US budget deficit up to -4.7% of GDP; bond yields and equity markets fall; Argentina rocked; China credit growth slows sharply; UST 10yr yield at 1.66%; oil unchanged and gold up; NZ$1 = 64.7 USc; TWI-5 = 69.6

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Here's our summary of key events overnight that affect New Zealand, with news of a sharp turn to risk aversion.

The US budget deficit pushed on up closer to the -US$1 tln mark in July, now at -US$961.8 bln. That is 27% higher than one year ago, and well higher than for all of the previous fiscal year. However the recent Congressional deal makes a debt limit shutdown much less likely even when it pushes on up through that benchmark. At -$1 tln, that will represent -4.7% of US GDP, up from -3.9% in fiscal 2018 and -3.4% the previous year.

Bond markets winced, becoming even more risk averse and driving the yield for benchmark US Treasury 10 year bonds down to 1.66% which is the lowest level since October 2016.

Equity markets also reacted negatively, with the S&P500 now down -1.5%. This is much more than the -0.2% that European markets closed at overnight. Yesterday Asian equity markets were generally positive, especially Shanghai which was up almost +1.5%.

Another overnight negative however came from Argentina where the President suffered a shock loss in a primary election campaign for re-election, beaten by a candidate not committed to reform. The reactions have been swift and harsh on both the Argentine currency and equity markets.

In China, credit growth is slowing, and quite sharply. Banks lent just on US$150 bln in new loans in the month, more than -30% lower than for June and more than -15% less than analysts were expecting. This significantly slower pace of lending will significantly fuel expectations that Beijing will have to step up monetary easing measures to boost the weakening economy amid escalating trade tensions with the US.

Just outside Hong Kong, China is readying forces to move in and take over, in an ominous signal.

Locally, we get the REINZ data for July house sales activity at 9am, so join us then for full analysis.

The UST 10yr yield is down a sharp -9 bps to be at just 1.66%. Their 2-10 curve is much flatter for the week, now at just under +10 bps and their negative 1-5 curve is wider at -22 bps. The Aussie Govt 10yr is at 0.95%, down another -4 bps from yesterday. The China Govt 10yr is unchanged at 3.05%, while the NZ Govt 10 yr is also little-changed at 1.12%.

Gold is +US$9 higher today at US$1,505/oz.

US oil prices are little-changed today at just on US$54.50/bbl. The Brent benchmark is little-changed at US$58.50.

The Kiwi dollar is unchanged today, still at 64.7 USc. On the cross rates we are marginally firmer at 95.5 AUc. Against the euro we are softer 57.5 euro cents. That sets the TWI-5 back slightly to just on 69.6.

Bitcoin is now at US$11,349 and that is almost exactly unchanged since 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 ».