Here's my summary of the key events overnight that affect New Zealand, with news commodity dairy prices have risen very sharply overnight.
The GlobalDairyTrade index was up +16.5% in this morning's auction and erasing all the declines since April. This is the third consecutive strong rise, and it validates the industry expert option that a rise was coming, a view they gave to much scepticism four and five months ago.
Importantly, the prices for wholemilk powders were up the strongest, rising +20.6% from the last auction and taking them back to levels we last saw in March. Volumes sold exceeded 36,000 and above the average sold per auction over the past year. More importantly, these prices set market expectations for the much larger transactions that don't go through the auction platform.
Elsewhere, in the US the data out overnight was generally disappointing. August retail sales were up, but by less than analysts were expecting. July factory sales were stable but down compared to the same month a year ago, also weaker than expected. A bigger fall in car production during their holiday period was the catalyst.
Whether this softer data will affect the Fed's decision on Friday morning is unlikely. Markets seem more accepting a rate hike is coming. And as an early signal US consumers are powering their recovery, one major courier company has announced it is hiring an additional almost 100,000 workers to be ready for their end of year holiday season. Equity markets are up strongly in late trading today.
But the World Bank came out overnight pleading for low interest rates to remain, concerned about the impact it will have on emerging markets and their sky-high asset values. In this, it is joining the European-dominated IMF and the BIS. But the Fed seems unlikely to be swayed.
Equity markets were lower again in China yesterday.
In Australia, early polling has given a remarkable endorsement to the change of prime minister. The bounce is bipartisan, something unusual for Australia. It may be one of those political events that completely changes the economic mood. And lets not forget, PM Turnbull was once head of Goldman Sachs in Australia.
In New York, the UST 10yr yield benchmark is noticeably higher today, now up to 2.23%.
The US benchmark oil price is also higher, now at US$45/barrel but the Brent benchmark is still at US$46/barrel. Parity between the two now seems close and that is a lot to do with the internationalisation of US domestic oil production.
The gold price has given up yesterday's small rise, now back down to US$1,103/oz.
The New Zealand dollar starts today pretty much unchanged since this time yesterday. It fell during yesterday, but recovered after the dairy auction. It is now at 63.3 US¢, at 88.9 AU¢, and 56.1 euro cents. The TWI-5 is now at 67.7.
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 »
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3 Comments
Even at its peak, Fonterra only ever sold about half of its product on the auction platform. The reductions in offered quantities move that very little. Most is not sold that way, but the platform price signals are very influential on existing contracts and new non-platform sales.
Fonterra NZ annual production ~1.4 mln tonnes, sold on GDT platform in last 12 mths = 790,000 tonnes.
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