WTO red flags costs of Brexit; global watchdog warns regulators don't have a grip on shadow banks; Fed President calls for looser regulation of small US banks; UST 10yr yield 1.85%; oil up, gold lower; NZ$1 = 67.7 US¢, TWI-5 = 71.8

Here's my summary of the key events overnight that affect New Zealand.

The global Financial Stability Board is red flagging risks around the world's US$35 trillion shadow banking sector. It says regulators have yet to get a good grip on the firms that carry out services similar to banks, with supervision and data gathering still too patchy to spot risks properly. The Board's concerned more heavy regulation of the banking sector since the GFC has seen some of the risk shifted to more loosely regulated shadow banks.  

Meanwhile the Dallas Fed President is calling for looser regulation of the US's smaller banks. Suggesting there's more room for fiscal policy to boost the US economy, Robert Kaplan says the Fed's been suffocating its small banks, which is hurting local business formation. He says monetary policy isn't "the be-all and end-all" and the US hasn't seen a lot of fiscal policy in the last seven of eight years. 

The head of the World Trade Organisation warns just how hard a Brexit will hit Brits' pockets. He says British consumers would have to pay 9 billion pounds, or US$13 billion, in annual additional import tariffs, if it was to leave the European Union. Britain's exports would be also burdened with 5.5 billion pounds of new tariffs in overseas markets, and leaving the EU would require a full reboot of Britain's trade relations.

In New York the benchmark UST 10yr yield has dropped to 1.85%. 

Oil has made decent gains overnight, following new data showing a drop in inventories. The US crude and Brent benchmarks have risen by around a dollar to just below US$50/bbl. 

The gold price has continued to decline today to US$1,219/oz.

The NZ dollar has strengthened slightly (as at 7.30am before the Fonterra announcement) to 67.7 US¢, 94.0 AU¢, and 60.6 euro cents. The TWI-5 index has jumped 50 points to 71.8.

We can expect to the see fluctuations in the NZD today, further to Fonterra announcing its opening milk price forecast for 2017 this morning, and the Government announcing the Budget this afternoon. ANZ expects a small OBEGAL surplus for the 2015/16 fiscal year, with this surplus set to increase to over 2% of GDP by the end of the forecast period. Health and education are also likely to get the lion’s share of extra funding, while previously flagged tax cuts for have been dropped in favour of debt repayment.

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 ».