Here's our summary of key economic events over night that affect New Zealand, with news US Treasury yields have soared after the American labour market data updates out this morning.
Markets were anticipating a 'good' rise in non-farm payroll jobs of +185,000. But in fact this headline number was up +272,000. Even more impressive, hourly pay was up +5.3% from a year ago, weekly wages up +5.6% on the same basis.
But as regular readers know, we also look at the 'actual' data. There are now +917,000 more people on employer payrolls in May than in April. Overall there are now 161.3 mln people employed, although that is little-changed from April. So all the gain is a shift from the unincorporated self-employed on to employer payrolls. That may be why the pay gains are well above inflation.
Whatever way you slice it, it is a pretty good result, and markets are assuming the Fed will look at this and see pressures that are unlikely to quell inflation. The bond and FX markets reacted, but the equity market went quiet at unchanged levels (although they may argue this gain was already priced in - see below).
The March rise in American consumer debt levels was a pretty modest +$6.3 bln from the prior month and April was expected to catch-up with a +$11 bln but still-modest rise. But in the event, April consumer debt levels only rose +US$6.4 bln again, up just +1.5% from a year ago. There is no evidence that Americans are stretching themselves further with additional debt obligations.
Meanwhile American household net worth rose +3.3% or +US$5.1 tln to more than US$160 tln at the end of March 2024 from December 2023. The value of household equity holdings increased +$3.8 tln, while the value of real estate held by households rose by +US$900 bln. In complete contrast, American household liabilities were up only +US$100 bln to US$20.6 tln. There is a huge amount of overall resilience here. (We are not suggesting this is evenly spread, because clearly it isn't.)
Canada also released labour market data overnight. Their payrolls rose +27,000 and more than the +22,000 expected. But it was all part-time jobs that rose and by +62,000, and full-time jobs shrank -36,000. Their jobless rate rose to 6.2%. They are probably not happy with this outcome but at least their central bank has cut its official interest rate and that may bring some relief to employment in the rest of 2024.
Perhaps proving important context to the zooming container freight rates, exports from China soared +7.6% year-on-year in May and beating market expectations of a +6% rise. It was also up from a +1.5% rise in the previous month. It's the steepest rise in outbound shipments since January, fueled by a lower base from last year and sustained overseas demand. The big export destinations were ASEAN countries (+9.7%) and South America, especially Brazil (+26%). Elsewhere litlle-change or decreases. China's imports were weak however, virtually unchanged from a weak May a year ago.
China's foreign exchange reserves rose to US$3.23 tln in May from US$3.2 tln in April and above market forecasts. Their gold reserves were unchanged at 72.8 mln troy ounces, an unusual pause because they had risen for 18 consecutive months. But the rise in the gold price saw the value of their holdings rose to almost US$171 bln.
The Reserve Bank of India (RBI) held its policy rate unchanged at 6.5% and said inflation's pressure at 4.85% is not changing much. Their policy target is a very generous 2%-6%. But food prices are rising and were up +8.7% in April from a year ago. Given their heat and water stress levels, this is an economic consequence they will struggle with.
EU GDP rose its most in Q1-2024 since Q3-2022, but to be fair the annual growth from a year ago was only +0.5% for the EU, slightly less for the Euro Area (+0.4%).
In Russia, their central bank held its benchmark interest rate at 16% for the fourth consecutive time overnight. But they also said another hike is probably coming soon. Domestic war-related demand continues to outstrip the current capacity levels that the Russian economy can achieve, driving an imbalance between supply and demand, and lifting inflation risks. War distortions are building quite quickly there. If they remove their central bank chief because they don't like the message, the full slip into fantasy will be complete in Russia.
World food prices were up only marginally in May but are still running below the levels of each of the past three years. Global food security seems ok and at prices that are affordable (even if there are pockets of real stress and distress). Dairy prices are one area prices are rising and they have been for eight straight months. Meat prices are low and relatively stable.
The UST 10yr yield is now at 4.44% and up +16 bps from yesterday on the changing views following the US labour market reports. A week ago this rate was 4.50% so not quite back to that level yet. The key 2-10 yield curve inversion is unchanged at -44 bps. Their 1-5 curve is also little-changed at -73 bps. But their 3 mth-10yr curve inversion is much less at -93 bps. The Australian 10 year bond yield is still up at 4.33% and +7 bps higher than yesterday. The China 10 year bond rate is unchanged as usual at 2.32%. The NZ Government 10 year bond rate is now at 4.70% and unchanged from this time yesterday. But it is down -17 bps from a week ago.
Wall Street was down -0.1% in Friday trade on the S&P500. That makes it +0.9% higher than a week ago. European markets were all down -0.5% in overnight trade. Tokyo ended its Friday trade little-changed to be a mere -0.1% lower for the week. Hong Kong was down -0.6% yesterday but up +0.5% for the week. Although Shanghai finished unchanged yesterday it was down a sharpish -1.1% for the week. Singapore was unchanged. The ASX200 ended its Friday trade up +0.5% and up +2.1% for the week.The NZX50 ended down a full -1.0% on Friday, but was up a very creditable +2.6% for the week.
The Fear & Greed index has moved back into the "neutral" range as risk appetites improve But it is only a small improvement..
The price of gold will start today down a sharpish -US$76 from yesterday at US$2303/oz. And they are down -US$23 from a week ago at this time.
Oil prices have been somewhat volatile in the past 24 hours but are currently unchanged from this time yesterday up at just on US$75.50/bbl in the US while the international Brent price is up slightly at US$79.50/bbl. A week ago these prices were +$1.50 higher back then.
The Kiwi dollar starts today sharply lower from yesterday at just on 61.1 USc, and down nearly -1c as the USD suddenly strengthens again all-comers. A week ago this rate was 61.4 so a -¼c dip since then. Against the Aussie we are down slightly at 92.8 AUc. Against the euro we are almost -½c softer at 56.6 euro cents. That all means our TWI-5 starts today at just on 70.6, down -60 bps from yesterday but only down -10 bps from this time last week.
The bitcoin price starts today at US$69,031 and down -2.9% from this time yesterday. But it is up +2.7% from this time last week. Volatility over the past 24 hours has also been moderate at just on +/- 2.5%.
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