Here's my summary of the key events overnight that affect New Zealand, with news of deja vu; markets are turning their attention to debt risk again.
But first, new American single-family home sales tumbled in January from a 10-month high as sales in the West of the country fell sharply, and following yesterday's softish existing-home sales, some analysts think the whole sector may be on a 'softish footing'.
Adding to that sentiment, there has been a similar tumble in confidence in the vast American services sector. A survey out overnight showed a big drop in the rate of expansion to a 28 month low.
Equity and bond markets are unsettled by the data. Wall Street is down about -1%, bond yields have fallen sharply, and CDS spreads have risen.
Asian credit risk is also in the spotlight today.
Standard & Poor's is saying that companies in the region are on the hook to repay almost US$1 tln of debt over the next four years with more than half of it priced in US dollars. The greenback's strength and slowing economic growth globally will make it tougher and more expensive for these borrowers to roll over US dollar debt as it comes due.
And China's shadow banking sector is morphing to avoid tighter regulation. Brokers and funds are taking on the role previously played by more heavily regulated trusts in their expanding informal financing sector. Banks are increasingly turning to so-called directional asset-management plans issued by brokerages and the subsidiaries of mutual-fund providers to channel lending. The amount of money placed in such products jumped +70% last year to US$2.9 tln, outpacing the +17% growth for trust assets.
The level of world debt is at record highs, propelled primarily by this Chinese debt growth, but there are other pockets of explosion as well. Since the GFC, US$60 tln has been added to the world's debt load and it is now approaching US$200 tln. That is more than two and a half times world GDP.
Overnight, Brazil’s sovereign rating was cut to junk by Moody’s Investors Service, the last of the major ratings companies to strip the country of its investment grade. And South Africa's finance minister has said his country's economy is in crisis.
In New York the benchmark UST 10yr yield is sharply lower today by -14 bps to 1.66%. Yesterday, local swap rates fell -4 bps across the curve and are almost certainly going to fall further today. In fact, the last time our two year swap rate was this low was in May 2012 and it is now possible that record low will be challenged in the next few days.
The oil price is unchanged from this time yesterday although in the meantime it has risen and then fallen back. it is now at US$32/barrel in the US while Brent is just a little higher at US$34/barrel.
The gold price is +US$16 higher today at US$1,241/oz.
The NZ dollar is still range-trading. It is now at 66.3 US¢, at 92.4 AU¢, and at 60.2 euro cents. The TWI-5 will start today at 71.
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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