90 seconds at 9 am: Eyes on rising US wages

RBA get new boss; US jobless claims rise, but so does pay; Alibaba shines; US banks to be blocked from imposing arbitration clauses; UST 10yr yield 1.76%; oil and gold unchanged; NZ$1 = 68.8 US¢, TWI-5 = 71.9

6th May 16, 7:23am by David Chaston

Here's my summary of the key events overnight that affect New Zealand, with news markets are in a holding pattern awaiting tomorrow's US non-farm payrolls report.

First up today is the news that the Reserve Bank of Australia will have a new governor in September, with Philip Lowe replacing Glen Stevens whose extended term ends then. They are following a recent Aussie tradition of appointing a deputy governor to the top job. This move embeds the current policy approach the RBA has followed for years.

Next, markets are now awaiting the US non-farm payrolls report out early tomorrow. There was a slight rise in jobless claims last week, but most analysts are expecting to see a clear signal that wages are rising at an increased rate; +2.4% pa is the expectation. If confirmed, that may well change the Fed's outlook.

In China, Alibaba Group posted an almost +40% rise in sales in the March quarter as it cashed in on quickly improving consumer sentiment. Part of their growth is a push into rural villages - but they are in 'only' 14,000 of 600,000 of them. Yahoo owns 15% of Alibaba. If you do business in China, you need an Alibaba presence.

In the US, Republican presidential hopeful Donald Trump says he would replace Janet Yellen, solely on partisan grounds; apparently she is not a Republican. He also stated he likes the low interest rate policy the Fed has. Which is a flip-flop from an earlier position.

Staying in the US, there is a move to block banks from using mandatory arbitration clauses in their terms and condition for their products. Such clauses are a way banks avoid class actions when they err, and a way they can cover up systemic errors.

In New York the benchmark UST 10yr yield is slightly lower at 1.76%. We saw sharp falls yesterday in local swap rates bringing them back to near record lows across the curve.

But the oil price is a tad higher, now just over US$44/barrel in the US, while Brent is now just at US$45/barrel.

The recent 'frenzy' in iron ore prices seems to have come to an end, with recent fixing showing some small declines.

The gold price is essentially unchanged at US$1,273/oz.

And finally today, the NZ dollar is not much changed either, still at 68.8 US¢, at 92.2 AU¢, and at 60.4 euro cents. The TWI-5 index is now at 71.9.

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

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

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5 Comments

by Andrewj | 6th May 16, 8:30am 1462480252

It looks like the BLS thermometer is broken! Whatever temperature they show us, the actual temperature
is higher, as experienced by the average American family. For instance, the reported CPI inflation over
the past 10 years ending December 2015 was about 1.9% a year. If we focus on the “big four” over the last
decade, the inflation that Americans experienced was about 0.5% more. Let’s call this 0.5% difference a
“measurement bias.” Paradoxically, the inflation measures for these four categories are produced by the
same people who assemble the CPI. Other sources peg the gap as being considerably larger.
These considerations have a direct bearing on our prosperity. How much real growth, for example, has
occurred in the past decade? Officially, GDP has grown 1.4% a year, over and above inflation. Over the
same period, the U.S. population has grown by 0.9% a year. Thus, real per capita GDP has risen by a scant
0.5% a year. Subtract the 0.5% measurement bias – probably a conservative estimate – and the average
American has experienced zero growth in personal spending power over the past decade. With wealth
and income concentration, if the average is flat, then median per capita spending power must be lower.
Comparing 2015 with 2005, this feels about right. The official statistics do not.

http://ggc-mauldin-images.s3.amazonaws.com/uploads/pdf/OTB_May_04_2016…

by Stephen Hulme | 6th May 16, 9:10am 1462482626

We saw sharp falls yesterday in local swap rates bringing them back to near record lows across the curve.

Can it be confirmed that the pricing agents are none other than those seeking to force a lower funding cost to affect a better NIM structure - hence bank profits in preparation for the annual repatriation back to ailing Australian parents? What or who undewrites the real imposed cost of ANZ returning $8.5 billion across the ditch because APRA said so?

by murray86 | 6th May 16, 9:20am 1462483220

The move against the banks by the CFPB is interesting but is merely a proposal. I'd suggest that there is a long way to go for it to come into law, and knowing the US political system would expect the banks to lobby hard against it getting through, thus making it unlikely to succeed. However with the learnings from the GFC, the Yanks would be well advised to consider it seriously as a small move towards limiting banks power and making them more accountable. Not heard any noises from Trump on his position re the financial sector. Probably too beholden to them to be able to.

by Boatman | 6th May 16, 10:29am 1462487364

That's a big spike against the Aussie $ over the past few days ........

by iconoclast | 6th May 16, 11:00am 1462489234

No, you've got your bi-focal eye-glasses on upside down

Wasn't the NZD spiking up
The AUD plunged on the "unexpected" RBA rate cut forcing weak longs to cover

What hasn't happened is a rebound after the "longs" were got out of the way