Here's our summary of key economic events overnight that affect New Zealand with news investors and financial markets are calm in the face of some unexpected data.
First, the big news today is the undershoot in the US labour market. The US economy added just +12,000 jobs in October on a seasonally-adjusted basis, well below a slightly downwardly revised +223,000 in September and forecasts of +113,000. It is the lowest job growth since December 2020 on this basis, and it is this one that sets the narrative.
The 'reasons' for the low result is said to be a combination of the hurricane effects (they had two), plus the on-going Boeing strike.
Regular readers will know that we also look at the actual data, in addition to the seasonally adjusted data. Somewhat surprisingly, that rose a very strong +826,000 to 160 mln people on company payrolls, the highest ever. And that is a gain for the year of +2.1 mln jobs. (The seasonally adjusted data shows essentially the same on an annual basis.)
The broader household measure (which includes the unincorporated self-employed) continued its reporting of large shifts away from self-employment and back on to company payrolls. So the overall year-on-year employed gain isn't as large, just under +300,000.
Market reactions to the low headline jobs number suggests they see it as an outlier. Fears were in check, and there seems to be a build-back of the view that the Fed may cut afterall at its meeting later this coming week.
The widely-watched American ISM Manufacturing PMI unexpectedly fell in October from September and came in below forecasts. This survey pointed to the another contraction in the manufacturing sector and the worst since July 2023. In contract, the globally-benchmarked S&P/Markit version reported an improvement, although it too records a contraction, just less so. Some are doing well, but some are finding it tough.
But in Canada, there was a factory expansion. A rise in new orders pushed their result to a 20 month high.
In China, the Caixin factory PMI turned minorly positive, pretty much confirming the official factory PMI there released earlier.
Reuters has an interesting note on changes to China's food security moves. China has decreased American grain purchases, buying more from Brazil, Argentina, Ukraine and Australia, even as it boosts domestic production.
In Australia, CoreLogic reports that Sydney has now followed Melbourne and recorded a month-on-month house price drop. Nationally, prices inched ahead because of continuing gains in Brisbane, Adelaide and Perth. But the pace is slowing everywhere now. Affordability limits seem to have been reached.
Meanwhile, there was essentially no growth in home loan activity in September from August, and for investors those levels slipped. Both recent trends were weaker than expected, especially for first home buyers.
The internationally-benchmarked Australian factory PMI reported that their factory sector contraction eases in October but it still remains in a deep contraction.
The UST 10yr yield is now at just on 4.37% and up +10 bps from this time yesterday, up +12 bps for the week. The key 2-10 yield curve is now positive by +17 bps. Their 1-5 curve inversion is also now much less inverted, now only by -7 bps. And their 3 mth-10yr curve inversion is also much less inverted, now by -29 bps. The Australian 10 year bond yield starts today at 4.56% and down -1 bp. The China 10 year bond rate is down -2 bps at 2.13%. The NZ Government 10 year bond rate is just on 4.49% and down -1 bp from yesterday, but up +4 bps for the week.
Wall Street has started its Friday with the S&P500 up +0.5% but down -1.7% for the week. Overnight, European markets were higher, all by about +0.8%. Tokyo ended yesterday down -2.6%. Hong Kong was up +0.9%. Shanghai fell -0.2% yesterday. Singapore closed down -0.1%. The ASX200 ended its Friday session down -0.5% for a -1.1% weekly retreat. And the NZX50 ended its session down -0.6% on the day, down -2.0% for the week.
The Fear & Greed Index ends the week having moved into the 'neutral' zone and away from last week's 'fear' settings.
The price of gold will start today at US$2737/oz and down -US$2 from yesterday and well off its high, and -US$8 lower than a week ago, one where a new all-time high was hit mid-week.
Oil prices are up +50 USc to US$69.50/bbl in the US while the international Brent price is up +US$1 at US$73.50/bbl. These levels are about -US$2.50 lower than a week ago.
The Kiwi dollar starts today at 59.7 USc and up +10 bps from this time yesterday. A week ago it was at 59.8 USc so very little-changed. Against the Aussie we are also up +10 bps at 90.9 AUc. Against the euro we are up +20 bps at 55.1 euro cents. That all means our TWI-5 starts today at just on 68.7, up +10 bps from yesterday at this time and unchanged from this time last week.
The bitcoin price starts today at US$69,719 and down -1.0% from this time yesterday. A week ago it was at US$66,267. Volatility over the past 24 hours has been moderate at just on +/- 2.0%.
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23 Comments
Often on here, articles have pin pointed China’s achilles heel as being their food supply and/or security. The move to producers other than the USA for wheat could well be seen as preparedness for the impact of another Trump presidency. On the other hand if you have ever had any experience, same as with cheese too, of the basic supermarket American loaf of bread, you might too look askance at the wheat that makes it.
"undershoot in the US labour market."
Easy problem to solve! Tariffs. More jobs at 'home' and reverse all that decade's long out-sourcing. Very, very few countries could shut their borders and do everything at home; have both the production and consumption parts of the equation within. But the USA is one of them.
So who knows. It could work for them. But as for the rest of us?
Last time Trump made it quite obvious that he was questioning whether the USA needed the world as much as the world needed the USA. If he regains the presidency, from the look of the posturing so far, he has answered his own question. America will first and foremost, take care of America.
Couldn't help but read the numbers in this article and think they just reinforced that tourism is all about low wage/productivity. They talk about creating jobs, at $42k per year. And they fail to point out the substantial costs often footed by ratepayers for infrastructure etc to accommodate the numbers. Like many I just fail to see any real benefits.
https://www.rnz.co.nz/news/business/532608/cruising-for-disaster-high-c…
This is very significant.
It will limit the amount of rate cuts central banks will be able to deliver and it is going to hit the economy hard. If this reversal off the 3.60 lows breaks 4.50% with momentum, we could be facing a bond rout. Either way, it's bad news for borrowers and the economy.
I don't think the election is a significant factor, in fact I could see the R's being more fiscally responsible than the D's given the latter have been in power 12 of the past 16 years. I think Musk tweeted a graph of the US public debt and it's entering the parabolic stage. Look at asset prices, look at the stock markets, Bitcoin. Inflation isn't dead.
I'm not reading much into that 70bps difference, I_O.
There was a common belief that the Fed would revert to neutral in short order. Subsequent comments from the Fed have indicated that they're not in any rush, especially while the USA economy is trucking along quite nicely. Which, I note, is not what is happening to poor old NZ Inc. Ergo, the RBNZ's OCR track is likely to quite different. (Or the RBNZ could reinforce their lack of credentials by getting it wrong ... again.)
A recent report by economist E.J. Antoni highlights a significant decline in the real value of Americans' retirement savings, estimating a loss of approximately $2.5 trillion due to inflation and economic policies under the Biden administration. This analysis indicates that while retirement accounts have nominally increased, the impact of inflation has severely diminished their actual purchasing power.
From 2021 to 2024, the average 401(k) plan reportedly grew by $11,000; however, after accounting for inflation, this translates to a real loss of $12,000, or 9.2%.
The report notes that retirement plans with significant allocations in bonds have been particularly hard-hit, experiencing their worst returns since 1928. This has forced many near-retirees to reconsider their plans, with some needing to work an additional six years to recover lost savings.
https://www.foxbusiness.com/fox-news-politics/inflation-cuts-2-5t-from-…
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