Here's our summary of key events over the weekend that affect New Zealand, with news markets greeted good US jobs data with considerable scepticism.
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 average hourly pay rose +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). And it was hiring to deliver online parcels that underpinned the October level.
The higher than expected rise in wages brings forward the Fed's likely rate hikes and adds to their likely count. Consumer price rises are starting to flow into the economy. Wall Street fell -0.8% on the news while the UST10 year yield rose to back over 3.22%. The oil price fell. All that happened even though there seems to be some talk that a China-US trade deal is now possible - so clearly markets are sceptical.
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. The US goods and services annual trade deficit against all countries represents -2.9% of American GDP.
North of the border, Canada also reported better than expected jobs numbers. But they also 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%. Still, that is much higher than the American participation rate.
And in Vancouver, the slowing of their housing market is getting sharp. Sales volumes are down -35% year-on-year to October while listings are up +42%.
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. We should also note that the Shanghai stock exchange closed up an impressive +2.7% on Friday.
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 set 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 starting the week sharply higher at 3.22% and a +14 bps rise for the week. Their 2-10 curve is steeper at +31 bps. The Aussie Govt 10yr is at 2.70% (up +3 bps), the China Govt 10yr is at 3.55% and up +1 bp, while the NZ Govt 10 yr is at 2.62% and up +1 bp. 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.
Gold is down -US$4 overnight to US$1,232/oz. See this.
US oil prices fell today to just over US$63/bbl. The Brent benchmark is now under US$73/bbl also a pullback. Russia, Saudi Arabia and the United States all indicated they were pumping at record or near-record levels. 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 starting the week noticeably stronger at 66.6 USc, and recall it was just 65.1 USc a week ago. On the cross rates we are also firmer at 92.5 AUc, and much stronger at 58.5 euro cents. That puts the TWI-5 at back up to 71 and its highest in three months.
Bitcoin is now at US$6,426 which is exactly where it was a week ago. This rate is charted in the exchange rate set below.
This chart is animated here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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