Here's my summary of the key issues that affect New Zealand overnight with news of a clampdown on mortgage lending to residential property investors in Australia.
But first, stocks fell around the world, while haven assets from Treasuries to the yen (and curiously the NZ dollar) advanced amid concern that tighter lending rules in China will slow growth and early elections in Greece will trigger political turmoil.
In the US however, the number of job openings rose to a near 13 year high in October, wholesale trade grew more than expected in October, and a couple of December confidence measures were also up more than expected, all painting a positive economic picture.
But back across the Atlantic, its deja vu. There is a new Greek political crisis (new elections have been called after fury they balanced their budget), the Russians are selling assets to prop up its sinking currency, and the market expects the next ECB bond sale to be a fizzer.
And things are less than positive in China too after their government took some necessary action. They are working to reduce the growth of opaque local-government debt, but these actions caused a tumble in riskier bond prices and fuelled their stock market’s biggest fall in five years.
Reinforcing the risks, S&P warned late yesterday that the credit cycle may be turning in the Asia-Pacific region amid soft economic prospects, weak credit conditions, and a build-up of debt in the region. Lower growth prospects in China are at the heart of this re-evaluation.
In Australia, the Australian Prudential Regulation Authority (APRA) has told banks to rein in excessive lending to housing investors/speculators, especially in Sydney and Melbourne. It says more than 10% of lending to this sector is too risky, and it will step up oversight of the mortgage market.
At the same time the Australian Securities and Investments Commission (ASIC) has launched an investigation into interest only loans. ASIC's probe will look at the conduct of banks and non-bank lenders, and how they are complying with important consumer protection laws, including their responsible lending obligations. Interest only loans as a percentage of Australian banks' new housing loan approvals reached a new high of 42.5% in the September 2014 quarter.
This clampdown will likely give the Reserve Bank of Australia more room to cut their benchmark policy rates sooner.
The review follows concerns by regulators about higher-risk lending, following strong house price growth in Sydney and Melbourne.
In New York, UST 10yr bond yields fell sharply on all this re-emerging risk and are now at 2.20%.
The oil price has stabilised overnight at US$63/barrel and the Brent price is at US$66/barrel.
The gold price however has jumped significantly and is at US$1,230/oz level.
Meanwhile our currency has regained yesterday's fall. We seem to be a beneficiary of risk-off setting by investors these days, a complete turnaround from a year ago. But lets wait to see how markets react to this morning's Fonterra payout announcement. We start today at 77.1 USc, 92.7 AUc, and the TWI is at 77.6.
If you want to catch up with all the changes yesterday we have an update here.
The easiest place to stay up with today's event risk is by following our Economic Calendar here »