US on tenterhooks awaiting non-farm payrolls report. Other data positive. Canada warns on house price drop. EU and BofE turn hawksih.
Kia ora,
Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.
I'm David Chaston and this is the International edition from Interest.co.nz.
Today we lead with news the Omicron impact on the soon-to-be released US non-farm payrolls report is scaring the bejesus out of the wider global financial markets. Risk is 'off' until the dust settles on this data when it is released tomorrow.
US jobless claims came in without any special jobs effect however. Last week there were 257,000 initial claims and slightly lower than expected. The total number of people on these claims went up slightly however to 2.04 mln, which means fewer came off these registers. Still, the overall level remains lower than pre-pandemic.
The Challenger job cuts data for January remained very low too, also not playing into the non-farm payroll fears either. They say most of those losing their jobs are anti-vax or anti-mandate workers, even if the numbers are actually tiny.
The US service sector PMI slipped, but not by as much as you might expect, and not be as much as analysts had expected. New order levels held up, price pressures eased somewhat, but the employment subcategory isn't expanding as fast as previously. Despite the overall small pullback, the extended expansion remains historically strong.
We also got US factory order data, but that was for the prior month, December. It reported a -0.4% slip from a strong November although these order levels are almost +15% higher than the same month a year ago.
A Canadian banking regulator is warning that some house prices there could fall as much as -20% after their current speculative bubble bursts.
China is buying a fight with India. At its Olympic torch ceremonies, it has politicised them with ceremonies honouring those who died recently in their border clash. India isn't impressed.
South Korea's factory expansion improved in January, although it remains modest. Japan's factory sector contracted slightly. And India's factory sector expanded slower in January.
In Europe, both the European Central Bank and the Band of England met market expectations with their policy reviews overnight with the BofE raising rates +25bps to 0.50% (a back-to-back increase) and the ECB keeping policy unchanged. However, both meetings unveiled substantial hawkish shifts. The British are reducing their money printing, and the ECB is saying "the situation has changed", setting up conditions for tapering there soon too.
One reason is that producer price inflation isn't easing in the EU. The latest data for January shows it rising to an eye-watering +26% from a year ago, up +2.9% from the prior month and an acceleration from +1.9% in November from October. Yes, the situation is changing, and fast. Energy costs are driving the spectacular rises, but all the non-energy sub-indexes are up way above target too. British PPI is up sharply too, by +9.3% in a year led by a +68% rise in energy costs on the same basis.
In Turkey, their inflation rate has risen to an eye-popping +48% from January a year ago. In January 2021 it was +15% and the local were worried then
In the world of sea shipping, container rates slipped marginally last week, mainly because rates out of China fell. But bulk cargo rates fell too, for the same reason - demand out of China is down.
The UST 10yr yield opens today at 1.83% and up +8 bps.
The price of gold starts today at US$1806 and down -US$3 from this time yesterday.
And oil prices start today up by nearly +US$1 from yesterday at just under US$88/bbl in the US, while the international Brent price is now just over US$89.50/bbl.
The Kiwi dollar will open today little-changed at 66.3 USc. Against the Australian dollar we are also little-changed at our lower level at 93 AUc. Against the euro we are marginally firmer at 58.7 euro cents. That means our TWI-5 starts today at 70.9 and a small net rise.
The bitcoin price is down -1.3% since this time yesterday and now at US$36,824. Volatility over the past 24 hours has been modest at +/- 1.9%.
You can find links to the articles mentioned today in our show notes.
And get more news affecting the economy in New Zealand from interest.co.nz.
Kia ora. I'm David Chaston and we’ll do this again on Tuesday, remembering that Monday is a full public holiday in New Zealand – Waitangi Day.