sign up log in
Want to go ad-free? Find out how, here.

Global equity markets nosedive; China support measures fail; UST 10yr yield 2.01%; oil falls under US$38/bbl; NZ$1 = 65.2 US¢, TWI-5 = 68.9

Global equity markets nosedive; China support measures fail; UST 10yr yield 2.01%; oil falls under US$38/bbl; NZ$1 = 65.2 US¢, TWI-5 = 68.9

Here's my summary of the key events overnight that affect New Zealand, with news of a nosedive in financial markets.

They plunged when holiday-mode northern hemisphere markets opened after a near -9% dive in China shares and State support measures failed, but commodities and the US dollar recovered initial losses and Wall Street staged a striking comeback in the middle of the day in a volatile session after European markets closed. The session started badly with the Dow opening an unprecedented 1,000 points lower, staged its comeback, but late in the session the weakness has returned.

The sell-off seems to have little to do with the US or EU economies: it's all about China and 'emerging markets'.

This is where we are at now:

The S&P500 is down -4.2% from where it closed on Friday on Wall Street. This is after it was down -7% at one point.

The oil price is now under US$38, about as low as it has been in the past few days. It's under US$42 on the Brent benchmark. Copper has been another big casualty. But dairy prices only show a small adjustment. These will be worth watching today.

Gold is at US$1,153, and not displaying any additional inverse reaction which seems unusual. Bond demand seems to be taking up the role.

The NZD is at 65.2 USc although it was lower two weeks ago. It briefly hit 62.4 USc and at one point there were no bids for the Kiwi dollar. Things seem to have normalised now although the TWI has settled at 68.9, a three year low.

In New York, the UST 10yr yield benchmark has fallen as investors buy bonds, now at just 2.01%. This is its lowest level since the end of April.

Sharply lower equity prices will have an impact on KiwiSaver fund values.

All this seriously clouds the impending US Fed decision on September 18, although it probably cements in another OCR cut by the RBNZ on September 10.

The New Zealand dollar starts today lower at 65.2 US¢, at 90.7 AU¢, and a lot lower at 56.3 euro cents. The TWI-5 is at 68.9, down -200 bps from this time yesterday.

If you want to catch up with all the local changes yesterday, we have an update here.

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

Daily exchange rates

Select chart tabs

Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
Daily benchmark rate
Source: RBNZ
End of day UTC
Source: CoinDesk

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.

46 Comments

I blame those economists who were ever so subtly hinting that it may not be all roses.

Up
0

huh? Some like Krugman and Keen were saying things pretty outright, but have been ignored. Meanwhile the pollies between their dogma (yes austerity works, yes we've fixed the banks) and back handers (oops I mean campaign contributions) refused to do anything.

http://krugman.blogs.nytimes.com/2015/08/23/nobody-could-have-predicted…

Up
0

ZING!
Sails effortlessly over your head.....

Up
0

Gold is at US$1,153, and not displaying any additional inverse reaction which seems unusual.

Margin/collateral calls curtail further exposure. Anyway, if markets can be shut when it doesn't suit, best to stay away and nurse liquidity, or as you say seek positive sovereign iou NPV transfers from the less deserving.

Up
0

Look where the Bitcoins are going

http://fiatleak.com/

Up
0

the DOW dropped a 1000 points on open first time in history. it looks like QE has is failing and all it led to was asset inflation which is now correcting.
if people think this wont move into property next are kidding themselves as all asset bubbles will burst

Up
0

How long until the ingenious central planners in China and their ingenious brothers in spirit in all "Western" central banks will ride to the rescue with the only thing they know: yet more money printing, yet more "stimulus" i.e. yet more unwinding of the market mechanisms which have served us reasonably well over the years? Krugman and Hickey, where are you?

But seriously, it is hard to imagine that the intellectual giants in the central banks and govts will keep their clumsy fingers out this time. More of the same after a bit of sputtering.

Up
0

No one in power has done much listening to Krugman and Steve Keen in 8 years, why listen now?

The CB's will indeed try their best to stop a 1929 happening, otherwise are you suggesting they sit idle while our financial system collapses and lockups up?

Up
0

Capitalism is market Darwinism. Companies with a dysfunctional business model and countries with dysfunctional governments go broke. QE did not let that happen. Zombie companies, banks and countries are soaking up human and financial capital to eventually fail anyways.

Yes, I do suggest that markets should be allowed to function and central banks should piss off. They had their opportunity for nearly 10 years now and have just made the mess worse.

Up
0

Good comment, PeterPen. Nobody should confuse stockmarkets with business fundamentals.

Sometimes stock prices and individual company fundamentals align more or less. Every serious analyst, every careful investor, contributes to this alignment.

But stockmarkets - like individual stocks - can move right out of alignment with fundamentals. They froth via created and cheap money - both of which mean unearned money - and the naive enthusiasms and crowd motivations of gamblers.

The froth constantly needs cleaning off. And for every argument anyone can muster - economic, social, environmental, political - we shouldn't be basing our well-being on froth.

Up
0

Propping up the system just makes it more fragile. It needs a good clearing out to fix the issues

Up
0

Yes I agree. This time (Whatever that means) central banks should let the markets crash and burn. I'm sure intellectual giants and god-like investors as yourself will be just fine because you have a few gold coins in your sock drawer. Am I correct?

Up
0

Just a wee bit of panic detectable in that post from you OU? Market going against you so already pleading for intervention in that wonderful 'free market' you espouse?

Up
0

QE was the only game in town allowed by a wonky Congress and Govn, however the greedies have made it fail, if it ever had a chance.

Up
0

ASX futures showing a 230 point fall, will probably fall a tad less if China bounces...

Its All on like Donkey Kong

Up
0

This whole thing was not unexpected , maybe unintended , but not unexpected .

The world is awash with unproductive cash which has found its way into speculative assets like shares and property sending prices into the stratosphere , it was always going to come down again

I am not an economist , but anyone watching this could see it was not going to last forever

Up
0

So the Fed will be raising rates eh?

https://www.youtube.com/watch?v=hcO4MMzdYE8

Up
0

Maybe not ?

Up
0

I take that's a "no" Steven.

Up
0

QE4 here we come , not surprising at all really , get some gold and silver while you can , popcorn check this will be worth watching

Up
0

If QE4 is coming, then wouldn't it better to buy stocks because we all know that QE 'distorts' share prices by inflating then. So only a fool would buy gold and silver right?

Up
0

Haha, yeah, that's right. A Gold Maple is really not money, it dosent produce any return while sitting in the bottom drawer and there's the opportunity cost as well. Oh dear, how silly some people are!

Much better to drag some cash out of the house and have a whack at trying to make some real money. I'm sure there'll be some advisors around who will help out, advise to buy the dips and hold tight when everyone else is running for the door !

Yes, maybe so but it depends on the investor's appetite for risk in a market that is crooked and manipulated to keep the music playing. Not for me ... !

Up
0

I'm going to load up on Maple Gold. I loooove that stuff. The only good thing to come out of Canada since, well....forever.

http://www.amazon.com/Maple-Syrup-12-Ounce-Glass-Bottles/dp/B001EPPQFO

Up
0

Today is the best time to buy shares since 2013. Must dash, shopping to do.

Up
0

Hah , I'll stay at home sitting on my hands thanks

Up
0

Just remember jumping doesnt hurt til you get to the bottom.

Up
0

If I was happy to buy shares last month (I was) then I am even happier this month as I can get the same shares at a 10% discount. When you are in it for the long run, these decisions are easy.

Up
0

Well on past experience, no to gold. "worth watching" but you are in the same "test tube" as the rest of us.

Up
0
Up
0

I'm with Peter Pen above. We let the financial industry disconnect from fundamental business activity. And we suffer.

Up
0

I got out of BHP, Boral Caltex Australia and Rio Tinto starting in January , and had exited fully by July .

Just in time it seems , except I don't know where to put the money now and my broker says money market or Bonds .

I don't like that idea , maybe the plain old ANZ bank short term fixed deposit is a good place for now

Up
0

Invest in small companies; become an Angel? create Jobs?

Up
0

From a depositors view the good old (state any name) bank with its savers govt. gtee does not exist any more.
Probably why he left it off the list?

Up
0

I hear everything in Greece is going real cheaply, these days.
Buy an island or 2.

Up
0

Okay , I not in that league

Up
0

For future reference. It all depends on how the PROC reacts to stem the tide of market sentiment.

http://www.investopedia.com/stock-analysis/cotd/vxx20120626.aspx

Up
0

If you hold onto your money, and prices keep crashing at this rate...........

Up
0

Think of an OBR event. So "conventional wisdom" is cash like things which would be short term Govn bonds?

Up
0

Time to take some money out of the bank and buy one or two Auckland homes. You cannot lose when you buy bricks and mortar. Better than interest from the Bank.

Up
0

...except Auck property is no longer bricks and mortar...50% maybe, the other 50 being the ponzi component.

Up
0

Never was much bricks and mortar. We in New Zealand usually do a few sticks with some sprayed goop, misnamed plaster, on top

Up
0

another asset bubble waiting to pop, 41% owned by investors what happens when the banks change to only lending to only owner occupiers as it safer in these times and demand 50% + LVR from investors

Up
0

... what happens when the banks change to only lending to only owner occupiers as it safer in these times and demand 50% + LVR from investors

Pigs will fly, that's what will happen.

Up
0

have to laugh at this: the people who comment seem to have a firmer grasp on reality than the business editor of the main chatterati outlet.....
.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=115…

Up
0

That link didn't have any comments so I assume you mean this one. Good reading indeed.
http://m.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11502…

Up
0

Yes, that's the one I meant to post. Not sure what happened, there.

Up
0