took a back seat on Thursday and Friday on market hopes that the US Congress
would pass the US$900 billion stimulus package and bank rescue plan this week. The
worst US payrolls
report ever only served to increase the likelihood such measures would be implemented.
Global stimulus is expected to take traction soon, and money which has been
parked in safe havens is starting to be put to work. The S&P500 index duly
rose 2.7%, led by a 13.8% rise in the banks‚Äô sub-index. Copper rose 9%, and
Baltic Shipping 10%, signs that economic activity is expected to bounce soon.
Interest rate markets are now considering the possibility that easing cycles
are almost complete, US 10 year treasuries selling off by 8bp to 2.99% (and
steepening the 2-10 year curve to 300bp), while Australian 3 year swap rates
in risk appetite helped NZD rally over 3.5 cents since
Thursday‚Äôs NZ close, to 0.5365. Note that the thinner liquidity during Friday‚Äôs
NZ national holiday may have exaggerated the move. Stimulus packages have
consistently provided short-term boosts to risk-currencies, and this week‚Äôs
speculation surrounding the US plans
should do likewise.
Australian close, the AUD accelerated from 0.6520 to
0.68, in the wake of an earlier RBA report implying the big rate cuts are over.
Recent strength in commodities and shipping is another factor here. AUD/NZD
stabilised in a higher 1.2650 to 1.2750 range, the divergent central bank views
providing a positive tone.
EUR led the
charge in risk currencies, moving from 1.2750 to almost 1.30, a large EUR/JPY order
from an auto-maker helping. ECB signals it may cut 50bp in March dominated weak
German data and fears of Russian credits impairing European bank assets.
Thursday‚Äôs BoE rate cut of 50bp to 1.00% lingered, helping GBP from 1.46 to
1.48. With IMM JPY longs at very high levels,
waiting to be squeezed higher, from 90.75 to 92.20. JPY volatility has fallen
in the past week, making carry trades more attractive.
payrolls dive 598k in Jan, and with annual benchmarking revisions unflattering
to late 2008 data, it is now the case that jobs are being shed at near a 600k
pace in the past few months, whereas prior to this report it was ‚Äúonly‚ÄĚ half a
million a month. The separate household survey found a staggering 1.2 million
job losses in Jan alone, enough to push the jobless rate up to 7.6%, its
highest since 1992. However it‚Äôs not quite that bad; annual statistical tweaks
to the household survey boosted that Jan decline by around 400k leaving a still
huge but genuine 800k job loss in place. The Nov to Jan payrolls slump of
1.77mn is unprecedented in the modern era, surpassed only by the 1.97mn
soldiers who lost their jobs after the war in late 1945. There were no
redeeming features in the report. The job losses were broad-based across most
industries. Hourly earnings growth slowed to 0.3% which indicates that it is
not just lower-paid workers losing their jobs; for earnings to slow like that,
higher paid workers must also be lugging bin-bags of personal possessions home.
Hours worked fell a further 0.7%, their fifth straight decline and an early
sign that Q1 GDP growth should at least match Q4‚Äôs ‚Äúonce in a generation‚ÄĚ pace
IP down 4.6% in Dec. Yet more evidence that the global trade melt
down in Q4 last year is really hitting the German factory sector hard. The
December IP fall was the steepest ever recorded for the current series which
began in 1991 after the East-West reunification.
data from the industrial sector. Producer price inflation kept or resumed falling
in January, depending on the measure, with the diving pound in recent months
not yet significant enough to offset the impact of plunging materials costs and
weak demand. Industrial output fell sharply again, though not quite as steeply
as in November, which was revised weaker. There are grounds now to expect a
downward revision to Q4 GDP growth, originally reported at ‚Äď1.5%. Annual IP
growth of ‚Äď9.4% yr is the weakest since 1981.
posted its biggest ever monthly job loss of 129k in Jan since the series
began in 1976. There was across the board weakness, with full-time workers, and
manufacturing hit especially hard (perhaps exaggerated by temporary autoplant
light data calendar until Friday‚Äôs retail sales, the NZD is at the mercy of offshore
events. Risk is back, for now, and domestic players will need to adjust
positions after holidaying on Friday, which will support NZD on the day. A
range of 0.52 to 0.5370 is suggested, with risk to the upside.
Speizer, Senior Market Strategist, NZ, Ph: (04) 470 8266
contributions from Westpac Economics
Country Release Last Forecast
9 Feb Aus
Jan ANZ Job Ads ‚Äď9.7% ‚Äď
Current Account ¬•bn ¬•581.2 ¬•320.0
Orders %mth ‚Äď16.2% ‚Äď8.6%
Watchers Survey Current 15.9 13.3
Sentix Investor Confidence ‚Äď34.4 ‚Äď30.0
Current Account ‚ā¨bn 8.6 7.5
Housing Starts ‚Äė000 172.2 169.3
10 Feb Aus
Jan NAB Business Survey ‚Äď6 ‚Äď
Stevens Speech, AEDT
Wholesale Inventories ‚Äď0.6% ‚Äď1.0%
‚ÄĘ NZ Q4 HLFS
Review (5 February)
‚ÄĘ NZ Q4 LCI
and QES Review (2 February)
‚ÄĘ NZ Weekly
Forex Outlook (2 February)
‚ÄĘ RBNZ OCR
Review (29 January)
‚ÄĘ NZ Weekly
Forex Outlook (27 January)
‚ÄĘ NZ Q4
labour market preview (26 January)
papers/publications are available on Online Research on Westpac
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Mon 12 Mar 2018 A 17:00 US- 3-Yr Auction Tue 13 Mar 2018 A 10:00 DE- ZEW Survey AA 12:30 US- CPI A 17:00 US- 10-Yr Auction Wed 14 Feb 2018 AA 12:30 US- Retail Sales A 12:30 US- PPI A 14:30 US- EIA Crude A 17:00 US- 30-Yr Auction Thu 15 Mar 2018 A 12:30 US- Weekly Jobless A 12:30 US- Philly Fed, Empire PMI A 12:15 US- Industrial Production Fri 16 Mar 2018 A 10:00 EZ- final HICP A 12:30 US- Housing Starts/Permits A 14:00 US- prelim Univ of Mich
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