed a lower participation rate - fewer people are looking for work - down to 65.2%. That is much higher than the American participation rate however.
China has announced new job creation measures. Given the stresses their economy is facing, the announcement involved humourous language gymnastics to underplay the real reasons why such a new initiative is required.
In Europe, the European Banking Authority has published results of a stress test it ran on major lenders from the EU and Norway, showing that a clutch of British banks and two lenders from Italy fared worst.
In Australia with their painful electricity price crisis, the installation of roof-top solar both residential and commercial has been supercharged and is running at all-time record levels. One consequence they will face however is that it will make their power distribution infrastructure uneconomic soon without huge reforms. Basically those on solar won't want to pay for that infrastructure, even if they want it there as a backup for when their micro-local systems fail or can't deliver what they need.
The UST 10yr yield is ending the week sharply higher at 3.21% and a +13 bps riise for the week. Most of that has come today with the release of the strong US jobs data. Their 2-10 curve is marginally steeper at +30 bps. The Aussie Govt 10yr is at 2.70% (up +3 bps overnight and up +10 bps over the week), the China Govt 10yr is at 3.55% and up +1 bp overnight and unchanged for the week, while the NZ Govt 10 yr is at 2.62% and up +1 bp overnight and up +5 bps over the week. New Zealand swap rates rose about +5 bps across all durations for the week. Our 2-10 swap curve returned to +82 bps, the general level it has been at since July.
The VIX has slipped to 21 this week and down from 26 last week. But it is way above its average over the past year of 12. And the Fear & Greed index has remained at the extreme end of the 'fear' side. In fact, it will be hard for it to get even more extreme.
Gold is down -US$4 overnight to US$1,232/oz. See this.
US oil prices fell today to just over US$63/bbl. That is a -US$0.50/bbl overnight change and a -$US4.50/bbl weekly change. The Brent benchmark is now under US$73/bbl also a pullback from this time last week. The US rig count is unchanged this week. Based on these lower prices, China has cut petrol prices, their largest reduction since 2014. This is also in the shadow of strong profits at Chinese oil companies. The US's Iran oil sanctions are about to start, and they have issued waivers to eight countries to allow them more time to shift purchases. Japan and Korea are in the confidential list, and China may be as well.
The Kiwi dollar is ending the week noticeably stronger at 66.4 USc, and up more than +1c in the past seven days. On the cross rates we are also firmer at 92.4 AUc, and much stronger at 58.3 euro cents. That puts the TWI-5 at back up to 70.8 ending the week near its highest in three months
Bitcoin is now at US$6,369 and little changed over the past week, recording a tiny -1% retreat. This rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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