Here's my summary of the key issues from overnight that affect New Zealand, with news the Aussies may be about to tighten bank capital rules.
Firstly, the latest US Fed statement was a tame affair. They are sitting pat while the effects of a flat first quarter works its way through the US economy.
Advanced first-look data out overnight showed that the US economy barely grew in the first quarter - it was up at an annual rate of just +0.2% in that period, set back mainly on adverse weather conditions and a surprisingly strong savings rate. That follows a +2.2% economic growth level in the final quarter of 2014.
The Fed sees the slowdown as 'transitory'.
American consumers stayed at home. In fact, they are getting into the habit of saving more, it seems. Their personal disposable incomes in the February data released overnight were up +4.5% above the same month a year ago, whereas their personal consumption expenditures (PCE) were up a more modest +3.3%. Their personal savings rate of +5.8% in February was the highest it has been since the end of 2012. This data may help explain why their economy sagged in the March quarter but their stock markets boomed.
The savings data may also explain why their housing market is picking up. House sales rose in March to their highest level since 2013, a positive sign for their housing market and showing it is emerging from a soft patch.
Across the Atlantic, the ECB released data the showed loans to private sector companies rose in March for the first time in three years and apparently the end of a long credit squeeze. It also adds to signs that euro zone banks are recovering from the crisis that began in 2008.
In Australia, APRA, their banking regulator said is willing to act "sooner rather than later" to require the big four banks to hold higher capital against mortgage lending. It is a move the RBNZ should be working towards as well. The low capital requirements needed to support mortgage lending is a key reasons for both sharply rising lending for housing and dangerous levels of bank leverage.
Australia is also facing a glut of over-built apartments, something that could have credit consequences here.
Back in New York, the UST 10yr benchmark yield jumped today and is now at 2.07%. The rise was a result of the dovish Fed statement. We are likely to see similar rises in the New Zealand swap markets later today.
The US oil price inched higher to US$58/barrel, while Brent crude is also slightly higher at US$66/barrel in trading today.
The gold price fell to US$1,202/oz. There was a big gold-swap deal reported overnight between CitiBank and Venezuela, one done at a discount. Venezuela is having trouble buying its groceries.
The New Zealand dollar starts today off of yesterday's recent highs. It is at 77.1 US¢, at 96.1 AU¢, and 69.4 euro cents. The TWI is now at 80.5.
If you want to catch up with all the local changes yesterday, we have an update here.
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