Here’s our summary of key events overnight that affect New Zealand, with news of more disparate signals on trade and international cooperation.
First up there has been a weak start in October to the traditional peak season for air cargo and the twelfth consecutive month of year-on-year declines in freight volumes. They were down -3.8% globally and down -6.1% internationally in the Asia Pacific region which recorded the steepest decline.
In the US we get the non-farm payrolls report this weekend. Today the precursor ADP report is out and that isn’t indicating strong jobs growth at all. But at least there was some. In today’s report the gain was the second lowest since 2010 and the factory sector got job losses. At +67,000 it was less than half analysts expectations. Their expectations of +190,000 for the non-farm payrolls report will no doubt be sharply revised lower now too.
This lower outlook is somewhat supported by the US service sector PMIs. The closely-watched ISM one is lower at 53.9, a fall and below expectations. The internationally-benchmarked Markit one records a more timid expansion, but it did pick up from October.
And even after accounting for the Thanksgiving holiday, the latest report on US mortgage applications fell more than -9%.
In Canada, they had an official rate review, but there has been no change at 1.75%. They have inflation running at their target +2% level even if growth is low and weakening. But they say they see signs of global growth stabilising.
In China, more private companies are defaulting on their bond obligations. The total is now up to six in the past two days.
Good progress is being made at the OECD on the new BEPS framework. But now the Americans are balking suddenly as they realise it is many of their companies that have been not paying their share and they are starting to resist change. They don’t want “erosion of longstanding international tax rules”.
On top of their very strong current account surplus, the Australian economy has posted annual growth of +1.7%, up from a decade low of +1.4%, confirming the RBA’s assessment that their economy has passed a “gentle turning point”. But their household sector was “subdued” and kept the result modest. This is a result that shows their election bribe helicopter money was essentially saved by households and did nothing to encourage economic spending and growth. It was strong exports that saved it.
And the Aussie banks are bracing for the RBNZ bank capital announcement later this morning. We will have full coverage.
International equities are a little higher today, reversing some of yesterday’s drop. Today talk of background progress in the US-China talks is encouraging these markets. The S&P500 is up +0.6% so far, following a +1.2% rise in most of Europe (but not London). Yesterday, Asian markets were down more than -1% before the trade-talk rumours started.
Bond yields are volatile too. The UST 10yr yield has reversed course again today, now back up at 1.78% and a +8 bps rise since this time yesterday. Their 2-10 curve is a little wider at +20 bps. Their 1-5 curve has turned back positive at +4 bps. Their 3m-10yr curve is also also back positive +18 bps. The Aussie Govt 10yr is at 1.13% and that is back up +6 bps since this time yesterday. The China Govt 10yr is now at 3.21%, and a -2 bps slip. The NZ Govt 10 yr is now at 1.40%, and -3 bps retreat.
Gold is down -US$7 to US$1,480/oz.
US oil prices are up strongly today to just on US$58.50/bbl. The Brent benchmark is just on US$63.50/bbl. These are rises of more than +US$2 and come as American crude oil inventories fell sharply. A surprisingly large decline in output in their domestic oil patch is having an international effect. It also comes as a severe winter bites the US.
The Kiwi dollar is marginally higher again, now at 65.3 USc. On the cross rates we are now staying up at 95.3 AUc. Against the euro we unchanged at 59 euro cents. That puts the TWI-5 up at 70.5.
Bitcoin is firmer today at US$7,453 and up +1.7% from this time yesterday. 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 ».