US mortgage rates rise; airfreight volumes grow impressively; China suffers sharp fall in currency reserves; EU fines 7 banks €2 bln; UST 10yr yield at 2.35%; oil down, gold up; NZ$1 = 71.6 US¢, TWI-5 = 77

Here's my summary of the key events overnight that affect New Zealand, with news of accelerating currency outflows in China.

But first, in the US interest rates on American fixed-rate mortgages rose to their highest levels in more than two years, sending weekly home loan application activity to its weakest level since early January.

Airfreight volumes are growing faster than analysts expected. Demand as measured in freight tonne kilometers (FTKs), rose an impressive +8.2% year-on-year in October. This was the fastest pace of growth seen in 18 months. Freight capacity, measured in available freight tonne kilometers (AFTKs) increased +3.6% over the same period, so load factors are up. Indicators of forward demand are equally positive. 87% of all airfreight is for international shipments.

Global passenger traffic in October saw demand (measured in revenue passenger kilometers) rise +5.8% compared to the same month last year. However capacity grew +6.3% and and so the load factor slid 0.4 percentage points to 80.1%.

In China, their foreign exchange reserves fell NZ$96 bln last month as their central bank defended the yuan from greater depreciation on the back of accelerating capital outflows. Reserves at the People’s Bank of China fell to just over US$3 tln in November, a decline of -2.2% from the previous month and the largest drop since a -3% fall in January. China's foreign exchange reserves peaked at US$4 tln at the start of 2014 but it has been leakage on a huge scale since then. It has been almost six years since these reserves have been this low. Today's data surprised analysts at the recent steepness of the fall. And it's not going to slow down.

In Europe, the EU competition regulators fined three large banks €485 mln for colluding to fix benchmark interest rates tied to the euro. These were the three holdouts that did not agree to a 2013 settlement with a number of other banks who at the time plead guilty and were fined €1.3 bln. Overnight, JPMorgan Chase was hit with a €337 mln fine, Crédit Agricole was penalised €11 mln and HSBC €34 mln. Those that had settled earlier got a 10% discount. That makes the total penalty in this Euribor fixing case just over €2 bln (NZ$3 bln) for the seven banks involved. Today's three are still protesting their innocence in the case and may yet appeal.

In Australia, the rise of the iron ore price continues unabated, surprising many. It is now over US$82/tonne and at its highest level since October 2014. Resurgent China demand is driving the uplift. This rise will help Australia avoid another GDP decline like we saw in Q3.

In New York, the UST 10yr yield is a sinking today is now at 2.35%. Bond prices are rallying even as equity prices on Wall Street hit new highs.

Oil prices are lower again today, now just over US$50 for the US benchmark, while the Brent benchmark is now just over US$53 a barrel.

The gold price is still yo-yoing at its lower level, and today it is back up to US$1,177/oz.

The New Zealand dollar is yo-yoing as well and now back at 71.6 US¢. On the cross rates it is at 95.7 AU¢, and against the euro up at 66.5 euro cents. The NZ TWI-5 index is back at 77.

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 ».