China factories slow; Greeks get EU's back up; Russia does u-turn; Australia shows intolerance for reform; UST 10yr yields fall; oil and gold jump; NZ$1 = 72.4 USc, TWI = 76

Here's my summary of the key issues that affect New Zealand over the weekend with news the Aussies renew their intolerance for change or reform.

But first, China's factory sector unexpectedly shrank for the first time in nearly 2½ years in January and major manufacturers are seeing more softness ahead, an official survey showed and mirrored an earlier survey of mid-sized companies. It also raises expectations that policymakers will take more stimulus action to forestall a sharper slowdown. However, we should also note that their services sector is still expanding quite well.

Staying in China, following last year's spate of food safety issues with dairy products, China moved to register importers. It turns out more than 1,800 have now been granted registration with New Zealand representing a tiny proportion.

In Greece, their radical rhetoric does not seem to be working with its creditors. German Chancellor Merkel ruled out yet another debt writedown for Greece over the weekend, and an ECB member threatened to cut off funding to Greek banks if Athens does not agree to renew its bailout package. The calls for a rollback elsewhere will not be helping. Greece is hoping socialist France will be its big brother friend.

Over the weekend the Russian central bank has done a sudden u-turn, cutting its official interest rate from 17% to 15% just a week or so after it raised them to defend the ruble and tame inflation stoked by international sanctions related to the Ukraine conflict. There is real confusion in Moscow on how policy makers should respond to their crisis, and there seems to be panic in the business community.

Over the weekend, Croatia forgave all the debt owed by its poorest citizens. The NZ$40 mln program will go to those whose incomes were less tha NZ$200 per month.

In Australia, the size of the stunning election result in Queensland on Saturday night has only emphasised that the country has no appetite for economic reform, or any change that might involve a 'cost'. They are becoming the poster-child for can-kicking. And Fairfax have headlined their 2015 Economic Survey, "Australia Adrift".

In New York, benchmark UST 10 year bond yields are at 1.64%, down -10 bps on Friday. It is likely we will see a reactive shift locally when New Zealand swap markets open here.

The oil price rose dramatically at the end of last week, up to US$48/barrel with Brent crude at US$52/barrel. There seemed to be two reasons; an upsurge of ISIL activity near one of Iraq's main oil-producing centers, and a sharp rig count fall in the US, the most since records began in 1987.

Gold rose sharply in late trade on Friday - in fact after the London markets closed and is up to US$1,283/oz. The recent volatility in the gold price sort of suggests markets don't really know how to price it in the current environment.

We start today with the New Zealand dollar holding last week's lower levels. It is at just 72.4 USc, at 93.6 AUc and the TWI is now just under 76.

If you want to catch up with all the changes on Friday we have an update here.

The easiest place to stay up with event risk is by following our Economic Calendar here »