Early Morning Call: gold rises above $2,000 on lower-than-expected US job openings

RBNZ rate hike

The Reserve Bank of New Zealand (RBNZ) surprised the markets this morning with a 50-basis point (bp) hike, taking the official cash rate to 5.25%. Investors were expecting New Zealand policy makers to slow the pace of hikes to 25-basis points.

The central bank had indeed signalled a half a percentage point increase at its last meeting in February, but, as the economic outlook deteriorated, economists had forecast a smaller increase.

For the RBNZ, "Inflation is still too high and persistent, and employment is beyond its maximum sustainable levels", and it decided to maintain the pace of its tightening policy, even though it acknowledged the level of economic activity over the fourth quarter (Q4) was lower than anticipated.

Equity markets

APAC equity markets were mixed overnight, after yesterday’s US session. Indices fell, and gold rose above $2,000 to its highest level since March 2022 after the release of US JOLTs job openings. The index fell to the lowest level in nearly two years to 9.9 million in February, below market expectations of 10.4 million, signalling the labour market might have started to cool.

The Federal Reserve's (Fed) aggressive hikes have had an effect on inflation but so far, the job market remained too hot. Now economists agree that February's move below 10 million could signify a more enduring pullback, even though we are still far from the seven million level of pre-Covid times.

After yesterday's job openings data, the market awaits the ADP survey, scheduled at 1.15pm. The market anticipates 200 000 jobs created in the US private sector in March, after 242,000 in February.

On Thursday, we'll get the weekly jobless claims, and March mon-farm payrolls (NFP) on Friday. Expectations point to 240,000 job creations, after 311,000 in February. Unemployment is expected to remain at 3.6%, and average hourly earnings to rise by 4.3% year-on-year (YoY).

Commodities

Oil prices are up after API data showed another crude and gasoline inventory fall. Crude oil stocks fell by 4.3 million barrels last week. Gasoline inventories fell by four million barrels after falling the previous week by nearly six million barrels. Distillate stocks were also down 3.7 million barrels.

New York orange juice prices rose by another 1.5% on Tuesday. Production in Florida, which accounts for about 80% of US production, is expected to fall by 61% from last year, to levels not seen since the Great Depression. The United States Department of Agriculture now estimates that production will reach 16 million boxes.

In 2022, Florida had to face two hurricanes, a January freeze, and a disease called "citrus greening". The bacteria, spread by an insect, makes the trees produce a green, bitter fruit, unsuitable to sell.

Now producers need to replant, but this takes time. Three years are required to get a tree to bear fruit. These trees won't be profitable before six to nine years.

However, the tragedy that hit Florida planters benefits another country: Brazil. The world's largest orange juice exporter saw shipments increase by 58% in the first four months of this season.