Here's our summary of key events over the weekend that affect New Zealand, with news all eyes were on the American labour market - until Trump shifted them to the trade war rhetoric.
Firstly, the US payrolls data reported a gain of +201,000 jobs in August, right on expectations. Impressively, wage data showed a +2.9% year-on-year rise and that is an improvement that wasn't expected. It was the largest rise since 2009. But there are some other signs worth noting. Prior month gains were revised down by a sizable -50,000 jobs. Their participation rate slipped (when most thought it would be rising), and new manufacturing jobs actually fell in August when a big gain was expected.
Actually, that lower participation rate was significant. Because of it, the total civilian workforce in employment actually fell from 156.0 mln to 155.5 mln. The headline 'gain' of +201,000 jobs comes from 'establishment' data surveys. The measurement of labour force employment comes from a separate 'household' data survey. This surveying difference will come out in the wash over time, but it is not necessarily obvious which way yet.
However, on the headline data (and especially the wage gain item), expectations of another Fed rate hike rose. The US dollar rose. Benchmark bond rates rose.
In Canada, the headline jobs report was very negative, showing a loss of -52,000 jobs following two months of strong increases. But it might not be as bad as it looks - all the losses were of part-time position. Full time employment actually grew by +40,000 jobs. Still, the result was not expected, and they too saw a fall in their participation rate - even if it sits quite a lot higher than the US level. And like the US reports, there was a big difference with the 'establishment' data surveyed. Those have shown impressive jobs gains. Separately, a central bank official has said that Canada's economy can tolerate more interest rate hikes.
In Mexico, their August inflation rate edged up to +4.9% from +4.8% in July. It seems more official interest rate hikes are on the way there too.
In Europe, the final measure for their Q2 GDP growth was pegged back a little to +2.1%.
China released data on its foreign currency reserves, now more closely watched given the trade war they are in with the United States. Those reserves slipped a little more than expected, but are still comfortably above US$3.1 tln.
China also released data for its trade in August and its trade growth slowed down in August. Their export growth rate slowed to under +10%% in August from +12% in July, while import growth also moderated, to +20% from +27% a month earlier. Exports to the US grew +13% in August from a year earlier to over US$44 bln, a faster rise than in July. The August trade surplus with the US widened to +US$31 bln in August and up from +US$26 bln in August 2017. Basically it is only the US that can't seem to get its trade in balance with China. Almost everyone else can, including New Zealand.
In frustration, the US President threatened to impose new tariffs on US$267 bln more of Chinese exports to the US. It is being dubbed "Total Tariffs." Apparently, these are in addition to the $200 bln that the US is preparing but not yet imposed. So far only $50 bln of tariffs have actually been put in place. Although this latest threat may just be more bluster, it does seem as though chances of a negotiated resolution is fading. China may respond with matching 'export rebates'.
And there is more trouble for China. A number of countries are banning pork products from there as their swine fever infestation grows.
In Australia, their unique superannuation industry has been caught with a rort. Funds have been automatically classing customers as smokers, resulting in higher insurance premiums when they up-sell life insurance with superannuation membership. About 70% of all life insurance in Australia is sold this way.
The UST 10yr is higher at 2.94% following the US payroll data. Their 2-10 curve is little changed however at just under +24 bps. The Aussie Govt 10yr is at 2.57% (up +2 bps), the China Govt 10yr is at 3.65% and unchanged, while the NZ Govt 10 yr is at 2.55%, down -1 bp. New Zealand swap rates have edged lower with the 2 year now at 1.97%.
Gold is marginally weaker and is now just on US$1,196/oz in New York, down -US$2.
US oil prices are unchanged and now just under US$68/bbl. The Brent benchmark is now just under US$77/bbl.
The Kiwi dollar is starting the week -¾c lower than at this time last week at 65.4 USc, as the US dollar rises. On the cross rates we are at 92 AUc, and at 56.5 euro cents. That puts the TWI-5 at 69.4 and -60 bps lower over the week.
Bitcoin is now at US$6,381 and -9% lower for the week. And in Australia, ASIC says that in the next year it will be "monitoring threats of harm from emerging products" such as ICOs and cryptocurrencies. (See page 10.)
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8 Comments
Still think the US trade war with China is just a polite way of saying "Get out of the South China Sea". Classic bit of asymmetric warfare. Not sure what China can do about it. They will probably keep bluffing until their economy collapses, which I think is Trump's objective, on the basis that China needs America but America don't need China. Them sea lanes matter.
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