Here's our summary of key economic events overnight that affect New Zealand with news the US Fed will probably like the slowing US labour market.
Overnight the closely watched non-farm payrolls report for the US was released with a headline result of +206,000 larger employment in June, more than the +190,000 expected, and their unemployment rate changed little at 4.1%.
But this seasonally-adjusted data masks an actual rise of +547,000 people on company payrolls, although that was lower than the +844,000 increase the prior month. It also masks some downward revisions to the prior month.
There are now 161.8 mil people employed in June, including the unincorporated self employed, up +433,000 from May. So all the growth is in company payrolls and people are shifting out of self-employment to the more formal workforce.
And that is conformed by pay rates. Average hourly pay hit US$30 for the first time ever in June, up +4.0% from a year ago (and rising faster than inflation). Average weekly earnings (which accounts for working hours), rose +3.7% (also more than inflation which is running at 3.3%).
Basically, today's data changed their economic situation little but is has a sense of a slowing trend. US Treasury yields fell on the news, but Wall Street equities took it in its stride. The USD eased very slightly.
The Fed probably liked what it saw. New York Fed boss said the US economy was doing remarkably well and there had been significant progress towards inflation goals.
The next US Fed rate review is on August 1, 2024 NZT.
In Canada, their labour market report for June wasn't as positive. In fact their employed jobs fell a trivial -1,400 when a +22,500 rise was expected. They will be disappointed in that. This data probably advanced the case for a July rate cut when their central bank meets next on July 25, NZT. Their policy rate is currently 4.75%.
In Japan, their huge Government Pension Investment Fund, one of the world's biggest institutional investors, booked a +NZ$462 bln gain in the past year (more than New Zealand's entire economic activity as measured by GDP). They need it however; as wages rise there and their workforce ages further, the claims on that will rise. That fund alone has reserves of almost NZ$2.5 tln.
In Thailand, they have decided to close duty-free shopping for travelers arriving at international airports in an effort to lift spending by tourists inside the country proper. This week's cabinet decision affects eight airports, including Bangkok and Phuket.
In Europe, one major election (Britain) is resolved with the expected result. Today the French are voting. The outcome is far less certain there, but the earlier 'expected' far-right win is now no longer a sure thing.
And we should probably note than in the first week of July, we have seen a sharp rise in the copper price, reversing some of its wall from the peak at the end of May.
The UST 10yr yield is now at 4.28% and down -9 bps from yesterday and down -12 bps from a week ago. The key 2-10 yield curve inversion is little-changed at -33 bps. Their 1-5 curve is now at -78 bps. And their 3 mth-10yr curve inversion is more inverted at -110 bps. The Australian 10 year bond yield starts today at 4.41% and down -4 bps. The China 10 year bond rate is now at 2.27% and up +5 bps. The NZ Government 10 year bond rate is now at 4.77% and down -3 bps but up +4 bps from a week ago,
Wall Street is higher today with the S&P500 up +0.5%. It ends its interrupted week up almost +2%. Overnight European markets were mixed with Frankfurt up +0.1% but London down -0.5%. Paris is trading nervously but only down -0.3%. Yesterday Tokyo ended its Friday session little-changed to cap a +2.7% weekly rise. Hong Kong was down -1.3% on Friday but ended its week up +1.2%. But Shanghai ended down another -0.3% for a weekly slip of -0.5%. Singapore was down -0.3%. The ASX200 ended down a trivial -0.1% in its Friday trade to be up +0.7% for the week. But the NZX50 rose +0.4% yesterday to be also up +0.7% for the week.
The Fear & Greed index is little-changed, in the 'neutral' range.
The price of gold will start today up a sharp +US$33 from yesterday at US$2390/oz. A week ago this price was US$2326/oz
Oil prices are -50 USc softer from this time yesterday at just under US$83/bbl in the US while the international Brent price is down -US$1 at US$86.50/bbl. A week ago these prices were US$81 and US$85/bbl respectively.
The Kiwi dollar starts today +20 bps firmer from yesterday and back up at 61.4 USc. A week ago it was under 61 USc so nearly a +½c rise since. Against the Aussie we are still at 91 AUc. Against the euro we are also holding at 56.7 euro cents. That all means our TWI-5 starts today at 70.6 and uup +20 bps from yesterday but only up +10 bps in a week.
The bitcoin price starts today at US$56,536 and down another -3.0% from this time yesterday. A week ago this price was US$60,654, so it is down -6.8% from then. Volatility over the past 24 hours has been very high at just on +/- 4.7%.
Go the ABs !
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In Japan, their huge Government Pension Investment Fund, one of the world's biggest institutional investors, booked a +NZ$462 bln gain in the past year
What should the Bank of Japan do with its huge stock portfolio?
The central bank has called time on its ETF buying but has yet to say what it will do with its massive investments
Today the French are voting.
BREAKING: ECB threatens a bond market crash, if Le Pen or new gov't in France fails to do what the ECB wants. https://cnbc.com/2024/07/02/french-elections-ecbs-de-guindos-discusses-le-pens-fiscal-rules.html This is what they meant with the "Liz Truss moment": As I explain in detail here: https://open.substack.com/pub/rwerner/p/french-bond-rout-timely-reminder?r=3otl34&utm_campaign=post&utm_medium=web The British Prime Minister who dared to review the excessive powers of the Bank of England was brought down by a vicious bond market crisis created deliberately by the Bank of England. Looks like France is next. Don't let yourself get blackmailed by the ECB! All eurozone member countries now need to show solidarity with the embattled French and EXIT TOGETHER from the euro! Link
The Government’s 40 point plan for the third quarter of 2024 is here.
"In Europe, one major election (Britain) is resolved"
Tories are out after 14 years in power. How will this affect the UK economy? We will wait and see.
In NZ, Newshub is officially no more. If you go to their website, they will direct you to Stuff. Out of curiosity, I went to Stuff, and the headline news is "a kindergarten in Manawatu is forced to close". Not sure where I will go for news in future.
I never watched the TV news from Newshub, but always preferred their site to both the Herald and Stuff (there are nematodes residing in my dog's intestines with more to offer the world in terms of insight and utility than Stuff).
TBH I find this site, and then checking the headlines on Reddit gives a pretty good run down of news.
It took 165 years for the US to accumulate its first $1 trillion of debt. Now, the US amasses $1 trillion in debt every 100-150 days.
She'll be right they reckon,
That would also be a 16% increase from the current debt levels versus a projected 4% GDP growth. In other words, US federal debt is set to rise 4x faster than the economy. These numbers are staggering.
https://www.globalmarketsinvestor.xyz/p/how-dangerous-the-us-debt-crisis
Who owns the debt?
Depends on what debt you're looking at. Anyway,
- Public: 74% of the current federal debt, which includes:
- Foreign investors and foreign governments: 30%
- Individual investors and banks: 15%
- Intragovernmental debt: 26% of the current federal debt, which includes:
- Social Security and disability insurance accounts: 50%
- Medicare accounts: 3%
- Retirement funds for the military and civil servants: 36%
- Federal Reserve: 12% of the current federal debt, which is held as part of US mon pol
Foreign Ownership of US Treasuries
As of Jan 2023, foreign countries own $7.4 trillion in Treasurys - approx 24% of total US debt.
- China: 29% of all Treasurys issued to other countries approx USD 1.18 trillion
- Japan: $1.03 trillion
- United Kingdom: $655 billion+
- Other countries: including Brazil, Ireland, and others.
Small Nations with Surprising Amounts of US Debt
Some small nations own a significant amount of US debt, including:
- Cayman Islands: $284 billion in Treasury bonds, with a population of 70,000.
- Bermuda: $144 billion in Treasury bonds, with a population of 71,000.
- Bahamas: $123 billion in Treasury bonds, with a population of 393,000.
- Luxembourg: $114 billion in Treasury bonds, with a population of 590,000.
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