US Fed maintains dovish stance; US exports drop sharply; air cargo volumes recover slightly; China imports steel; iron ore price up; UST 10yr yield at 0.58%; oil unchanged and gold at new record high; NZ$1 = 66.6 USc; TWI-5 = 69.9

Here's our summary of key economic events overnight that affect New Zealand, with news the price of gold is suddenly very volatile.

But first in Washington DC, the US Fed held all its monetary policy settings unchanged but said the resurgent virus is threatening their economic recovery from the first wave, and "will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain smooth market functioning". It was a Statement that didn't move financial markets, but it did move the gold market.

And in an update on Congressional action on extending the fiscal stimulus programs, both sides say they are far apart on any agreement. Congress ends the current session on August 7 after which the election campaign period formally begins.

In the real economy, American exports rose slightly in June from May in their usual seasonal shift, but are -24% lower year-on-year. American imports are down -13.5% year-on-year. The June 2020 merchandise trade deficit was -$74 bln compared to -$69 bln in June 2019. By any measure, their aggressive trade policies aren't working.

Improving however are US pending home sales in June, which were up +6.3% year-on-year suggesting the July levels will show increases too. The gains in the West are notable.

But American manufacturing is taking some heavy blows. Boeing said it would cut production of commercial jets even further and continue to shrink its workforce as the pandemic deepens its toll on aviation. And GE also said it is now losing huge money in its jet engine business.

But these negative earnings reports from these two bellwether companies hasn't hurt Wall Street today.

The S&P500 is up +1.3% in afternoon trade. That follows mixed and tame results in Europe overnight. Yesterday, Shanghai was up a very strong +2.0%, Hong Kong was up +0.5%, but Tokyo fell -1.2%. The ASX200 ended down -0.2%, while the NZX50 rose +0.2%.

In China, a surprise trade data revelation: China became a net steel importer in June for the first time since the last global recession in 2009, with imports from India, Japan, South Korea and Vietnam set for short term gains as demand overshoots supply in the rapidly recovering economy. China can't make enough steel for its own needs, it seems. No wonder the iron ore price just keeps on rising, up more than +40% so far in 2020. And that makes it difficult for China to 'punish' Australia for its foreign policy tensions.

In Australia, the steep fall in CPI inflation predicted happened, but just a whisker less than expected. They reported -1.9% deflation in June from the March quarter, and annual deflation of -0.3%. This was the largest quarterly fall ever in Australia. Since 1949, this was only the third time annual inflation has been negative. The previous times were in 1962 and 1997-98. The pandemic benefit of the public provision of free pre-school childcare was the main contributor, along with lower petrol prices. Without both they would have had a small amount of inflation. Food prices were up +4.1% pa in the year to June.

The international air cargo market is far, far healthier than the passenger market, but it has it's own steep decline to report. Overall aircargo volumes were down -19% in June from the same month in 2019 (which was a smaller decline than in May) and Asia/Pacific markets were down -20%. The smallest drop was in North America, down -9%.

The latest compilation of COVID-19 data is here. The global tally is 16,820,000 and that is up +280,000 since this time yesterday. Global deaths reported now exceed 662,000 (+7,000).

A quarter of all reported cases globally are in the US, which is up +65,000 from this time yesterday to 4,526,500. US deaths are now just over 153,000 and a death rate of 462/mln (+6/mln). And the number of people actively infected in the US rose +15,000 yesterday to 2,160,200.

In Australia, there have now been 15,582 cases reported, another +278 since this time yesterday, and still concentrated in Victoria but also small pockets in Sydney's suburbs. Their death count is up to 176 (+9). Their recovery rate has stayed at under 62%. There are now 5787 active cases in Australia (+81) and almost all are community transfer.

The UST 10yr yield is holding lower, at just on 0.58% (It has since fallen to 0.56%). Their 2-10 curve is unchanged at +45 bps. Their 1-5 curve is also little-changed at +13 bps, and their 3m-10yr curve is unchanged too at +49 bps. The Aussie Govt 10yr yield is unchanged at 0.88%. The China Govt 10yr is firmer, up +2 bps at 2.96%. But the NZ Govt 10 yr yield is lower and now at 0.83% after a -2 bps dip.

The gold price has pushed on up to yet another new all-time high of US$1,962/oz and a further gain of +US$8/oz for the day. And then after the US Fed announcements, it climbed further by another +US$14 to US$1,976/oz - and then promptly reversed itself. China announced measures to clamp down on precious metals speculation through leveraged transactions.

Oil prices are little-changed today. They are just on US$41/bbl in the US and the international price is just at US$43.50/bbl.

And the Kiwi dollar will also start today unchanged at 66.6 USc. Against the Australian dollar we are soft at 92.8 AUc. Against the euro we are also soft at 56.5 euro cents. That means our TWI-5 has slipped to 69.8 but still in the general range we have been in, all year.

The bitcoin price has risen again, up another +2.2% since this time yesterday to US$11,216. That has cumulated to be a +17% rise on one week. 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 ».