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Here's our summary of key events overnight that affect New Zealand, with news we are in the news shadow for the RBNZ rate review this afternoon.
First up today, there was another dairy auction overnight and it was a disappointing downer, reversing most of the gains from the previous event. No doubt the risk aversion sweeping financial and commodity markets world-wide affected bids. In any event, prices dropped -2.6% overall with the key WMP taking the least hit, down just -1.7%. In NZD terms, the overall result was a tiny +0.1% rise as our currency's depreciation took up the slack. Volumes sold in this auction were the highest so far this year.
Wall Street is staging a bit of a bounce-back today, recovering about a third of yesterday's losses. But it was lower yet again in Europe overnight. And bond investors haven't changed their negative view today.
Yesterday in Shanghai, their equity market was down -1.5%. Hong Kong was down -0.7%, and Tokyo was also down -0.7%. But that was light compared top the -2.4% drop in Australia. The NZX50 was down -1.7%. These declines will hurt KiwiSaver funds if they are sustained in August.
We usually wait until the weekend to update how the VIX volatility index is tracking but in just two days so far this week it has jumped to levels we haven't seen in in 2019. The Fear & Greed index we follow has jerked over to the 'extreme fear' range.
In the US, job openings and hiring fell in June, suggesting that demand for labour was cooling in tandem with a slowing economy. Of course, this data well precedes the recent heavy market correction. But things won't have gotten better since then and that may provide another reason for the Federal Reserve to cut interest rates again next month.
Another front might be opening in the trade war; China has told India not to block Huawei from doing business in the country, warning there could be consequences for Indian firms operating in China.
And in China, another company is struggling, this time a large regional dairy company, and it is seeking a state bailout to survive.
In Hong Kong, things are getting even more ugly as Beijing hires the triads to take on the protesters and calling on locals to "defend your home".
In Germany, factory orders rose unexpectedly in June, up +2.5% from the prior month.
The trade surplus in Australia just gets larger and larger. We had reported April as an all-time record surplus, then May was an even larger record. Now we can report that for June that it was another huge surplus, this time far, far larger than any previous month at +AU$8.6 bln (actual, not seasonally adjusted). That means for the year to June, they had a goods surplus of +AU$53.6 bln (or 2.8% of GDP) and far above the +AU$12.9 bln surplus on the same year to June 2018 (0.5% of GDP).
Despite these great trade outcomes, the RBA has trimmed its economic growth forecast yet again to +2.5% for this year (from 2.75% as their May forecast, and 3.0% in February which itself was previously forecast as 3.25%) and admitted inflation will undershoot for years. They did this when holding their official interest rate steady at a record low 1% after two consecutive -25 bps cuts.
Locally, QV figures for July out today show property values on a long slow decline in Auckland, and they are starting to head downwards in several other regions.
The UST 10yr yield is unchanged at 1.73%, embedding the earlier weakness. That may not have moved much overnight but shorter rates did and their 2-10 curve is flatter at just +12 bps while their negative 1-5 curve is wider at -28 bps. Their 3m-10yr curve is now over a negative -30 bps. The Aussie Govt 10yr is holding at 1.03%. The China Govt 10yr is also little-changed at 3.08%, as is the NZ Govt 10 yr which is still at 1.33%.
Gold is up another +US$5 today at US$1,472/oz.
US oil prices are lower yet again. They are now just under US$54/bbl which is another fall of almost -US$1. The Brent benchmark is also lower at under US$59.
The Kiwi dollar starts today softer at 65.2 USc. On the cross rates we are still surprisingly firm at 96.5 AUc. Against the euro we are softer at 58.2 euro cents. That sets the TWI-5 a little softer at just on 70.5.
Bitcoin is now at US$11,725 and virtually unchanged 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 ».