US slows its balance sheet shrinkage; Canada labour market eases; China battles deflationary forces; Russia battles inflation jump; Wall Street ends with big weekly gain; UST 10yr 3.94%; gold and oil up; NZ$1 = 60 USc; TWI-5 = 68.6

Here's our summary of key economic events overnight that affect New Zealand with news equity markets have ended the week positively, essentially holding on to all of the large 2024 gains through the recent 'summer holiday' volatility.

But first we should note that the US Fed is not shrinking its balance sheet as fast as it planned, with only a tiny -US$49 bln reduction in the past month. But that takes it back to the level it first rose to at the outset of the pandemic four years ago. From its peak in April 2022, it is down -US$1.8 tln or -20% however. Progress now is slowing however.

In Canada, their labour market is marking time. Employment fell by -2,800 in July to 20.5 mln, a surprise because analysts expected a +22,500 rise. Still, the number of unemployed fell by -8,600. They also had a -0.3 percentage-point drop in their labour force participation rate, and that takes it to a two-year low of 65%, the lowest since 1998 if you exclude the pandemic.

In China, their July vehicle sales fell to just under 2.5 mln units or -2.4% lower than in June but +4.1% higher than the same month a year ago. China is the world's largest vehicle market. But those sales figures include exports. Domestic sales fared far worse, falling -10.1% on the year to just under 1.8 million units for a steeper drop than the -7.4% decline recorded in June. Within this decline, NEVs accounted for 51.1% of passenger vehicles sold domestically as the segment crossed the 50% threshold for the first time. Carmakers won't worry, but the impact of very low resale values for NEVs, especially EVs, will bite this market at some point. (Countries like New Zealand that import EVs will be getting bargains.)

And still in China, their consumer inflation picked up from an ultra-low +0.2% in June to +0.5% in July. But food prices are still showing some deflationary effects. Although overall they are up a tiny +0.2% year-on-year, that is only because of a +20% rise in pork prices (from very low levels a year ago). Beef prices are down almost -13% in the year, lamb prices down more than -6%. Milk prices are down -1.9% on the same basis. If you take out the base effect from some key items like pork, the deflationary threat in China is still very much alive.

And Chinese producer prices are still deflating, down -0.8% in July from the same month a year ago. That is the same fall recorded in June.

In Russia, they are suffering the opposite through fast-rising inflation. In July it rose to 9.1% from 8.6% in June. Everything is rising faster there, especially food prices.

The UST 10yr yield is now at just on 3.94% and down -6 bps from yesterday. But that is up +17 bps from a week ago. The key 2-10 yield curve inversion is back out to -12 bps. Last week it was -9 bps. Their 1-5 curve is also more at -69 bps. And their 3 mth-10yr curve inversion is deeper at -143 bps. The Australian 10 year bond yield starts today at 4.06% and down -8 bps. The China 10 year bond rate is up +5 bps at 2.20%, a big move for them. The NZ Government 10 year bond rate is now just on 4.30% and down -2 bps. A week ago it was 4.26%

Wall Street is a little higher in Friday trade with the S&P500 up +0.5% from yesterday. And for the week that is a +3.8% net rise after all the volatility. (Looking longer, it is still up more than +12% from the start of the year.) Overnight European markets were all up about +0.3% too. Yesterday Tokyo rose +0.6% to end its week -0.6% lower. Hong Kong was up +1.2% on the day, up +2.5% for the week. Shanghai fell -0.3% yesterday in an afternoon selloff to be -0.9% lower for the week. Singapore rose +0.4% to be up +4.8% for the week. The ASX200 ended up 1.2% on Friday but down -2.1% for the week. And the NZX50 dipped -0.1% in Friday trade to be down a sharpish -1.7% for the week and the worst performance of the markets we follow..

Having gone through this last week it will be no surprise the Fear & Greed Index ends the week in the 'extreme fear' range.

The price of gold will start today up +US$4 from yesterday at US$2427/oz. And that is down just -US$5 froma week ago, so little net change overall.

Oil prices are marginally firmer at just under US$76/bbl in the US while the international Brent price is still just on US$79/bbl. A week ago these prices were US$73.50 and US$77 respectively.

The Kiwi dollar starts today little-changed from this time yesterday at just under 60 USc. A week ago it was at 59.6 USc, so a +40 bps rise since then. Against the Aussie we are up +20 bps from yesterday at 91.3 AUc. Against the euro we are down -10 bps at 54.9 euro cents. That all means our TWI-5 starts today at 68.6 and down -10 bps and up +20 bps from a week ago.

The bitcoin price starts today at US$60,195 and up +1.1% from where we left it yesterday. A week ago it was at US$63,058, so we are now down -4.5% since then. Volatility over the past 24 hours has been moderate at +/- 2.8%.

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