Jobs growth slows in US; TPP still unresolved; VW questions own viability; China eases FHB deposits; UST yield 1.99%; NZ$1 = 64.5 US¢, TWI-5 = 69.2

Here’s my summary of the key events over the weekend that affect New Zealand, with news that the positive omens we noted on Friday gave way to less-positive ones on Saturday.

The US employment situation in August and September got a major and unexpected downgrade. American employers slammed the brakes on hiring, raising doubts their economy is strong enough for the Federal Reserve to raise interest rates by the end of this year. However, pay rises are still running +2.2% year-on-year.

The shock result brought relief in the stock and bond markets, which jumped on the news – the latest version of a market tantrum playing out in the face of the rate-rise ‘threat’ by the Fed.

TPP negotiations have been extended in Atlanta, and the final sticking point seems to be how long drug companies can hold on to their research patents. The US wants 12 years, New Zealand currently allows 8 years, but a group of countries want to see a five year limit. The negotiation is tough. Interestingly, dairy liberalisation seems to have been flagged with Canada and Japan refusing to budge and the US saying it will only shift if those other two do. New Zealand may be a big exporter of dairy, but it is not especially prominent as a producer, and that makes undermines our negotiating leverage.

In Europe, the incoming chairman of Volkswagen says the scandal around the rigging of emissions tests is a threat to the firm’s viability (albeit a surmountable one), a newspaper quoted him as saying. In Australia, VW has stopped selling some diesel models in a tacit admission the fraud was probably going on there to. Where they stand with the regulator is unclear. In theory, fines there could amount to A$1 mln per vehicle that was fraudulently misrepresented. In New Zealand, finally, there is similar action to withdraw cars on a limited internal scale. But there are likely to be hundreds of vehicles on our roads with the ‘cheat’ software installed.

China is on a week-long public holiday, and don’t forget it is a public holiday in Australia today, their Labour Day.

But the holidays in China didn’t stop their banking regulator announcing a cut in the minimum deposit required by a first home buyer, from 30% to 25%.

In New York, the UST 10yr yield benchmark slumped on Saturday (NZ time) on the non-farm payrolls report and slipped below 2% for the first time since April. It will open today at 1.99%.

The US benchmark oil price is up marginally, now just under US$46/barrel, Brent and just over US$48/barrel. US crude production and stocks are at near all-time highs even though the rig count continues to fall.

The gold price jumped US$24 to US$1,138/oz.

The New Zealand dollar also gained. It is at 64.5 US¢, at 91.4 AU¢, and 57.5 euro cents as the consequences of the poor US data sunk in along with the expectation Wednesday morning’s dairy auction will be another good one. The TWI-5 is at 69.2, a one month high.

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 »

Daily exchange rates

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for(i=0;i

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