China makes big cut to reserve ratio, China fx reserves rise; China exports fall; US payroll growth weak; global air travel soft; UST 10yr yield at 1.56%; oil unchanged and gold lower; NZ$1 = 64.1 USc; TWI-5 = 69.3

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Here's our summary of key events overnight that affect New Zealand, with news China has sprung a series of data surprises.

They cut their reserve ratio by a chunky -50 bps, which is expected to release up to US$125 bln in additional bank liquidity. And they are doubling the cut to -100 bps for commercial banks that operate only within provincial-level regions. All this extra liquidity is to help fund their boosted infrastructure projects at provincial levels, funded by even more local authority debt.

And there was another surprise; China's foreign currency reserves actually rose in August, an unexpected outcome given the devaluation Beijing is orchestrating in the yuan. The rise wasn't large (+US$34 bln), but it masks a stronger situation than you might otherwise have assumed.

Also a surprise is an unexpected fall in exports in August. Exports fell -1% in dollar terms from a year earlier, while imports declined -5.6%, leaving a trade surplus of US$34.8 bln, The reason for the fall in exports is a sharp drop to the US, which was down -16% on a year-on-year basis. Analysts had expected a small rise as front-loading extended.

In Hong Kong, protests flared again this weekend. Ratings agency Fitch cut Hong Kong's credit rating to AA from AA+, citing these protests.

In New Zealand, ratings agency S&P has affirmed the ratings on the four major New Zealand banks (at AA-) and Rabobank (at A). The outlooks on all five banks are stable. They say the risks facing banks and nonbank financial institutions operating in New Zealand have reduced as house price growth has slowed in the past two years.

In Europe, German industrial production data extended its contraction.

And in Thailand, they have started offering a 50% tax cut for manufacturers fleeing China (there are a few, but so far there is no mass exodus).

In the US, their August non-farm payrolls data shows that they continue to add jobs, but at a very modest pace as the trade war intensifies and global growth slows. In fact, the +130,000 new August jobs is the fourth lowest month in the past year, and for the whole past twelve months, the jobs growth is -19% below the same prior period, and the least since 2011. Of note, freight companies 'slashed' their payrolls, the industry sector with the largest reversal. The only saving grace is that overall wage growth is staying up at +3.2% where it has been for about a year, although it is hard to see that sustained as labour demand wanes. The American participation rate remains low at 63.2% making their jobless rate look better than it really is.

A Presidential adviser conceded over the weekend that the trade war could take "a decade" to result, undermining his boss's claim that trade wars are "easy to win".

There is little to report on the trade war front and there probably won't be until the meetings in early October take place.

As we reported on Friday, the global airfreight market is now shrinking. But until now the international passenger market was in good shape. However the July data shows that growth is pulling back here too, up only +2.7% in a year, and only half the rate we reported in June. The Asia Pacific region grew similarly at +2.7% in July. The weakest region is North America with growth only half that.

The UST 10yr yield is unchanged since from this time Friday at 1.56%. Their 2-10 curve still marginally positive, but only just, at +2 bps. Their negative 1-5 curve is unchanged at -32 bps. Their 3m-10yr curve is at -49 bps. The Aussie Govt 10yr is at 1.07%. The China Govt 10yr is at 3.02%, while the NZ Govt 10 yr is now at 1.18% and up +8 bps over the past week.

Gold is lower at US$1,506 and a -US$12 fall over the weekend, a -US$17 drop in the week.

US oil prices are holding at now just over US$56.50/bbl. The Brent benchmark is also up at just on US$61.50.

The Kiwi dollar is firmer today, now up to 64.1 USc which is more than a +½c gain over the weekend and a +1½c gain since this time last week. We are back to where we were three weeks ago. On the cross rates we are firmer too at 94.2 AUc. Against the euro we are at 57.6 euro cents. That puts the TWI-5 back up to just on 69.3.

Bitcoin is now at US$10,397 and that is unchanged since this time on Saturday. 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 ».