US jobs growth solid; China signals rate cuts; India to adopt a GST; airfreight volumes rise strongly; UST 10yr yield at 1.56%; NZ sovereign CDS spreads sink; oil up +3%, gold lower; NZ$1 = 71.4 US¢, TWI-5 = 74.6

Here’s my summary of the key events overnight that affect New Zealand, with news risk premiums for NZ sovereign debt are sinking fast, and placing us among countries with the safest reputations.

But first, this weekend we will get the latest and important US jobs report. Today, the precursor ADP employment report was out and that revealed a stable gain of 179,000 private sector jobs, right on market expectations. Markets are expecting a non-farm payroll gain of a very similar level. Any surprise above that level will raise expectations of a US rate hike at their next meeting in the third week of September.

In China, nested deep on a key State website, is a call for Chinese interest rates to be cut soon. The Party website is influential and this call may well signal something significant is coming.

In India overnight, they have changed their laws to allow a Goods & Services Tax to be adopted. The new tax will do away with “a bewildering thicket of overlapping state and federal tax rules”. However, there is still some way to go before it is finally in place, a rate set, and a final definition of the items covered.

Global air freight demand recovered strongly in June with freight tonne kilometers (FTK) up +4.3% year-on-year. This was the fastest pace of growth in 14 months. Airfreight volumes are the biggest in the Asia-pacific region, but these under performed growth-wise compared to North America and Europe where the pickup was stronger.

Back in New York, UST 10yr yields are higher today at 1.56%. And we should also note that the risk premium the market requires for NZ sovereign debt has sunk to a new post-GFC low, lower than for Australia, and down to the levels commanded by Norway and Sweden, at just 26 bps. And it amounts to a -30% fall in risk in just one month. NZ Government debt is highly prized by international bond investors.

The US benchmark oil price has bucked its downward trend of the past week with some sharp rises. Crude is up more than +$1 today, or +3%, to just under US$41/barrel and the Brent benchmark is over US$43/barrel. Heavy petrol demand in the US for summer driving is the cause.

The gold price is going the other way, down -US$10 to US$1,355/oz.

The NZ dollar is also lower, down nearly -1c overnight, starting today at 71.4 US¢, at 94.2 AU¢, and at 64.1 euro cents. The TWI-5 index is still at 74.6. A stronger US dollar, and concerns over yesterday’s local labour market data were the drivers of the slip.

If you want to catch up with all the local changes yesterday, 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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