China's house sales pace startles; China's bond purchases distort; China's steel growth extraordinary; US jobs growth leaves it behind; UST 10yr yield at 0.72%; oil drops and gold unchanged; NZ$1 = 67.1 USc; TWI-5 = 70.2

Here's our summary of key economic events over the weekend that affect New Zealand, with news China is producing some extraordinary imbalances as it strives to avoid recession.

New Chinese home sales grew at a startlingly fast pace, up +31% year-on-year in August as their housing market continued to rebound. That was up from a +25% rise in July. Analysts expect the market to see more growth in the coming months as their economy improves further.

One large Chinese Bank (ICBC) and three regionals, are planning bond issues to shore up their capital positions that are so large, that the NZ$42 bln involved will alone amount to the second largest monthly Chinese bond issuance ever. And this is only the start of massive capital raising by Chinese banks. In fact, China’s four biggest banks face a shortfall of NZ$330 bln to meet global capital rules kicking in, in four years. It's going to be a bond-fest, and may be behind the rising benchmark bond yields in China that have been on a sharp upward trajectory since late April. It's an upward trend quite unlike what is happening in most other major countries.

And China is now producing more than 60% of the world's steel. With mills in other parts of the world handicapped by the pandemic, China is the only country where output is rising. Elsewhere it is estimated that steel production is down more than -40%. It does seem very odd that with now only one main active buyer and many sellers, the iron ore price just keeps on rising and is at a six year high.

In Singapore, their July retail sales declined less than in the prior month on a year-ago basis but this was considered a weak improvement.

In the US we should note that they are on a long holiday weekend - Labor Day - and their markets won't reopen until Wednesday out time. It is a holiday that usually marks the end of their summer vacation period and a return to 'normal' business life. What 'normal' will be this year is anyone's guess.

And the S&P500 futures suggest that Wall Street will return with about a -1.4% drop. That will be on top of last week's -2.0% fall.

American employers added a bit less than +1.4 mln new jobs in August which was almost as expected. (In July they rose +1.7 mln.) But that now leaves a net loss since February of -11.5 mln jobs so far. Their participation rate hardly changed and payroll growth in private sector firms was the weakest contributor, a full -30% less than in July. And even though total jobs have collapsed, the number of part-time jobs is now +3.3 mln more than in February.

Canadian payrolls grew less than expected in August and far less than in July. But almost all of their increase was for full-time jobs. Still, they would have been disappointed by this 'bounce-back'.

Back in the US, we should note that US coal production is down -22% over the past year to the end of August. That is the steepest annual decline ever and that industry is on track to be wiped out within a few years. Production levels are at 50 year lows and production in recent months has fallen at ever faster rates.

And it is not only the coal industry that is suffering. American agricultural exports, which peaked at the beginning of 2016, have been on a downward track since - requiring a very sharp rise in farm subsidies that more than doubled since 2017.

And imports into the US seem to be surging, suggesting that August and September could well bring a record trade deficit, fueled by imports from China.

In Germany, new factory orders declined less in July compared with the same month in 2019, than they did in June. But this was a much tamer outcome than analysts were hoping for.

The latest global compilation of COVID-19 data is here. The global tally is 26,950,000, up +531,000 since Saturday. Global deaths reported now exceed 881,000 (+10,000 in two days).

Just under a quarter of all reported cases globally are in the US, which is up +88,000 to 6,448,000 and a relentless rise. US deaths are now just over 193,000 and a death rate of 583/mln (+5/mln) and approaching Italy's level. The net number of people actively infected in the US is down slightly to 2,541,000. Testing over the weekend will go into a lull.

In Australia, there have now been 26,279 COVID-19 cases reported, and that is +143 more cases over the weekend and clearly the Victorian emergency isn't getting worse. Australia's death count is rising however to 753 (+16). Their recovery rate is now over 85%. There are 3064 cases in Australia (-170) and a turned tide and more recoveries than new infections.

The UST 10yr yield rose sharply at the end of trading last week and start today up +10 bps at 0.72%. Their 2-10 curve is notably steeper now at +57 bps. Their 1-5 curve is up even more at +17 bps, and their 3m-10yr curve steeper too at +62 bps. The Aussie Govt 10yr yield is up +1 bps at 0.96%. The China Govt 10yr is unchanged at 3.14%. And the NZ Govt 10 yr yield is also unchanged at 0.60%.

The price of gold is little-changed and now at US$1,935/oz.

Oil prices are lower today, down -US$2/bbl to over US$39.50/bbl in the US while the international price is down to just over US$42.50/bbl.

The Kiwi dollar is marginally softer today from Saturday and now at 67.1 USc. Against the Australian dollar we little-changed at 92.2 AUc. Against the euro we are also little-changed at 56.7 euro cents. That means our TWI-5 is at 70.1 and similar to this time last week.

The bitcoin price is lower again today from this time Saturday, now at US$10,218 which is another -2.0% reduction. The bitcoin 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 ».