More slowdown signals

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and welcome to Friday's Economy Watch where we follow the economic events and trends that affect New Zealand.

I'm Rebecca Caroe and this is the International edition from Interest.co.nz.

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Looking at the markets ahead, investors have become increasingly focused on the US Fed. The markets are pretty confident that they’ll cut interest rates at the June or July meeting. These cuts are expected to push the US share markets higher. However, renewed concerns over the trade war between the US and China may continue to dampen positive sentiment. Whatever the market's doing at the moment, a buy-and-hold approach to investing can be a great way to earn long-term returns.
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Today this podcast leads with news monetary policy officials are bracing to do more to counteract growing slowdown signals.

In the US, the number of Americans filing applications for unemployment benefits unexpectedly rose last week, which adds to concerns that their labour market is losing steam after job growth slowed sharply in May.

Trade flows are also now slowing markedly. Imports at the two large Southern California ports fell sharply in May, with inbound container handling down more than six percent. Exports fell more than seven percent. This comes at a time when they are usually building up for the Summer peak.

Most economists in the US now say that the US Fed will cut rates soon, and reverse their normalisation plans. They see a worsening economic outlook brought on by the trade mess.

And across the Pacific, China's officials are pushing ahead with slowdown responses too. China's official press is suggesting that they are readying looser credit conditions, including relaxing bank capital reserve requirements, as they hunker down for a long trade war.

Oddly, foreign investment levels into China grew strongly in May according to official data, up more than eight percent from May 2018.

The Australian jobless rate has come in as expected at five point one percent. The number of new jobs created in May was an impressive 42,300 - until you realise the number of new permanent jobs was only 2,400 with the rest being part time positions.

Meanwhile, the iron ore price has surged to over 100 US dollars per tonne. That is its highest level since April 2014 and represents a surge of more than fifty percent so far this year.

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The UST 10yr yield is sharply lower today and now just on two point one zero percent.

And we should note that late yesterday local swap rates sank, down across the curve by two or three basis points. The two year swap rate actually ended up below one point four percent taking it down eight basis points since the beginning of June, and now down twenty seven basis points since the beginning of May. Breaching one point four percent on the way down in of itself doesn't signal anything, but it does highlight just how far this relentless rate drop has gone. Of course, it is a record low.

Gold is up nine dollars today, now just on 1,342 US dollars per ounce.

US oil prices have jumped sharply today, up about a dollar fifty a barrel. They are now just under 52.50 US dollars per barrel. The Brent benchmark is under 61.50. A tanker attack in the Persian Gulf is the trigger.

The Kiwi dollar is a tad softer this morning and is now at 65.7 US cents. On the cross rates we are a little firmer at 95 Australian cents. Against the euro we are at 58.3 euro cents. That leaves the Trade Weighted Index little-changed at 70.6.

You can find links to the articles mentioned today in our show notes.

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I'm Rebecca Caroe. We'll do this again on Monday.