Here's my summary of the key issues that affect New Zealand overnight with news of record low oil prices.
But first up today, the latest Fonterra dairy auction held overnight saw prices rise. They were up +2.4% in USD terms, up +2.5% in NZD terms. Leading the way was butter which rose +10.4%. The key wholemilk powder price rose +1.4% with SMP down -3.2%. This is the third rise in the past five auctions and over that period overall prices have flat lined. Volumes offered and sold this time were low, the lowest since June. The Kiwi dollar pipped up on the results.
However, at US$2,270/tonne WMP prices are still a long way below the US$3,000+ level they need to be to support Fonterra's 2015 payout forecast.
American building permits and housing starts in November all grew at a slower rate over October and in some cases the growth was less than a year ago. But the trends are all higher.
It was a similar story in the American manufacturing sector. Output and new orders continued to rise at a solid pace in December, but both rates of expansion eased to the smallest for 11 months.
In China, their factory activity actually shrank in December for the first time in seven months, the latest in a string of weak economic indicators that will intensify calls for more stimulus measures to head off a hard landing. Despite all this, there was actually quite a sharp rise reported in foreign direct investment into China in the year to November in data out overnight. It is up more than +20% year-on-year.
In Europe the story was a bit brighter. Eurozone business activity grew at a slightly faster rate in December, but the pace of expansion was still one of the weakest seen over the past year. But as the ECB people reminded us overnight, despite the talk, the Eurozone is not [yet] in recession.
As we reported late yesterday, the Russian central bank imposed a sudden sharp rise in official interest rates to try and halt the slide in the ruble. The rate jumped from 10.5% to 17%. Despite this, their currency fell to record lows again overnight, inducing further panic in the nation’s financial industry. They have spent US$80 bln defending the ruble and that has now stopped. They say they have no plans to institute capital controls, although that is the sort of thing you say just before imposing them.
Benchmark UST 10 year bond yields fell again overnight and is now at 2.05%. We will get the echo in local swap rates here today. Interest rate markets are now awaiting tomorrow's Fed decisions, especially how it handles its now-famous two words "considerable time".
The oil price is down again, now at US$56/barrel although it did briefly slip below $55. The price of Brent crude is now below US$60/barrel. It has not been this low since 2009. Many large exploration and development projects are now threatened.
The gold price also fell, now below US$1,200/oz and at US$1,196/oz.
Despite all this apparent turmoil, stock markets are higher with the S&P500 back over the 2000 level.
We start today at 77.9 USc, 94.8 AUc, and the TWI is at 78.3.
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 »
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.