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Dairy auction prices change little; US construction strong; Russia near 'panic'; ECB frozen; oil price falls again; NZ$1 = 78 USc, TWI = 78.2

Dairy auction prices change little; US construction strong; Russia near 'panic'; ECB frozen; oil price falls again; NZ$1 = 78 USc, TWI = 78.2

Here's my summary of the key issues that affect New Zealand overnight with news of  'some panic' in Russian financial circles.

But first up, the latest GlobalDairyTrade auction overnight saw prices change very little overall. They were down slightly less than -1.1% in US dollars but up almost +0.8% in New Zealand dollars.

In fact, it was only whole milk powder that that kept the result low. Almost every other commodity saw rising prices. Butter was up +7.3% from the previous auction, cheese was up +5.2%, and skim milk powder was up +5.7%. Whole milk powder prices saw the only fall, down -7.1% to US$2,229/tonne. Fonterra is helped by not being wholly dependent to milk powders, unlike some.

Still, prices are now running at only about half the level they were a year ago and the expected overall rise expected by the industry will probably come too late to save another reduction in this season's dairy payout.

In the US, construction spending recorded its largest gain in five months in October, easing concerns of a slowdown in fourth-quarter economic growth. Vehicle sales are also reported to be strong in November. And a major New York area manufacturing purchasing index also reported continuing strong gains.

The situation in Russia however is getting worrying. Their economic crisis is deepening as the government acknowledged overnight it is heading for recession and one former central banker spoke of "some panic" in their financial system as a result of the plunging oil price.

At the ECB there are signs they can't get their act together to launch the Draghi-promised bond buying program. Announcements are getting pushed back as internal disagreement drags on.

The OECD has revealed overnight the scale of an enormous global corruption problem. They say large companies and their senior managers are responsible for the vast majority of the world’s bribery cases and they are giving up a third of their profits from related projects to corrupt officials. The OECD also questions the commitment of governments to fight the scourge.

Late yesterday, the Australian Reserve Bank kept its rates on hold but sharpened its rhetoric on the elevated Aussie dollar problem. Analysts think that opens the door to future rate cuts.

UST 10yr bond yields rose in New York overnight, up more than 10 bps to 2.28%. 

Meanwhile, the oil price could not hold yesterday's bounce. The US price is now under US$68/barrel and the Brent price is just under US$72/barrel. More supply may be heading from Iraq soon as the Baghdad government and Kurdistan agree on an oil export deal overnight.

The gold price's recent volatile movements continued and last night has seen a big fall, back under US$1,200. It is currently at US$1,197/oz.

The kiwi dollar also fell back overnight as the US dollar gained. We start today at 78 USc a whole cent lower than this time yesterday, 92.3 AUc, and the TWI is at 78.2.

If you want to catch up with all the changes from yesterday we have an update here.

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

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3 Comments

A really, really, really good graph of New Zealand projected (for planning purposes) vs actual vehical kilometres travelled.

http://www.transport.govt.nz/ourwork/keystrategiesandplans/strategic-po…

 

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What is more interesting is when that graph went flat.  Just when the oil price went crazy in 2004.  So that graph does a great mimic of conventional crude oil output per day, eerily so.

So they "explored" the possible futures but didnt consider Peak oil, oil's price and is future scaricty and how it will be rationed, on price.

None of those graph trends point downwards, not one....no consideration at all....

regards

 

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Wholemilk powder down 7.1% should be a concern to farmers.  It is the cornerstone of our payout.  The question is - how smart has Fonterra been on it's forex hedging so far this season? 

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