Here's my summary of the key events overnight that affect New Zealand, with Brexit nerves having a ripple effect through global markets.
With polls suggesting Brits are in support of leaving the European Union, ahead of the official vote in eight days' time, US and European stocks are sliding and investors are retreating to safe haven assets. Uncertainty around a Brexit is also expected to see the Fed stall any rate hikes at its meeting which finishes tomorrow.
The New Zealand Institute of Economic Research (NZIER) estimates a Brexit could see the value of our exports to the UK could drop by around $190 million a year, as income growth is expected to slow. Yet our exporters shouldn't find it any harder accessing the UK market, as Britain is likely to default to using the EU's existing World Trade Organisation commitments on tariffs.
Uncertainty caused by the Brits leaving the European Union could see UK investors, which hold stocks worth over $4.2 billion in New Zealand, take a more risk-adverse approach and limit their investments here. The Institute also warns a Brexit could make it harder for Kiwis to get jobs in the UK if the political environment becomes more nationalistic.
The Brexit aside, data out overnight indicates some inflation pressures are building in the US. Retail sales rose strongly in May as relatively higher fuel costs didn't stop Americans from buying cars and a range of other goods. Retail sales were up 2.5% from the previous year. Import prices also recorded their largest increase in over four years in May, as the drag from a strong dollar and lower oil prices faded. Import prices fell 5% from a year ago - the smallest decline in a year and a half.
The International Monetary Fund warns China must curb its soaring debt levels to avoid “serious problems down the road”. At 225% of GDP, it says the level of debt in China is “very high by any measure”. Breaking this figure down, it warns corporate debt is rising at 145% of GDP. The IMF says Beijing needs to speed up financial reform to head off the risk of a systemic shock.
In New York, the benchmark UST 10yr yield has fallen again overnight to 1.60%.
The US oil price has inched back slightly to just under US$49/barrel. The Brent benchmark is just below US$50/barrel.
The gold price has increased to US$1,288/oz.
The New Zealand dollar has weakened overnight to 70.0 US¢, 95.1 AU¢, and 62.5 euro cents. The TWI-5 index is now at 73.7.
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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