US jobs growth slows, jobless rate dips; Canada trade deficit narrows; China hits US goods with higher tariffs; US trade deficit widens; Italian bond yields jump; UST 10yr 2.95%; oil and gold down; NZ$1 = 67.5 USc; TWI-5 = 71.1

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Here’s our summary of key events overnight that affect New Zealand, with news China is retaliating against the lasted US tariff hike.

But first, American job growth slowed more than expected in July as employment in the transportation and utilities sectors fell, surprisingly for the transportation sector, but there was a drop in their unemployment rate to 3.9%. Their ‘low’ jobless rate is solely because they have a stubbornly low participation rate and that shows no signs of improving. Also stubborn is the rise in earnings, up +2.7% pa again. It has been at this level for more than two years now and if anything seems to be softer now than it was at the end of 2016. It is proving to be a long wait for tighter labour market conditions to show up in broader jobs gains or in pay increases.

Wall Street posted some modest gains on the jobs result. The UST 10yr benchmark fell however, and the US dollar was little changed.

Canada’s goods trade deficit narrowed from C$2.7 bln in May to $626 mln in June, the smallest deficit since January 2017. Total exports increased +4.1%, mainly on higher exports of energy products and aircraft. Total imports edged down -0.2%. This was a much better result tan markets were expecting. The Canadian trade surplus with the US widened however and locals spurned imports from their southern neighbour.

Consumers in other countries are also changing their buying habits away from US products.

More directly in the trade war, China as announced new tariffs on US goods, ones that will especially hurt US hardwood exports. They also targeted food products, chemicals, steel, aluminum and consumer goods like furniture, bicycles, baseball gloves and beauty products. More than US$60 bln of trade in additional goods have been singled out for additional tariffs.

And China is working to undermine US sanctions on Iran, and work with the EU to preserve the nuclear deal.

The Shanghai stock exchange closed -1% lower yesterday.

The American trade deficit widened in June at the fastest rate since November 2016, pushed by a stronger dollar and front-running buying. The trade deficit in goods and services increased +7.3% in June from the previous month to a seasonally adjusted -US$46.4 bln. It was, however, about what analysts were expecting.

American trucking companies ordered a record 52,400 big rig trucks for regional and long-haul routes in July, what is usually the slowest order month of the year. That is nearly triple the orders from last year, when fleets ordered 18,726 trucks, and a +24% jump from June’s orders.

In Italy, bond investors are retreating and yields rising ahead of what will be contentious budget negotiations within the new and unstable Italian government.

The UST 10yr yield has retreated on the US payroll data outcome and at the market close is at 2.95% and about where it was at this time last week. Their 2-10 curve has remained just on +30 bps. The Chinese 10yr is at 3.49% (unchanged from yesterday) while the New Zealand equivalent is now at 2.83%, also unchanged.

Interestingly, the VIX has retreated a bit and now just under 12. The average index level over the past year is 12. The Fear & Greed index has is moved further over to the ‘greed’ side.

Gold is down -US$2 from yesterday and now a just on US$1,213/oz in New York and that is a another -US$9 retreat over the week.

US oil prices are a little lower today from yesterday and now just over US$68.50/bbl. The Brent benchmark is now just over US$73/bbl. The US rig count is marginally lower this week.

The Kiwi dollar is ending the week at 67.5 USc, and although slightly firmer from this time yesterday, it is down -½c from this time last week. On the cross rates we are little changed at 91.2 AUc, and at 58.3 euro cents. That puts the TWI-5 at 71.1.

Bitcoin is now at US$7,384 which is down -1.5% from yesterday, and down more than -10% over the past week.

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

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Source: CoinDesk

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