Here's our round-up of the key economic events affecting New Zealand overnight, with news that the US economy added many more jobs than expected in January. Stock markets rose on the news, the U.S. dollar strengthened and bond yields rose on expectations that the Fed may not cut interest rates as soon as expected when the U.S. economy is in a stimulative phase.
At the headline level, the American payroll Employment increased by +355,000 in January and that is almost double the +180,000 increase the market was expecting. It is the second very strong result in a row.
Behind this result, we see that employers' payrolls at the end of January, at 155.6 million, are +2.9 million higher than a year ago, maintaining the annual growth rate of “around +2%”, that they have had since July, which is a record The pace has slowed from the previous pace of “about 2.5+%.”
More broadly, the increase is not that rapid, according to the household survey. Almost 160 million people are now employed, the difference in the salary report lies in the unregistered self-employed. It's clear that more people are moving into corporate payroll now, so overall growth isn't quite as strong as the payroll data suggests.
Average weekly earnings, which had increased by around +4% in 2023, fell to +3% in January compared to the previous year. However, markets focused on average hourly wages, which rose more than expected, rising +4.5% in a year. But they're looking at the wrong data – they should be looking at the broader average weekly data as that also includes working hours.
After a sharp increase in November American factory orders rose only slightly in December compared to the previous month and was +1.4% above the previous year's level. This is encouraging, although January PMIs suggest the pace will accelerate next month.
Consumers in this market are clearly doing better. The University of Michigan sentiment survey reported A big improvement and the highest level in 2½ years. They called the change an “increase.”
Investors are not interested in investing in American regional banks with large loan portfolios in commercial real estate. The sell-off over the last few days has been brutal. We discovered that yesterday. Today the markets have stabilized at the lower level and no institution has yet become insolvent.
The IMF was examination China's economic outlook is characterized by a relentless slowdown in growth. They expect GDP to fall to +4.6% in 2024 and fall further to 3.4% by 2028. The IMF understands that they have had to pay the price of substandard development in the past, and now demographics limit their ability to meaningfully improve their game. The seeds for this regression in growth were planted years ago.
And China's real estate market has had a difficult start to the year. In January, new home sales fell to a monthly low not seen in five years, despite government measures to boost the ailing sector, which is grappling with a liquidity crisis. New home sales fell -34% year-on-year and -48% compared to December.
The Chinese embassy is in Wellington reprimanded the newly elected government for flirting with the security group AUKUS. It issued a none-too-subtle warning that further steps towards our accession could affect trade with our largest export market. The rebuke was widely reported in Chinese media worldwide.
In Australia, mortgage approvals rose almost +12% throughout 2023, but ended the year with a weaker-than-expected result a monthly decline of -4%. And this December's data follows housing market figures on prices and sales, showing that housing market momentum has slowed and affordability pressures are beginning to take hold.
And in Australia, the port dispute between Dubai port operator DP World and the MUA union has reached a conclusion A big win for the dock workers. They won a +23% increase in four years (with support from the Canberra government behind them), ending a dispute that had held some of their biggest ports for months. It is expected that port fees will increase significantly as a result.
The FAO World Food Price Index fell in January for the sixth consecutive month, reaching a new low since February 2021. Grain prices fell significantly as global wheat export prices fell amid strong competition among exporters and the arrival of freshly harvested supplies in Australia and South America, both of which performed excellently, growing conditions declined. In addition, meat prices fell and milk prices remained stable. Overall, food prices worldwide are back to the level from 2007 to 2014. Adjusted for inflation, food is “cheap” worldwide.
The 10-year US Treasury yield starts today at 4.04% and has seen a sudden increase of +17 basis points since yesterday as bond markets are surprised by the impact of a strong US labor market. But that's still -11 basis points less than a week ago. The important 2-10 yield curve inversion was little changed at -35 basis points. Their 1-5 curve inversion is less deep, now around -83 bps. And their 3-month 10-year curve inversion is much lower, at -134 basis points. The 10-year Australian bond yield is now at 4.09%, up significantly by +16 basis points from yesterday. China's 10-year bond interest rate fell -1 basis point to 2.44% and is still near a new 20-year low. New Zealand's 10-year government bond interest rate fell -2 basis points to 4.62%. A week ago it was 4.75%, a decrease of -13 basis points from then.
Wall Street opened Friday trading with the S&P500 up +1.2% to a new record high and is heading for a gain of +1.4% for the week. Overnight, European markets were weighed down by the -0.1% decline in London and the +0.4% rise in Frankfurt. Yesterday, Tokyo ended its Friday session up +0.4%, representing a net increase of +1.0% for the week. But Hong Kong fell -0.2%, a weekly loss of -3.2%. Shanghai fell -1.5% yesterday, a very significant weekly loss of -6.2%. The ASX200 ended its Friday session with a daily rebound of +1.5%, taking it up +1.9% for the week. But the NZX50 was just +0.1% yesterday, a modest weekly gain of +0.6%.
The Fear and Greed Index has fallen back into “greed” territory from its extreme levels a week ago.
The price of gold will start today with a decline of -27 US$/ounce compared to yesterday at just under 2036 US$/ounce. But that's +$20 more than a week ago.
However, oil prices have fallen significantly, by -4 US dollars to just over 72.50 US dollars/barrel in the USA, while the international Brent price is now just 77.50 US dollars/barrel. A week ago, these prices were at $77/barrel and $82/barrel, an even steeper decline from then.
The Kiwi dollar starts today at just under 60.7, more than -½c lower than this time yesterday. It's -¼c lower than a week ago. Against the Aussie we are down -20 basis points at 93.2 AUc. At 56.2 euro cents, we are -30 basis points weaker against the euro. This all means that our TWI-5 starts today at just under 70 and is down -30 basis points from yesterday and essentially the same level as a week ago.
Bitcoin price starts firmer today. The price is now $43,217, +1.4% higher than this time yesterday and +3.1% higher than this time last week. Volatility was low to moderate at just +/- 1.0% in the last 24 hours.
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