Here's my summary of the key events overnight that affect New Zealand, with news of a substantial rise in risk aversion.
But first, a new report from the Asian Development Bank says that softer growth prospects for China and India, and a slow recovery in the major industrial economies, will combine to push growth in developing Asia for 2015 and 2016 below previous projections. The revisions are not major, but they do change the outlook from one where growth is accelerating to one where growth is contracting. The neighbourhood is in the early stages of catching a cold, it seems.
The ADB downgrade follows last week's OECD downgrade.
In Europe, the fallout from carmaker VW's fraud on diesel emissions is extending and their reputation is being polluted. And it goes some way to explaining why the air in US cities is much cleaner than those in Europe. The claim by most European carmakers that new diesel engines are cleaner than petrol has been exposed as a giant lie. So far 11 million cars are affected and that is just by VW. Most other European manufacturers of diesel cars are also expected to be caught-out, so the total may balloon to a much larger number. VW's claim that this doesn't affect New Zealand is not credible.
The scandal is affecting money markets. There has been a +7% jump in the cost of credit spreads for European investment grade bonds at a time the rest of the world's CDS spreads went up less than +1%. Markets rely on trust and honesty and the breaking of that by giants like VW (and earlier by banks) costs everyone.
In China, all eyes are on the president's official state visit to the USA. American's however, are only taking a passing interest.
In Australia, MasterCard has been outed as running a phoney 'consumer' campaign to push back on a regulators drive to reduce interchange fees. "It's one thing to argue for the interests of your business, it's another to fund front-groups to do it for you," a consumer group there says.
In New York, the UST 10yr yield benchmark could not hold the gains it made yesterday and is now back at 2.13%. Equity markets opened lower and have not recovered as the trading sessions come to an end.
The US benchmark oil price is unchanged today, now at US$46/barrel and the Brent benchmark is at US$49/barrel. But observers are expecting prices to soften, maybe when the official weekly assessment of US markets is released today.
The gold price is lower as well, now down to US$1,123/oz.
The New Zealand dollar starts today lower against the greenback but holding against most others. It is now at 62.9 US¢, at 88.9 AU¢, and 56.6 euro cents. The TWI-5 is at 67.6.
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 »