Dairy prices rise sharply; Pakistan falls out with China over B&R projects; airline Travel Pass launched; Aussie new house sales leap; UST 10yr at 1.10%; oil and gold up; NZ$1 = 71.1 USc; TWI-5 = 72.6

Here's our summary of key economic events overnight that affect New Zealand, with news of some 'green shoots' - remember them from the GFC?

First, there has been a better-than-expected dairy auction overnight. WMP powder prices rose at the expected rate, but other products took the limelight this time. Overall prices rose +4.8% in USD terms and +6.7% in NZD terms. This takes them to levels last seen in May 2014 after a positive run of nine rises in the past ten auction events. In that time, prices have risen +21%. This is probably enough to have analysts raising their farm gate milk price forecasts for this season, something some of them have done recently based on the earlier rises.

SMP rose an impressive +7.0%, butter was up +4.6%, and AMF was up a remarkable +17% in today's auction event from the prior event. All this comes despite rising world supplies from competing nations, and is part of a general rise in commodity prices for food. And in turn that is based on rising demand out of China. The 'cream' for farmers is the recent weakening of the NZ currency.

In China, there are claims that icecream made from an imported WMP base is the source of a COVID-19 outbreak in Tianjin, a city neighbouring Beijing. This WMP was sourced from the Ukraine. We do need to be careful about such claims however as Chian is fighting a propaganda war over its handling of the pandemic and its origins. Facts are hotly disputed.

China is also fighting rising food prices, and the potential for social instability is rising.

Further, China seems to have a fight on its hands over how it is developing its Belt & Road projects in Pakistan. These two have been very cosy for the past few years, but recent disputes about costs and sovereignty have flared in the past few weeks. Aggressive Chinese policies and debt positions have been a concern for developing nations for a while now. There are many Western agencies saying "I told you so". Sri Lanka is in China's grip on these issues too.

International travel is in grim shape, no news there. But now the airline industry has launched a Travel Pass to enable passengers to create a ‘digital passport’ to verify that their pre-travel test or vaccination meets the requirements of the destination. Two Gulf State airlines have adopted it and it may become the model for travel during a pandemic while the vaccination programs are being ramped up.

In Germany, there has been a surprise rise in business sentiment there, possibly driven by expectations that the international vaccination rollouts will gain increasing momentum.

In Australia, there has been a remarkable rise in new-built home sales, zooming higher in December.

Wall Street has started their Inauguration Week positively, up +0.7% in early afternoon trade following their public holiday. In Europe, markets slipped about -0.2% overnight. Yesterday Shanghai fell -0.8%, but Hong Kong rose a remarkable +2.8% while the very large Tokyo markets was up an also-impressive +1.4%. The ASX200 closed +1.2% higher while the NZX50 Capital Index ended its session up a more modes +0.3% and ending a string of six straight 'down' sessions.

The latest global compilation of COVID-19 data is here. The global tally is rising faster, now at 95,726,000 and up +547,000 in one day. We are heading for 100 mln in about a week now mainly because the UK variant is taking off worldwide now. It is still very grim everywhere except in our region. Global deaths reported now exceed 2,045,000 and +11,000 since this time yesterday as death rates rise everywhere.

But the largest number of reported cases globally are still in the US, which rose +139,000 for their tally to reach 24,628,000. The US remains the global epicenter of the virus. The number of active cases rose overnight and is now at 9,675,000 and that level is up +23,000 in just one day, so many more new cases than recoveries. Their death total is up to 409,000 however (+2000). The US now has a COVID death rate of 1231/mln, awful but made to look 'good' by the disastrous UK level (1344) where deaths are surging.

In Australia, their community resurgence is back under control although officials are on high alert over the risks from the UK variant which is starting to show up in managed isolation intercepts. That takes their all-time cases reported to 28,730, and only +9 more cases yesterday with all in managed isolation. 195 of these cases are 'active' (-8). Reported deaths are unchanged at 909.

The UST 10yr yield will start today up +1 bp at 1.10%. Their 2-10 rate curve is unchanged at +95 bps, their 1-5 curve is still at +35 bps, and their 3m-10 year curve is also unchanged at +101 bps. The Australian Govt 10 year yield is up +2 bps at 1.05%. The China Govt 10 year yield is unchanged at 3.19%, while the New Zealand Govt 10 year yield is also unchanged at 1.02%.

The price of gold is up +US$2 today in New York and now at US$1840/oz. Silver is firmer.

Oil prices are firmer today by nearly +US$1 and now just under US$53/bbl in the US while the international price is now just under US$56/bbl.

And the Kiwi dollar is marginally weaker again today from this time yesterday at just under 71.1 USc, a softening trend that has been evident since the start of the year. Against the Australian dollar we are softer as well at 92.4 AUc. Against the euro we are down to 58.7 euro cents. That means our TWI-5 is now down at 72.6 and its lowest since before Christmas.

The bitcoin price is notably higher this morning compared to this time yesterday. It is now at US$37,433 a gain of +4.8%. Volatility has been +/- 3.4% in between but we are currently near the top of this range. 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 ».