US job openings jump but SMEs less optimistic; US car loan delinquencies at record high; equity markets rise; China plays defense; AU business conditions flat; UST 10yr 2.69%; oil up and gold unchanged; NZ$1 = 67.4 USc; TWI-5 = 71.9

US job openings jump but SMEs less optimistic; US car loan delinquencies at record high; equity markets rise; China plays defense; AU business conditions flat; UST 10yr 2.69%; oil up and gold unchanged; NZ$1 = 67.4 USc; TWI-5 = 71.9

Here's our summary of key events overnight that affect New Zealand, with news markets have adopted risk-off sentiment today.

First, in the US job openings surged to a record high in December, led by vacancies in the construction, accommodation and food services sectors. Job openings in manufacturing however tumbled. And small businesses are sharply less optimistic, with a key survey at its lowest level in more than two years.

Americans are piling in to car loans - and serious debt trouble. Data from the NY Fed shows that while household debt is growing modestly, car loan debt is expanding fast and now exceeding US$1.5 tln in this type of debt. And so are car loan debt troubles. In fact although rising overall delinquency rates remain below 2010 peak levels, there were over 7 mln Americans with car loans that were 90 or more days delinquent at the end of 2018. That is a million more troubled borrowers than there had been at the end of 2010 when the overall delinquency rates were at their worst.

But that sort of data isn't worrying markets today. Signs that the US and China might reach an agreement in trade talks, and news of a tentative deal to avoid another US government shutdown have helped push world stock markets and bond yields broadly higher. Today the S&P500 is +1.2% higher and that follows more +1% gains on most EU markets (the exception was London). Yesterday Shanghai closed +0.7% higher, Tokyo a remarkable +2.6% higher, and the ASX was up +0.3% (the NZX50 was up +0.8%).

In China, they are responding to the sudden rise in iron ore prices. These have been driven higher by both a Brazil-induced supply shortage and rampant speculation. But China's steel mills probably cant absorb much of the rise. So officials there are starting mandatory shutdowns to quell demand pressures, using 'air quality' as the official reason.

In Australia, the influential NAB business survey has found that most businesses in NSW and Victoria reported flat conditions in January, while the retail sector is struggling. But conditions in smaller states including South Australia and Tasmania saw some improvement after a sharp drop in December.

And the Government in Australia has suffered a rare parliamentary defeat after opposition MPs backed the idea that doctors should decide where stressed refugees should be treated and processed.

The UST 10yr yield is higher at 2.69% and up another +3 bps today. Their 2-10 curve is just on +18 bps. The Australian Govt. 10yr yield is at 2.13% and up +4 bps. The China Govt. 10yr yield is unchanged at 3.09%, while the New Zealand Govt. 10yr yield is up +2 bps at 2.13%.

Gold is unchanged at US$1,309/oz.

US oil prices are up more than +US$1 today at just over US$53.50/bbl while the Brent benchmark is just on US$62.50/bbl.

The Kiwi dollar will start today unchanged at 67.4 USc. On the cross rates we are at 95 AUc which is marginally softer, as is the Kiwi against the euro at 59.5 euro cents. That dips the TWI-5 at 71.9, but still at a level it has been for over a week.

Bitcoin is virtually unchanged at US$3,580. 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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4 Comments

Yes. We pointed that out last week. It has all to do with the sudden imbalance in the iron ore trade, the cessation of shipments from Brazil. The Baltic Dry measures bulk carrier demand (actually a combo of three sub-indexes.) More iron ore volume is shipped than either coal or oil, so a sudden shift is very destabilising. (I used to work in a ship chartering business.)

We are going to see a lot more of that, as time goes on. Globally we have infrastructured wide but not deep - it's a system which lacks resilience. And entropy never sleeps. Just what happens when the US citizenry realise their decaying infrastructure will never 'be made great' again, is an interesting question.

It will also be interesting to see if the 'longer boats which are coming to win us' (Cat Stevens was on to it) and all the deeper-port infrastructure to support them, actually happen.

'Kate Barker, ex-member of the Bank of England Monetary Policy Committee: "I have come to wonder about my time at the Monetary Policy Committee setting interest rates. It's been a bit of a waste of time, really". University of Winchester, 11 February 2019.'

https://www.alhambrapartners.com/2019/02/12/zirp-at-20-the-zlb-is-a-trap...