Here's our summary of key events overnight that affect New Zealand, with news Wall Street is in another sharp decline today.
Firstly, American job growth slowed in November with their non-farm payrolls rising just +155,000 and well below the expected +198,000 gain. It was also well below the +237,000 gain in October. This represents quite a quick slowing in the pace of their labour market. Their unemployment rate was unchanged as was their low participation rate, but their underemployment rate rose. Monthly wages also increased less than forecast, but are still up +3.1% pa so it is likely the US Fed rate hike due on December 20 will still go ahead. From there however, things now look less certain and they may be nearing their 'neutral rate'.
Wall Street isn't taking kindly to the data or its indications of the economic track, and ended up down -2.3% for the day, down -3.8% for the week. And that means equities are now in loss territory over all of 2018, down -2.3%.
US wholesale trade sales fell in October from the prior month while inventories rose, more signs of an overall slowing economy. And part of that is the depressing effect the trade wars are having.
But so far there is not a lot of sign these economic impacts are flowing through to consumer sentiment which seems to be holding at a good level. But the 'expectations' of future gains are slipping.
Update: US consumer credit data has just been released for October and that shows an unexpectedly large jump, almost twice what was expected. Much of the increase was due a +10.8% jump in revolving credit, a category that includes credit cards. Non-revolving credit - which includes car loans and student debt - rose +6.7%.
Meanwhile in Canada, they also released jobs data overnight for November and it was impressively positive. Employment rose much more than expected (+94,100) and almost all of that was for full-time work (+89,900). Their jobless rate fell, and for them, to an all-time low. If there is an issue here it is their slow rise in wages, up just +1.5% year-on-year and well below the October gain of +1.9%, itself not impressive. Canada also released its merchandise trade data overnight and that showed a widening deficit.
In China, there is growing anger over the arrest of the Huawei CFO and presumption it is part of the US hard-ball negotiation style. But the event has also exposed Chinese hypocrisy on 'human rights' and arbitrary detention. They also can't really complain as the executive concerned is being detained because of her non-Huawei investments in companies set up deliberately to buy US goods for on-sale to Iran in open flouting of US sanctions. The Americans were tipped off by banker HSBC. Whatever you think of those sanctions, her own choices to profit from the trade led to her arrest. It is little to do with Huawei, a lot to do with her thinking she is immune to consequences that apply to others.
And Kevin Rudd thinks China is about to try and outflank the US during this 90 day trade truce. He thinks China will announce it will aim for a tariff-free position and attempt then to join the CPTPP.
The UST 10yr yield is ending the week at 2.85% and a big drop of -16 bps for the week. Their 2-10 curve has risen overnight to just under +14 bps although recall it was at +20 bps this time last week. The Aussie Govt 10yr is at 2.45% (down -2 bps overnight and down -14 bps over the week), the China Govt 10yr is at 3.31% and unchanged overnight but down -9 bps for the week, while the NZ Govt 10 yr is at 2.48%, unchanged overnight but down another -11 bps over the week. New Zealand swap rates flattened this week with the two year down -2 bps and the ten year down -10 bps.
The VIX has risen to over 22 this week. That is still well above its average over the past year of 15. The Fear & Greed index has gotten more extreme on the fear side in the past few days.
Gold is finally benefiting from all this uncertainty and risk retreat. It is up +US$27 this week at US$1,247/oz and that is its highest since July 2018.
US oil prices are up today on news OPEC and Russia actually did strike a deal to cut output. US prices rose about +US$1.50/bbl to just under US$53/bbl. The Brent benchmark is now just over US$62/bbl. The US rig count is still holding at its 200 week high despite these very low prices and this production has made the US a net exporter of crude oil.
The Kiwi dollar is ending the week firmer at 68.5 USc, which is about where it was this time last week. On the cross rates we are a whole +1c firmer at 95.1 AUc after the unexpectedly poor Aussie GDP Q3 result, and marginally softer at 60.1 euro cents. That puts the TWI-5 at up to 73.1.
Bitcoin is now at US$3,256 which is a -18.4% loss for the week. In fact, this price has halved in the past 30 days. 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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17 Comments
Roll on innovation and small oil. "The US exported more petroleum than it imported for the first time in decades last week, marking an astonishing if momentary reversal from its longtime status as the world’s largest oil importer. Net exports of crude oil and petroleum products from the country totalled 211,000 barrels per day in the week ended November 30, the Energy Information Administration said in a report on Thursday. As recently as 2005, US net oil imports averaged more than 12.5m barrels per day." ft.com
The USA is not a net exporter of 'oil', they are a net exporter of 'refined products'. David is wrong and the information he quotes is misleading. You can quite easily havea look at EIA data, they're still importing 4 million barrels of oil per day. What you're referring to is 'total products' which is obviously different. Below explains how this number comes about.
The US refines a lot of imported oil — for export. There is refinery gain in this. This means a barrel comes in. It is refined to various constituent parts like gasoline, diesel, kerosene, etc. The VOLUME of these parts are liquids of less density and this means their volume is greater. So a barrel of crude will yield a sum total of more than 1 barrel of liquids of lower density. Since these products are exported, the barrel count is in favor of exports vs the barrel count imported.
David, your financial reporting is second to none but your grasp on what's happening in the oil is misleading. At least change oil to 'petroleum products' if you value factual reporting.
Not so sure about this logic - you would have to add something by way of a hydro cracker - ie more H2 to make more product before you ended up with a greater volume.
Try pouring a litre of say kero into a litre of engine oil and I think you'll find you get the same old two litres one would expect.
Dallas, about the same population size as Auckland.
"Dallas is one of the markets where affordability has gotten furthest out of whack with historic norms. The metro area largely avoided the last housing boom....since they were less inflated, home values in the Dallas area fell less than 10% during the last housing crash, compared with 26% for the U.S. as a whole.
But prices have shot up in the past five years, to $235,500 for the median home, more than 50% above their 2007 peak and in line with increases in places like San Francisco and Seattle...the average household in Dallas finances 83% of its home purchase, slightly higher than the national average of 81%.. In the high-end subdivisions in the suburb of Frisco, builders are cutting prices on new homes...On one street alone, $4 million of new homes sat empty on a visit earlier this month. Some home builders are so desperate to attract interest they are offering agents the chance to win Louis Vuitton handbags or Super Bowl tickets with round-trip airfare, if their clients buy a home. Yet fresh-baked cookies sit uneaten at sparsely attended open houses.."
And those median homes at $235,000 aren't ex-housing commission do-ups from the 1950's. They are new builds.
Somethings going to give, and if Dallas (and yes, everywhere is different) is now contemplating another downturn, 'up' for Auckland do-ups seems improbable....
TRAFFIC ALERT Expect heavy traffic in downtown Seattle tonight as dozens of caroling teams sing near Westlake Center
https://www.seattletimes.com/business/real-estate/seattle-area-home-pri…
Ugly Week for Stocks: Bad Sign that Even the WSJ’s Mega-Effort to Reflate them Fizzled. FANGMAN down 10.4% for the week, down $1.12 trillion from peak. Apple plunges.
https://wolfstreet.com/2018/12/07/ugly-week-for-stocks-fangman-even-wsj…
David Chaston
May I congratulate you on a nice concise informative piece of writing
I’m unsure what peak oil ( improved technology allowing more extraction not more oil at all ) or Dallas (20% cheaper to live in than Auckers ) omments had to do with it but I appreciate your wordsmith skills & wished you to know.
Happy Christmas from Bermuda
Lets get heads around this thing we only can see from the outside.
Background start here
https://en.trend.az/iran/business/2783159.html
Than a brief listen
https://sputniknews.com/radio_double_down/201811131069763807-brent-crud…
Tillerson, you know this Tillerson, that guy who isn't so smart, in fact could be called dumb.
"The news that President-elect Donald Trump is expected to nominate Rex Tillerson, the chairman and chief executive of ExxonMobil, as his Secretary of State is astonishing on many levels. As an exercise of public diplomacy, it will certainly confirm the assumption of many people around the world that American power is best understood as a raw, neocolonial exercise in securing resources.
https://www.newyorker.com/news/news-desk/rex-tillerson-from-a-corporate…
"Tillerson figures prominently in “Private Empire: ExxonMobil and American Power,” a book I wrote about the corporation that came out in 2012. He declined my requests to interview him for that project, but I turned up at several public appearances he made and asked him a few questions from the reporters’ gallery. I also studied his public remarks, reviewed accounts of his activities reported in State Department cables obtained by Freedom of Information Act requests or released by WikiLeaks, and conducted interviews with other ExxonMobil executives, retirees, friends, competitors, civil-society activists and business partners from Asia to Africa to the Middle East."
https://www.washingtonpost.com/news/on-leadership/wp/2018/03/14/rex-til…
Chris Cook
"Confirms my view that the White House is unaware of what Tillerson & Cohn actually put in place"
https://seekingalpha.com/article/4121099-energy-dominance-america-first
"Together, LIBOR, TED, repo, etc., all propose greater illiquidity as well as, obviously, liquidity risks. Sounds about right especially this week. Just like July 2006 to September 2007, a Fed pause isn’t going to help.
If this reversal of mainstream fortunes seems awfully quick, it hasn’t been. Most people have been unaware of all these things going on for months already. It’s only UST curve inversion that has anyone paying attention. We’ve now got 2s5s at -2 bps (inverted), also pretty much aligned with the spreading chaos indicated across money markets."
https://www.alhambrapartners.com/2018/12/07/more-extraordinary-still/
And carefully tucked under the fold, the news that the KiwiBuild CEO has flown the coop. Good choice - he's seen the writing on the wall, and it's possibly a bit different to the happy meme he was sold initially.
Bait and Switch is the correct term, I believe.....
Bitcoin to test the $3,000 level soon?
Hit $3,297 a few minutes ago, and looking heavy.
Given the state of other asset markets, 'selling what you have when you can' might become the theme for the rest of the year. Then we have 2019....and that's looking worrying....
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