Dairy prices drop more than expected; China retaliates on de-risking; China drops TD rates further; RBA holds; global temperatures hits new record high; UST 10yr 3.86%; gold and oil firmer; NZ$1 = 62 USc; TWI-5 = 70.4

Here's our summary of key economic events overnight that affect New Zealand, with news the earth hit a heat record yesterday.

But first, it's a public holiday in the US, so financial markets will notice much lower volumes.

Second, there was another dairy auction this morning and lower price levels are setting in again. Prices fell a sharpish -3.3%, much more than the -1% expected, driven by a -10% dive in the butter price and a -6% retreat in the SMP price. Volumes sold were up on the prior auction two weeks ago but actually came in less than the advertised 'minimums'.

Milk supply is strongish in most producers and the local season is ending with higher supply volumes. So perhaps buyers realise in future the supply situation will be flush. A year ago this same event fell -4.1% and was followed by a set of following events that fell at similar levels. Let's hope that doesn't happen like that again this year. And it also doesn't help that the NZD is rising, because prices in local currency fell -3.9%.

In Canada, their internationally-benchmarked factory PMI fell to a slightly steeper contraction in June, marking the third month of contraction since the start of the year and tracking the bearish momentum in the Americas and Europe.

China said that it will impose new export restrictions on two materials crucial to making semiconductors and other electronic components after August 1, 2023, in an escalating technology trade standoff with the Americans. China is currently a key source for these materials, but not the only one. And actions like this play into the hands of those warning China is instinctively an unreliable trade partner. "De-risking" makes more sense when they do this sort of thing. Pressing one of the most innovative industries in the world just encourages innovation to be less reliant on China.

And staying in China, there are more reports of falling bank account interest rates as authorities move to make holding cash less attractive in the hope these savers will spend more of it.

In Australia, their central bank has kept its cash rate unchanged at 4.10% saying, although further increases might be needed to rein in inflation, it wants more time to assess the state of the economy, the economic outlook and associated risks. Financial markets had expected an increase but not with any great conviction. But they are all aware that inflation is running at 5.6% in the year to May, still far higher than their target.

Meanwhile, we should note that yesterday was the hottest day on record, globally. It might go unremarked elsewhere and it certainly isn't anything to celebrate. But with the seasonal peak usually in late July, yesterday's record seems unlikely to last long.

The UST 10yr yield will start today at 3.86% and unchanged from yesterday. Their key 2-10 yield curve inversion is also unchanged at -108 bps. But in between it briefly almost reached -110 bps and a 42 year record. Their 1-5 curve is holding at -124 bps. And their 3 mth-10yr curve is still at -133 bps. The Australian 10 year bond yield is now at 4.01% and up +3 bps. The China 10 year bond rate is little-changed at 2.71%. And the NZ Government 10 year bond rate is up +5 bps at 4.69%.

Wall Street is closed today for a national holiday. Overnight, European markets were quiet, and slipping about -0.2% across the board. Yesterday, Tokyo ended its Tuesday session down almost -1.0%. But Hong Kong recovered +0.6%, while Shanghai was unchanged. The ASX200 ended its Tuesday session up +0.5% and that was matched with a NZX50 rise, also +0.5%.

The price of gold will start today at US$1925/oz and up +US$4 from yesterday.

And oil prices are up +US$1 at just over US$71/bbl in the US. The international Brent price is firmer too at just over US$76/bbl.

The Kiwi dollar starts today just under 62 USc and up almost +½c this time yesterday. Against the Aussie we are up almost +½c as well at 92.5 AUc. Against the euro we are similarly higher at 56.9 euro cents. That means the TWI-5 is now at 70.4 and up +50 bps and our highest since late May.

The bitcoin price has fallen from this time yesterday and now is at US$30,889 which is a minor -0.4% fall. Volatility over the past 24 hours has been low however at just under +/- 0.9%.

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