Weekend briefing; Global data positive, bond market skeptical

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Here is our recap of the key overnight economic events affecting New Zealand with news the main driver of the global economy, the economic activity of America’s middle classes, appears to be improving.

we non-farm wages arrived better than expected with +531,000 new jobs added. This happened despite a contraction of -73,000 in the public wage bill. A gain of +450,000 was expected. Employment in the United States has increased by +18.2 million since the low point in April 2020, but remains down -4.2 million from the level before the pandemic of February 2020. Their rate of activity is unchanged at a low of 61.6%.

Average hourly wages increased by the + 4.9% expected in October compared to a year ago, essentially keeping pace with headline inflation.

But we still end up with the statistical conundrum that we raised last month. Perhaps seasonal adjustments don’t work as well after pandemic shocks. You may recall that we noted that September’s overall gain of +312,000 jobs was a far cry from the actual gain of +647,000 then. It is more pronounced in October when the effective increase in non-agricultural workforce is quite impressive at +1,558,000 compared to September and brings the employed workforce to 149,217,000. Against this background, it seems that the +531,000 reported greatly underestimate what is really going on. And stellar real numbers probably mean there won’t be any stagnation with current inflation.

Perhaps underscoring this, America’s supply chains are still developing rapidly. October Logistics manager index 72.6 continues the level above 70 for nine consecutive months now, a level seen as a significant expansion.

Vehicle sales in the United States, which have been declining steadily since April, came in October at an annual rate of just 13 million (but well below China, which is also down but is a market much larger). The recent improvement may have more to do with improving the supply of computer chips for cars than with demand.

And there has been more confirmation that US expansion has legs with the release of September consumer credit data posting a much stronger-than-expected increase of + 8.3% year-on-year.

North of the border Job expansion in Canada slowed in October, up +31,200 and below expectations, and well below the gain of +157,000 in September. But at least they’re back to pre-pandemic employment levels.

In a kind of surprise, Japanese household spending surged + 5% in September from August. It is a big step for them. It slowed down the decline a little from one year to the next. An increase was expected in September from August, but that delivered was about double that expectation.

And staying in Japan, a large mobile phone network will soon be testing technology that charge small personal electronics like headphones, smartwatches and other wearable devices just by walking near a mobile base station. And in the West, that is sure to spark more conspiracy angst among the Anti-All Squad.

Economic news from China seems very controlled these days, with only light “good news” populating their media. The series of substantial positive data stories seem to be gone. The lack of public introspection leaves you with a strong suspicion that all is not well in the Middle Kingdom.

Taiwanese inflation unchanged in October compared to September, and stood at + 2.6% over one year.

EU retail sales volumes are stable in September compared to August even if they were slightly disappointing, but are up + 2.5% compared to a year ago, and + 5.4% compared to September 2019.

The aluminum price is now falling rapidly. It increased all year round, but from mid-August it took off. But after hitting a high in mid-October, it dropped as fast as the August / September period. And magnesium also got his heady peak ready. Further away, iron-ore continues to fall. But just as dairy prices benefit from the global reopening of the restaurant industry, Palm oil. The apparent global dependence on palm oil is an unfortunate environmental and climate signal, with high prices sure to encourage more planting at the expense of native tropical habitats.

The signals from the bond market seem quite at odds with other markets. Bond prices are rising again, yields are falling and quite sharply today. These bearish signals are not respected in the equity, commodity or currency markets, nor in the technology markets. But one of them will be wrong and at some point a new assessment will occur.

In Berlin, it seems like it doesn’t pay to disappoint your bosses – if you work at the Russian Embassy. It is a very Russian “resignation”.

In Australia, with the reopening of their borders, professional companies are preparing for an exodus of young talent. Business leaders expect pent-up demand to further strain the already tight labor market.

And stay in Delta Australia case in victoria jumped again to 1,343 cases reported yesterday. There are now 18,952 active cases in the state and there were 10 more deaths yesterday. In NSW there was another 249 new community cases reported yesterday with 3,065 active locally acquired cases, and they had 3 more deaths yesterday. Queensland is report three more new cases. ACT has 6 new cases. Overall in Australia, more than 79% of eligible Australians are fully vaccinated, and 10% have now received an injection so far.

The 10-year UST yield opens today at 1.44% and drops a further -8 basis points overnight. or a weekly drop of -9 bps. The US 2-10 yield curve starts flatter today at +107bp. And their 1-5 curve is much flatter at +91 bps, while their 3m-10 curve is also flatter at +142 bps. The benchmark ten-year Australian government rate is down -4 basis points to 1.75%. The 10-year Chinese government bond was down -3 basis points to 2.91%. The ten-year New Zealand government is down -4 basis points to 2.54%. A week ago it was at 2.60% and two weeks ago at 2.44%.

On Wall Street, the S & P500 today opened another minor + 0.2% in Friday afternoon trading, up + 1.7% for the week and a new all-time high. Overnight, European markets were all up around + 0.5%. Over the week, Paris is up + 2.5%, Frankfurt + 1.8% and London 0.9%. Yesterday the Asian markets struggled; Tokyo fell -0.6% on a weekly basis but blocked a weekly increase of + 2.8%. Hong Kong fell 1.4% and posted a weekly loss of -1.6%. Shanghai ended its session down -1.0% for a weekly decline of -1.1%. The ASX200 ended its Friday session up + 0.4% for a strong weekly gain of + 1.8% while the NZX50 was the odd one out, ending with a sharp rise of + 1.0% on Friday , but an overall weekly decline of -0.2%.

The price of gold will start today at $ 1,813 / oz and up $ 21 from this time yesterday. For the week, it’s up + US $ 30 / oz.

And oil prices have recovered from + US $ 1 to just US $ 80.50 / bbl in the US, while the international price of Brent is now just over US $ 82.50 / bbl.

The Kiwi dollar today opens little change at just over 71.1 US. Against the Aussie we were also little changed at 96.1 AUc. Against the euro, we remain unchanged at 61.5 euro cents. This means that our TWI-5 starts today at the same time as yesterday at just over 74.9, but still well above the 72-74 range of the past eleven months.

The price of bitcoin has held since yesterday, and now at US $ 61,013 and a minor decline of -0.4%. Volatility over the past 24 hours has been modest at just over +/- 1.5%.

The easiest way to stay on top of the risks of events today is to follow our Economic calendar here ».

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