US jobs rise, wages rise faster; bond yields jump, stocks fall; China data tampering; China Party tampering; UST 10yr 2.85%; oil up and gold down; NZ$1 = 73.2 USc; TWI-5 = 74

Here’s our summary of key events overnight that affect New Zealand, with news of some key data out in the US.

First, job growth rose slightly more than expected in the US in January to +200,000 in the latest non-farm payrolls report. At 88 straight months of job growth, that makes it the longest streak on record. Their unemployment rate held steady at 4.1% and their participation rate was also unchanged at a modest 62.7%.

But there is sign that wages are rising faster now, up +2.9% above the same month a year ago and the largest annual gain in more than 8½ years. Markets take that as an inflation signal.

Benchmark bond interest rates jumped. The UST 10yr is up +7 bps today to 2.85%. That makes the rise over the past week +19 bps, getting everyone’s attention. This bond sell-off is the largest since January 2014, and it is now affecting equities; the S&P500 is down -1.5% today and aiming lower with just two hours to go in the Wall Street trading day.

In China, there is a story about data tampering that goes to the heart of official gaming of statistics. Officials in one city used dust-control machines to aim water vapour at pollution monitoring devices to sanitise the results. When managers are exhorted to make the Party machine look good, strange things can and do happen.

And the problem may be about to get a lot worse. The newly appointed chief of ‘discipline’ and the country’s central bank is on a mission to clean up the financial sector by raising the Party’s role in financial regulation and diminishing the influence of technical people. All this comes as directives tighten the requirements to embed Party committees into foreign companies operating in China.

The UST 10yr yield is up to 2.85%. The UST 2 yr is holding at 2.15%. The Chinese 10yr is at 3.92% (-3 bps) and the New Zealand equivalent is at 2.97% (-2 bps).

Local swap rates ended the week with a strongly positive yield curve. With the 2-10 curve now a positive +111 bps, that makes it its steepest since April 2017.

Gold markets aren’t closed yet but the price of gold is down to US$1,332 in New York, down -US$16 from this time yesterday.

Oil prices are also lower with the US benchmark now over US$65.50/bbl and the Brent benchmark under US$69/bbl.

The Kiwi dollar is off its recent highs and now at just under 73.2 USc. On the cross rates we are at 92 AUc and 58.6 euro cents. That puts the TWI-5 at 74 and its general level over the past week.

Cryptocurrencies have plunged overnight, with bitcoin at one point sliding to US$7,750, as worries about a regulatory clampdown globally sent investors scrambling to sell. The bitcoin price is currently at US$8,565. Ripple is down to US$0.84 and Etherium is down to US$886. These are sharply lower levels.

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

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Source: CoinDesk