US jobs grow strongly; IMF sees little global growth; Australia loses coal exports, sees lower ore prices; McKinsey warns on bank profits; CDS spreads jump; gold falls; NZ$1 = 63.9 US¢, TWI-5 = 68.7

Here's my summary of the key events overnight that affect New Zealand, with news commodity-based economies may be in for a lean time.

But first, US jobs growth was strong in September according to the ADP Employment Report. That is the precursor to the non-farm payrolls report that is due out on Saturday morning, and it showed a higher-than-expected 200,000 new jobs were created in the private sector in September. If the same annual pattern persists this year, it is likely that the official non-farm employment data for August will get revised higher as well. A strong report Saturday will all but lock in a Fed rate hike on October 29 because the recent PCE data also came in above Fed forecasts.

That is something of a contrast to the IMF's view that global growth in 2016 won't be much more than what we see in 2015. And they warn of the impacts on resource-based economies.

And just how hard Australia will be hit by China's changing resources appetite is revealed in a recent review that predicts Australia will export virtually no thermal coal to China in 5 years. That would be a very major loss. And iron ore demand is being overwhelmed by huge competitive supply, driving down prices sharply.

In Australia, building consents for housing dropped -6.9% in August from July. Markets were expecting a fall of only -2%. While this data can be a bit volatile, that was a head-scratching surprise in the 'lucky country' and embeds a lower trend we have seen for some time now.

Australia's economy may be about to be disrupted, but that is nothing like what the banking world is about to see. At least, that is what global consultancy McKinsey is warning. They say that up to 60% of bank profits are at threat of offerings of new entrants into the payments world. Mortgages and wealth management are also areas under serious threat.

In Europe, data out overnight shows they have returned to deflation, but solely because energy prices have become so cheap.

China is on a week-long public holiday.

In New York, the UST 10yr yield benchmark is rising today and is at 2.07%. While investment grade yields are still pretty modest, credit spreads are widening. In fact CDS data out overnight for Australian corporate investment grade bond spreads show they are up to levels we haven't seen since early 2014. Even sovereign bond spreads are widening quickly, the Chinese ones notably; they have jumped by a third in eight weeks. Rising spreads will limit the ability of banks here to pass on the full benefit of lower swap rates in their mortgage pricing.

Even more notable is the sharp rise in junk bond interest rates.

The US benchmark oil price is unchanged at US$45/barrel, Brent is at US$48/barrel.

The gold price has slipped yet again and is now at US$1,115/oz.

However, the New Zealand dollar starts the month noticeably higher. The futures market indicators on dairy prices remain remarkably strong, indicating another +20% jump at the next auction. The NZD is now at 63.9 US¢, at 91.1 AU¢, and 57.2 euro cents. The TWI-5 is at 68.7, its highest level since late August.

If you want to catch up with all the local changes on Friday, we have an update here.

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