US jobs growth disappoints; trade war talk grows; US consumer credit growth slows; airfreight and passenger growth rises; Westpac warns; UST 10yr 2.77%; oil down and gold up; NZ$1 = 72.8 USc; TWI-5 = 74.1

Here’s our summary of key events overnight that affect New Zealand, with news of very disappointing jobs growth in the USA.

Non-farm payrolls grew just +103,000 in March and far below what markets were expecting. Their unemployment rate was unchanged at 4.1% while their participation rate dipped -0.1% to 62.9%.

There were revisions to February jobs growth of +13,000 and to January of -63,000. Overall, given the ADP signal, this result is very disappointing.

The USD has slipped. Bond prices have rallied and the UST 10yr yield is back down to 2.77%. Equity markets have taken the news hard, with Wall Street slumping more than -2.5% in a dramatic reversal of the rises of the past two days. But that reversal might have as much to do with the sudden and worrying escalation of the trade war between the US and China with irresponsible and capricious moves on both sides. Two teenage egos are ignoring history and implications. World equity markets will start on Monday on the back foot.

US wage growth remained at +2.7%.

The new Fed chairman has been caught out by events, making a speech claiming the American economy is ‘strong’ and their labour market is also ‘strong’ and that they remain in track for gradual rate rises. He may be right, but today’s data undermines his credibility.

(North of the border, Canada reported jobs growth that beat expectations, although most other indicators like their unemployment rate and participation rate remained unchanged.)

Today also brought US data on consumer credit growth and that is falling away fast. It was up +6.0% in the year to December, +4.9% in the year to January, and today’s data showed it was up just +3.3% in the year to February. For an economy that lives on credit growth debt growth, this is a material slowdown.

The world airfreight market is off to its best start since 2005 with a strong rise in volumes in February on top of an even stronger January increase. The international growth in airfreight was +7.7% in February. Asia-Pacific volumes were up +8.7%.

Passenger travel is up strongly as well. February international passenger demand rose +7.2% compared to February 2017, which was up from the +4.2% increase recorded in January. Asia-Pacific international travel was up +9.1%. Interestingly, domestic travel in Australia was very lackluster, up only +3.9% and one of the weakest of the global performers.

And staying in Australia, the CEO of Westpac is floating the idea that mortgage brokers charge clients for their services rather than take commissions from banks. Such a change would need to be imposed by regulators however, and would clean up the ‘fiduciary responsibility’ mess currently infecting the relationships between customer-broker-bank. Westpac also warned that tighter credit standards that may come out of their Royal Commission review would most likely reduce access to housing loans.

The UST 10yr yield is now down at 2.77% and down -6 bps overnight. The Chinese 10yr is at 3.74% (up +1 overnight) while the New Zealand equivalent is at 2.82% (+1 bp).

The VIX has moved higher and the index is now just over 22 and very elevated. The average index level over the past year is 12. The Fear & Greed index is at “extreme fear” levels having jerked worse overnight.

Gold markets have not yet closed but at this time the price is at US$1,333/oz in New York. That is up +US$7 since this time yesterday.

Oil prices have fallen sharply today, down -US$1.50/bbl to just under US$62 and the Brent benchmark on US$67/bbl. The North American rig count has now moven on up over 1000 for the first time in three years.

The Kiwi dollar is ending the week up at 72.8 USc on a slipping greenback. On the cross rates we are at 94.8 AUc and 59.2 euro cents. That puts the TWI-5 at 74.1 and near the top of its 2018 range.

Bitcoin is however at US$6,610 and just where it was at this time last week, although this is a fall in the past 24 hours.

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

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Source: CoinDesk