US jobless claims fall; US net worth rises; ECB cuts rates, hikes stimulus; world trade volumes high and stable, UST 10yr yield 1.90%; oil down, gold up; NZ$1 = 66.7 US¢, TWI-5 = 70.6

Here's my summary of the key events overnight that affect New Zealand, with news of more central bank surprises.

But first, the number of Americans filing for unemployment benefits fell more than expected last week, hitting its lowest level since October, and pointing to sustained strength in the American labour markets that should further dispel fears of a recession in the US. A new poll of economists show they expect the US Fed to raise their policy rate at least twice more in 2016.

The net worth of American households ended 2015 at the highest level on record, driven by equities and bonds that remained at high levels and a continuing rebuild of home equity, according to a US Fed report out overnight. Their households had a total net worth of US$87 tln, or four and a half times their GDP. Wealth climbed by more than US$1.6 tln in the fourth quarter alone, or almost +2%. This wealth effect is a key reason the American economy is central to world trade and the well-being of many - if not most - other countries.

But some financial markets are showing unusual stress. The huge US government bond market is sending warning signals, with dealers and hedge funds blaming tougher bank capital rules as they choose not to exploit a key arbitrage opportunity. Futures trades are not refecting their underling drivers.

Across the Atlantic, the ECB hacked away at its official rates, dropping them to record lows. They dropped their main rate to zero, their marginal lending rate to 0.25% and their deposit rate is deeper in negative territory, now at -0.4%. The goal is to get banks to lend, rather than hold cash. The problem for EU banks is that opportunities for lending are not great and defaults and impaired loans are rising.

In addition to the interest rate levers, the ECB raised its QE - its 'asset purchase program - from €60 bln per month to €80 bln, an increase by one third. This was something of a market surprise, another one, coming after yesterday's RBNZ surprise.

Markets generally approved. But the euro strengthened, so go figure.

Part of the riddle of global trade levels has been revealed by an Australian analyst. While values have fallen and garnered much of the attention, trade volumes have hardly moved. Just as much world trade is going on as previously, only it is cheaper. Certainly, that is what the New Zealand dairy sector is experiencing. The pricing reset is ubiquitous and not making national trade balances any different anywhere, including for New Zealand.

In New York the benchmark UST 10yr yield is up and will start today at 1.90%. Local New Zealand swap rates fell very sharply yesterday and have stayed down in overnight trading. Risk premiums also fell sharply following the ECB rate moves. There is now plenty of room for banks to lower fixed mortgage rates - if they have funds sourced from wholesale markets recently. Those banks reliant on deposit funding - which will be most of them - will first need to make some uncomfortable reductions to their deposit offers if they are to match the drop in wholesale funding costs.

The oil price is marginally lower today at US$38/barrel in the US while Brent is at US$40/barrel. Hopes of an OPEC supply freeze are evaporating.

The gold price is up US$14 in mid-day trading at US$1,271/oz.

The NZ dollar will start today lower after the OCR cut reset. It is at 66.7 US¢, at 89.6 AU¢, and at 59.7 euro cents. The TWI-5 index is back down to 70.6.

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 ».