Breakfast briefing: news beyond the US elections

Here’s our look at the key economic events of the past weekend that will impact New Zealand, plus news that while this could be a crucial week regarding the US election, we’re staying away from the event. There are many other places where you can get the slope that suits you.

The main event in the coming week will be the US Federal Reserve’s rate decision on Friday morning. Analysts predict a rate cut of -25 bp. up to 4.75%. They won’t be the only central bank to revise its interest rate settings this week. We’ll also get them from Norway, Brazil, Poland and the UK, plus of course tomorrow from Australia, where analysts expect no change at 4.35%.

Back in the US, we’ll see important factory orders data, new services PMI results and new sentiment surveys. Data for Germany is also expected. And in China this week, data on the consumer price index, producer price index, trade data and the service business activity index will be published.

But the main news of the weekend was backlog in the US labor market. The US economy added just +12,000 jobs in October on a seasonally adjusted basis, well below the slightly downward revised +223,000 in September and forecasts of +113,000. This is the weakest job growth since December 2020 and is driving the narrative .

The “reasons” for the low result are said to be a combination of the consequences of the hurricane (there were two of them) and the ongoing impact on Boeing.

Regular readers know that we also look at actual data in addition to seasonally adjusted data. Somewhat surprisingly, corporate employment grew from 826,000 to 160 million, the highest ever. And this is an increase over the year of +2.1 million jobs. (Seasonally adjusted data show much the same on an annualized basis.)

The broader household measure (which includes the non-corporate self-employed) continued to report a significant shift from self-employment to company pay. So overall year-on-year employment growth is not that big, just under +300,000.

Average weekly earnings rose +4.0% in the year to October, the best performance since March and much better than current inflation. Over the past four years, average weekly earnings have increased by +4.5%; in the previous four it was +2.7%.

The market’s reaction to the low job numbers suggests they view this as an exception. Concerns have been brought under control, and there appears to be a rebound in sentiment that the Fed may still cut rates at its meeting later this week.

Popular American Manufacturing PMI (ISM) unexpectedly fell in October compared to September and was below forecasts. The survey pointed to another contraction in the manufacturing sector, the worst since July 2023. S&P/Markit version reported an improvement, although it also still recorded a reduction, just to a lesser extent. Some people are doing well, but some find it difficult. (It’s just normal human psychology to focus on those who do it hard and ignore those who don’t.)

North in CanadaThe plant was expanded. The rise in new orders pushed their result to a 20-month high.

In China Caixin Factory PMI turned out to be less positive, which largely confirms official factory PMI released there earlier.

In Australia, CoreLogic Reports that Sydney has now followed Melbourne’s lead and recorded a month-long fall in house prices. Nationally, prices have risen slightly due to continued growth in Brisbane, Adelaide and Perth. But now the pace is slowing everywhere. The limits of financial inclusion appear to have been reached.

At the same time, there was practically no growth. housing lending activities in September compared to August, and for investors these levels have decreased. Both recent trends have been weaker than expected, especially for first-home buyers.

Internationally ranked Australian Manufacturing PMI reported that the decline in their industrial sector eased in October, but it still remains in deep decline.

The 10-year UST yield is now just 4.39% and up +2 bps. compared to Saturday, and last week increased by +14 bp. The key 2-10 bond yield curve is now positive at +17 bps. Their inversion of the 1-5 curve is also now inverted much less, now by just -7 bps. And their 3-month-10-year curve inversion is also much less inverted, now at -26 bps. Australia’s 10-year bond yield starts today at 4.56% and remains unchanged. The rate on China’s 10-year bonds also remained unchanged at 2.13%. The New Zealand government’s 10-year bond rate is still at 4.49% and up +4 bps. in a week.

It should be noted that Warren Buffett’s Berkshire Hathaway reported third quarter results over the weekend, including that its ‘cash’ holdings rose to US$320 billion/NZ$538 billion (page 2) – most of which came from short-term US Treasury bills. It has increased because Buffett is selling shares, including Apple. (Fun fact for us: New Zealand’s nominal GDP is “only” NZ$413 billion.)

Gold price today will start at $2,736/oz and -$1 lower than Saturday, but still well below its high and -$9 lower than a week ago.

US oil prices are holding at US$69.50 per barrel, while the international Brent price is still at US$73.50 per barrel. These levels are approximately -US$2.50 lower than a week ago.

The kiwi dollar today starts at 59.6 US cents and is down -10 bps. compared to Saturday. A week ago it was 59.8 US cents, so little changed. Against the Australian we remained unchanged and amounted to 90.9 AUc. Against the euro, we decreased by -10 bp. up to 55 euro cents. What this all means is that our TWI-5 starts today at just 68.7, unchanged from Saturday at this time and unchanged from this time last week.

Bitcoin price starts today at $68,139 and is down -2.3% since Saturday. A week ago it was $66,267. Volatility over the past 24 hours was modest at just +/- 1.6%.

The easiest way to keep up with event risk is to follow our Economic calendar here ».