Here's my summary of the key issues that affect New Zealand overnight with news of another small rise in dairy prices.
The overnight Fonterra auction saw prices rise +1% although the important wholemilk powder price was up +3.8%.
At the same time the NZ dollar fell a bit more than half a cent so that means that in New Zealand dollars, prices are up locally by +2.3%.
These small rises are the third straight increase, all up taking prices +7% since early December and +9% in New Zealand dollars.
But they are small rises, not the larger moves Fonterra had been hoping for, and that means the 2014-15 payout will need to be revised lower yet again. Yesterday ANZ reduced their forecast by -50c to just $4.35/kg. Although there is likely to be little volume consequences due to the growing dry conditions, the continuing low prices will have a big impact.
In China, their property market may be improving again. New-home sales jumped +40% last month after the first interest rate cut since 2012 boosted demand and developers made more apartments available to tap improving sentiment in the nation’s property market.
China's economic growth held steady at 7.3% in the fourth quarter from a year earlier, and that was slightly better than expected. A lot is being made that it is at a 24 year low in growth terms, but it still beat estimates and is in transition from an investment led economy to one that can be consumption led. It is actually a remarkable performance and that transformation will help New Zealand.
In New York, benchmark UST 10 year bond yields fell about -5 bps to 1.78%. Yesterday, New Zealand swap rates also slipped a couple of basis points but retained their remarkably flat curve.
Kauri bond sales are off to the strongest start in a year offshore issuers tap into demand for the yield offered by New Zealand dollar notes.
The oil price is unchanged overnight remaining about US$47/barrel range while Brent crude is in the mid US$48/barrel range. The IMF cut its 2015 global growth forecast.
On the other hand, gold made some strong gains. The price is now up to US$1,295/oz.
We start today with the New Zealand dollar lower by at least ½c following the dairy auction at 76.9 USc, at 94.1 AUc and the TWI is at 79.2. However it seems to be recovering some of those losses at this time.
Later this morning we will get the December CPI data.
If you want to catch up with all the changes yesterday we have an update here.
The easiest place to stay up with event risk is by following our Economic Calendar here »