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Here's our summary of key events overnight that affect New Zealand, with news of a bloodbath in equity markets worldwide.
In fact, we are witnessing a dangerous sell-off in all financial markets.
Wall Street is down a whopping -3.4% so far today and sinking fast. And that follows Europe being down about -2% overnight. And that followed steep declines in Asia. Shanghai was down -1.6% despite 'home team' support. Hong Kong was also thrashed -2.9%. And Tokyo was not much better, down -1.7%. Yesterday, the ASX200 lost -2% and the NZX50 lost -0.9%. This could well be the start of the Trump Recession. The tax-cut sugar rush has worn off and fast; the hangover starts.
Commodities are falling, with oil down -1.8%, copper down nearly -4%, iron ore dropping -6%. And we have our eyes on dairy prices at the Wednesday auction. Derivatives pricing suggests a small retreat. Gold on the other hand is up more than +1.7%.
Not helping is that benchmark interest rate yields are sharply lower too with the US Treasury 10yr down to 1.74%. The Australian Government 10yr yield fell to just 1.02% and may slip soon under 1% for the first time ever. Remember this is a rate that started 2019 at 2.3%.
Given that this market slump was triggered by US tariff action, most economic data precedes that trigger. But still, in the US, the closely watched ISM services PMI has disappointed for July. It has come in at its weakest level since August 2016. New orders dropped to a three year low.
China is releasing its peg on the yuan. The Americans are fixated on this, but they can hardly be surprised. The 7-to-the-dollar level is now breached. The trade war may now morph into what was always a likely outcome of a tariff war - a currency war. And an own-goal by Washington, given that the US can't really respond as its currency is the benchmark in trade.
China also halted crop buying from the US.
These market earthquakes are probably more than US Fed actions - or any central bank - can weigh against.
In China, their services PMI has come in at a five month low.
And in Australia, a similar survey has also weakened. But globally, the sevices sector was expanding moderately in July. However, that was before the ructions of this week.
Today UST 10yr yield is now at 1.74%, and -10 bps lower in a day. Their 2-10 curve is flatter at just +16 bps and their negative 1-5 curve is much wider at -26 bps. Their often-quoted 3m-10yr curve is now a negative -27 bps. The Aussie Govt 10yr is at 1.02%, down another -7 bps since this time yesterday. The China Govt 10yr is down -7 bps for the week to 3.07%, while the NZ Govt 10 yr is now at 1.33%, a -6 bps decline.
Gold has leapt higher today, up to US$1,467, a +US$27 gain overnight.
US oil prices are falling hard. They are now just on US$54.50/bbl which is a drop of more than -US$1. The Brent benchmark is even lower at US$59.50, a drop of more than -US$2.
The Kiwi dollar starts today firmer than intra-day trading yesterday but back to where it started the week at 65.4 USc. On the cross rates we are firmer at over 96.6 AUc and that is a 19 week high. Against the euro we are softer at 58.4 euro cents. That sets the TWI-5 at just on 70.7 and little-changed overnight.
Bitcoin is now at US$11,810 and another +8% from this time yesterday. 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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