US jobs growth slows sharply; Wall Street in 2018 loss; Canada jobs data impresses; China in faux-anger over Huawei; Rudd sees big China move soon; UST 10yr 2.85%; oil and gold up; NZ$1 = 68.5 USc; TWI-5 = 73.1

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Here’s our summary of key events overnight that affect New Zealand, with news Wall Street is in another sharp decline today.

Firstly, American job growth slowed in November with their non-farm payrolls rising just +155,000 and well below the expected +198,000 gain. It was also well below the +237,000 gain in October. This represents quite a quick slowing in the pace of their labour market. Their unemployment rate was unchanged as was their low participation rate, but their underemployment rate rose. Monthly wages also increased less than forecast, but are still up +3.1% pa so it is likely the US Fed rate hike due on December 20 will still go ahead. From there however, things now look less certain and they may be nearing their ‘neutral rate’.

Wall Street isn’t taking kindly to the data or its indications of the economic track, and ended up down -2.3% for the day, down -3.8% for the week. And that means equities are now in loss territory over all of 2018, down -2.3%.

US wholesale trade sales fell in October from the prior month while inventories rose, more signs of an overall slowing economy. And part of that is the depressing effect the trade wars are having.

But so far there is not a lot of sign these economic impacts are flowing through to consumer sentiment which seems to be holding at a good level. But the ‘expectations’ of future gains are slipping.

Update: US consumer credit data has just been released for October and that shows an unexpectedly large jump, almost twice what was expected. Much of the increase was due a +10.8% jump in revolving credit, a category that includes credit cards. Non-revolving credit – which includes car loans and student debt – rose +6.7%.

Meanwhile in Canada, they also released jobs data overnight for November and it was impressively positive. Employment rose much more than expected (+94,100) and almost all of that was for full-time work (+89,900). Their jobless rate fell, and for them, to an all-time low. If there is an issue here it is their slow rise in wages, up just +1.5% year-on-year and well below the October gain of +1.9%, itself not impressive. Canada also released its merchandise trade data overnight and that showed a widening deficit.

In China, there is growing anger over the arrest of the Huawei CFO and presumption it is part of the US hard-ball negotiation style. But the event has also exposed Chinese hypocrisy on ‘human rights’ and arbitrary detention. They also can’t really complain as the executive concerned is being detained because of her non-Huawei investments in companies set up deliberately to buy US goods for on-sale to Iran in open flouting of US sanctions. The Americans were tipped off by banker HSBC. Whatever you think of those sanctions, her own choices to profit from the trade led to her arrest. It is little to do with Huawei, a lot to do with her thinking she is immune to consequences that apply to others.

And Kevin Rudd thinks China is about to try and outflank the US during this 90 day trade truce. He thinks China will announce it will aim for a tariff-free position and attempt then to join the CPTPP.

The UST 10yr yield is ending the week at 2.85% and a big drop of -16 bps for the week. Their 2-10 curve has risen overnight to just under +14 bps although recall it was at +20 bps this time last week. The Aussie Govt 10yr is at 2.45% (down -2 bps overnight and down -14 bps over the week), the China Govt 10yr is at 3.31% and unchanged overnight but down -9 bps for the week, while the NZ Govt 10 yr is at 2.48%, unchanged overnight but down another -11 bps over the week. New Zealand swap rates flattened this week with the two year down -2 bps and the ten year down -10 bps.

The VIX has risen to over 22 this week. That is still well above its average over the past year of 15. The Fear & Greed index has gotten more extreme on the fear side in the past few days.

Gold is finally benefiting from all this uncertainty and risk retreat. It is up -US$27 this week at US$1,247/oz and that is its highest since July 2018.

US oil prices are up today on news OPEC and Russia actually did strike a deal to cut output. US prices rose about +US$1.50/bbl to just under US$53/bbl. The Brent benchmark is now just over US$62/bbl. The US rig count is still holding at its 200 week high despite these very low prices and this production has made the US a net exporter of crude oil.

The Kiwi dollar is ending the week firmer at 68.5 USc, which is about where it was this time last week. On the cross rates we are a whole +1c firmer at 95.1 AUc after the unexpectedly poor Aussie GDP Q3 result, and marginally softer at 60.1 euro cents. That puts the TWI-5 at up to 73.1.

Bitcoin is now at US$3,256 which is a -18.4% loss for the week. In fact, this price has halved in the past 30 days. This rate is charted in the exchange rate set below.

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

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End of day UTC
Source: CoinDesk

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