Here's our summary of key events overnight that affect New Zealand, with news the Reserve Bank of Australia has cut its official rate again.
But first, today's dairy auction has been a generally tame affair with the overall price fall less than expected. Prices this time are down -0.5% in US dollars with WMP unchanged and SMP up +3.2%. Other products didn't far as well however. And this time the currency has gone against us, meaning the small US dollar price drop is magnified in New Zealand dollars, down -2.7%. There is however little in this auction to change farmgate milk payout forecasts, even if it is the fourth decline in a row, but don't forget that since early May the cumulative retreat is now more than -8%.
Equity markets have been lacklustre over the past 24 hours, wobbling between a gain and a loss. On Wall Street the S&P500 is virtually unchanged, in no mood to 'celebrate' the record 121 growth run the US economy which started with the election of President Obama in the depths of the GFC. In that time the S&P500 has risen about +300%. The rise from just prior to the GFP is about +200%. But some are now saying the next US recession will start in 2020.
Not helping have been downbeat comments from the UK central bank chief.
At the EU, after some fraught negotiations, it has been agreed that the current IMF boss Christine Lagarde will replace the retiring Mario Draghi has the head of the European Central Bank. At the same time, it was announced that Jean-Claude Juncker will hand over the EU Presidency to the current German defense minister, Ursula Von der Leyen, and Angela Merkel protege.
In China, analysts are watching official numbers think there is a concerted and major effort to push-back on a growing wave of capital flight, one that is being masked in that official data.
The iron ore price is rising sharply yet again. An official Australian report is forecasting rather a steep drop in iron ore export volumes in the next year (see page 26), and along with Brazilian mine woes, and expanding demand in China, this price may go even higher yet. China's supply of steel to India, which is struggling with its own domestic capacity, is a big part of the demand story.
In Australia, their Reserve Bank went ahead with another -25 bps rate cut yesterday, as markets expected. That takes their official rate down to just 1%. Now the flow-through will be watched closely. Savers beware. House prices are likely to get a new burst if banks can get the lending out the door under the new constraints. Most analysts think that this is the last cut by them in the current cycle even though the RBA boss said they would go lower if needed. But the RBA bosses are renewing their call on the Federal government to do more - actually do something - to assist monetary policy support of their economy.
Most Aussie banks are passing on all or most of the cut. Some are also offering a term deposit 'special' - of 2%.
The UST 10yr yield is falling and now at 1.98%, down -5 bps from the same time yesterday. Their 2-10 curve is now at +22 bps and their negative 1-5 curve is at -18 bps. The Aussie Govt 10yr is at 1.33% and down -2 bps overnight. The China Govt 10yr is down -3 bps to 3.23%, while the NZ Govt 10 yr is down -2 bps, now at 1.59%.
Gold has jumped back, recovering much of yesterday's drop, up +US$19 overnight to US$1,405/oz.
US oil prices are sharply lower today as demand fears grow. They are now under US$57/bbl The Brent benchmark is down too at under US$63/bbl.
The Kiwi dollar is unchanged against the US dollar and now at 66.8 USc. On the cross rates we are marginally softer at 95.6 AUc. Against the euro we are also unchanged at 59.1 euro cents. That leaves the TWI-5 at 71.5.
Bitcoin is firmer today, up almost +8% from this time yesterday to US$10,820. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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