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US jobs growth low; US trade deficit high; China caps bond trader pay; China FX reserves grow; surprise Aussie trade deficit; UST 10yr yield 2.48%; oil down and gold up; NZ$1 = 71.7 USc; TWI-5 = 73.9

US jobs growth low; US trade deficit high; China caps bond trader pay; China FX reserves grow; surprise Aussie trade deficit; UST 10yr yield 2.48%; oil down and gold up; NZ$1 = 71.7 USc; TWI-5 = 73.9

Here's our summary of key events overnight that affect New Zealand, with news China is still growing is foreign exchange reserves.

But first in the US, their jobs recovery lost some steam in December, with the level of new jobs created coming in at +148,000 and well below market expectations and the lowest December in the past four years.

The American trade deficit rose to -US$50.5 bln in November its highest level since January 2012. This is a deficit of both goods and services. Their goods trade deficit hit almost -US$71 bln in November (about half of it is with China), a -6% deterioration from the same month a year earlier, driven by a surge in imports as upbeat American households stepped up purchases of cellphones, household items and other products. Their services surplus of +US$20 bln was unchanged.

The jobs story was better north of the border. Canada’s unemployment rate dropped to a 42 year low in December of 5.7% and job creation exceeded expectations by a wide margin for a second straight month, adding +78,600 jobs in December.

In China, their securities regulator has placed a cap on the pay of bond traders. They now say annual salary and bonus from bond trading business for securities brokerage employees should not exceed 1 million yuan (NZ$215,000) and if there is anything above that it needs to be delayed and paid in two years.

China’s foreign-exchange reserves posted an 11th straight monthly increase of +US$20.7 bln to US$3.14 tln in December, slightly better than analysts estimates. That brought the full-year increase to +US$129 bln driven by tighter capital controls, a stronger yuan and economic growth that is holding firm.

China's leading home appliance maker Haier announced its global revenue increased 20 percent to US$37.2 billion in 2017. Profits were up +41%. They said the great result came from the company's rapid growth in the high-end home appliance market. Haier owns both GE Appliances, which it bought in 2017, and Auckland-based F&P Appliances which it bought in 2012.

Going the other way, HNA is going down the gurgler with more missed payments.

Australia's trade in goods and services slumped to a AU$628 mln deficit in November. Weaker commodity exports, especially for coal and grain, combined with increased imports for the worst result since October 2016. The result came in far below market expectations of a surplus of up to AU$800 mln, with even the most pessimistic forecasts of a flat balance proving to be out of reach.

The UST 10yr yield is unchanged at 2.48% today (+3 bps). In China, the equivalent 10yr sovereign bond is yielding 3.94% (unchanged) while the equivalent NZ 10yr sovereign bond is yielding 2.76% (-1 bp). We should also note that the US 2-10 yield curve is now just +50 bps and its lowest in more than a decade. Further, we should note that the difference between the North American investment grade credit default swap index and the Australasian one is now the skinniest at +1.45 bps than at any time since November 2007. On their own, the Australasian corporate CDS spreads are now at an historic low level and probably their lowest ever.

Oil prices are lower by -US$0.50 in the US today with the WTI benchmark now just under US$61.50 a barrel, while the Brent benchmark is just under US$67.50.

Gold is up another +US$3 to US$1,321/oz.

This morning the Kiwi dollar is firmer this morning at just on 71.7 USc, and on the cross rates it is at 91.2 AUc, and against the euro it's also higher at 59.5 euro cents. That puts the TWI-5 at 73.9 and its highest since when Winston Peters anointed Jacinda Ardern.

Bitcoin has sunk back a little from its Saturday boost and is now at US$15,964, a -2.9% retreat.

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

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11 Comments

But first in the US, their jobs recovery lost some steam in December, with the level of new jobs created coming in at +148,000 and well below market expectations and the lowest December in the past four years.

Disappointing, given the extraordinary sum of ledger liabilities extended by central banks to avert such an outcome

American central bankers and economists aren’t alone in their Phillips Curve nightmare. They are joined by others practically everywhere else around the world. In Europe, for example, the unemployment rate there continues to fall while inflation keeps on misbehaving in its meandering. Unlike the US, however, the Europeans don’t have the luxury of burying millions of prospective workers in other categories that aren’t counted for the unemployment rate. They have one for “inactive” persons, but the rules are different as to who can be forgotten there. Read more

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How True

The Fat-Cats and Financial Elites have grown corpulent on the truck loads of QE thrown at them expecting them to allow it to trickle down to employ the cannon-fodder down at the bottom

The Fat-Cats are hanging on to their freebies and the cannon-fodder down at the bottom are giving up waiting for the swamp to drain and a few trinkets to trickle down into their out-stretched hands

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Russia is going to change the way we think about food production. I don't see another option, change or get flattened. Global warming could give Russia an extra 400, 000 sq miles of farmland. When I worked in Alberta we got 2 meters of snow a year, look today, hardly covers the ground https://roadreports.ama.ab.ca/cameras/lloydminster

We need to take notice, even Kazakhstan, is becoming a big player.

http://www.world-grain.com/articles/news_home/World_Grain_News/2017/12/…

But its going to be Russia that we run smack into, it's making 50 million tonnes of animal feed a year, although dwarfed by Chinas 200 million tonnes. Also China the world biggest producer of HF corn syrup a diabetes nightmare.

https://farmlead.com/blog/insights/are-you-fing-kidding-me-russia-wheat…

Things change, just look at whats happened to Media in not much more than a decade, apple iphone launched in January 2007, it's only been ten years, then look at the change in transport
https://www.inmotionventures.com/movement-disrupted/

Many friends are holding off buying new cars with the expectation that their next car will be electric, thats me too.

My children live in a vastly changed world, in the Caribbean storms last year , what surprised me most was the 160,000 British on holiday there at the time, that one hell of a lot of flights and fuel. People are super mobile and more informed, for better and worse.

The problem in the world food industry is diabetes. I had an old friend in Pittsburg, he was a Surgeon in WWII, in Nth Africa with the Kiwis.
Before he died he told me that the western health care system will collapse under the weight of two diseases that we are not prepared for. They were depression and diabetes, he told me the cost of treating these ailments is something the system was never designed for, a bypass is cheaper in one day out in a week, and technology on your side.

In Mexico i was told the diabetes crisis is so out of control that in ten years time it will consume the entire present health care budget.
https://www.npr.org/sections/goatsandsoda/2017/04/05/522038318/how-diab…
China
https://qz.com/756585/diabetes-is-chinas-next-public-health-crises/
USA
https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sit…

Depression I hardly need to mention, it's gone mainstream. https://www.nbcnews.com/health/health-news/one-6-americans-take-antidep…

People are eating all the wrong food, the sugar lobby is worse than the Tobacco industry, soon the legalised cannabis industry will have it's own lobbyists. We need less refined carbs and less sugar, it's where we need to direct our food production, clean, healthy, low carb, zero sugar.
The corporates will fight but it's stacked against them.

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I couldn't agree more.
Over Christmas I was back in my home town which is heavily dependent on the dairy industry. Talking with family and friends who are dairy farmers, they had absolutely no idea about the industry that is developing in Russia and China.
Astonishingly they laughed off my warnings that these two countries will likely destroy dairy farming in New Zealand within a couple of decades.
For years now economists have been promoting diversification of our industries, but no one has bothered to listen. The wake up call will come thick and fast when our dairy outputs are dwarfed by the aforementioned countries at significantly lower marginal cost.

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How a tiny religious cult created the Food Pyramid that destroyed health globally.
https://www.youtube.com/watch?v=IlhL-WQ_X2Y&feature=youtu.be

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Investigation: how Kellogg’s and Sanitarium infiltrated the medical profession

https://www.michaelwest.com.au/investigation-kelloggs-sanitarium-infilt…

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"Sales of organic milk sour as plant-based varieties grow"
https://www.fooddive.com/news/sales-of-organic-milk-sour-as-plant-based…

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..interesting post as usual..thanks Andrewj

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To put Russia's new 400,000 sq miles of agricultural land into perspective - NZ's total agricultural area is about 45,000 sq miles.

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Australia's trade in goods and services slumped to a AU$628 mln deficit in November. Weaker commodity exports, especially for coal and grain, combined with increased imports for the worst result since October 2016.

Does antagonising China militarily lead to explicit citizen impositions?

Retired Major General Jim Molan is currently being promoted by the Murdoch media, the Australian Broadcasting Corporation (ABC) and other media outlets in order to emphasise the purported “need” for a massive increase in military spending and in the combat readiness of the armed forces and their supply chains.

In an opinion piece published by the Rupert Murdoch-owned Australian on January 3, the ex-general gave one over-riding justification for his call for a military build-up: the decline of “American power.” Molan catalogued what he labelled the deficiencies of the US Army, Navy and Air Force, and raised doubts as to the ability of the United States to win a war with North Korea or Iran, let alone with Russia or China.

Australian imperialism, he insisted, therefore had “strong grounds to question” its “expectation” that the US would, or could, come to its assistance in the event of an “extreme scenario”—that is, a major war. Australia, while “remaining the staunchest of US allies,” had to be able to “defend its national interests independently.”

Molan concluded: “The best allies are highly self-reliant and Australia is one of the best of America’s plethora of allies.” Read more

Including New Zealand?

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Champion of the suburban battlers in Australia and promoter of the well known approach to wealth generation in Australia and NZ hits a few speed bumps.

Mr Birch, who claims to have a net worth of $30 million and earn $500,000 a year after expenses from his portfolio of more than 200 properties, said he had “briefly” fallen behind on “one or two mortgages” because of increased lending restrictions imposed by the Australian Prudential Regulation Authority.

“Most importantly, they’re all paid up now and I’m coming to the end of this challenging year on top of things, still with an ever-growing net worth position,” he told The Australian Financial Review.

https://www.businessinsider.com.au/high-profile-property-investor-natha…

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