Markets resilient to political turbulence; USD riding high; Dairy prices ease back; US bank lending getting risky; China wants to avoid trade war with US; UST 10yr yield at 2.58%; oil stable, gold down; NZ$1 = 69.3 US¢, TWI-5 = 76.1

Markets resilient to political turbulence; USD riding high; Dairy prices ease back; US bank lending getting risky; China wants to avoid trade war with US; UST 10yr yield at 2.58%; oil stable, gold down; NZ$1 = 69.3 US¢, TWI-5 = 76.1

Here's my summary of the key events from overnight, with news a German minister has declared Germany is in a 'state of war' further to a suspected terrorist attack in Berlin. Donald Trump has also officially won the Electoral Collage vote and Turkish authorities have detained family members of the cop who assassinated the Russian ambassador. 

However, investors are resilient, digesting bad news quickly. US stock indexes have touched record highs as the rally in riskier assets continues. For traders, reassurance over Italy's plan to spend up to 20 billion euros to rescue its troubled banks has offset geopolitical jitters. The US dollar has hit a 14-year high, as the yen slid after the Bank of Japan stuck to its ultra-loose monetary policy. The New Zealand dollar is now down to 69.3 USc.

Dairy prices have eased back for the first time since October in the fortnightly GlobalDairyTrade auction. The index is down 0.5%, largely due to the price of whole milk powder (WMP) softening 0.8% to US$3,568/MT. There wasn't quite enough demand at the auction to soak up the increased volume of WMP Fonterra put on the market, as it changed its product mix. AgriHQ says the auction result is still strong enough to support the $6/kgMS price forecast by Fonterra.

A US bank regulator is raising its concerns over large US banks lowering lending standards. An Office of the Comptroller of the Currency survey has found banks have loosened their underwriting standards - mostly in personal loans, mortgages, conventional home equity, and commercial real estate loans - for the fourth year in a row. It says credit risk could accelerate if these trends continue. Weak underwriting practices were a red flag in the run-up to the 2008 financial crisis.

Morgan Stanley will pay US$7.5 million for violating customer protection rules using trades involving customer cash to lower its borrowing costs. The bank escaped a larger fine as the issue was caused by a computer error and didn't expose customers to a shortfall if trades failed. The Bank of America's Merrill Lynch was fined US$415 million earlier in the year for a similar offence, which did expose the bank. 

China says it wants to avoid a trade war with the US. China's deputy finance minister says a trade war with the States would hurt both countries, but admits China will take "appropriate steps" to cope with the possibility. 

In New York, the UST 10yr yield has risen overnight to 2.58%. 

The US benchmark oil price remains at US$52 a barrel, while the Brent benchmark is stable at US$55.

The gold price has dropped back to US$1,130/oz.

The New Zealand dollar has also dropped to 95.4 AU¢, but is up to 66.7 euro cents. The TWI-5 remains at 76.1.

This is our last 90@9 for the year. David Chaston will keep you posted with daily news updates throughout the holiday break. Have a very merry Christmas! 

If you want to catch up with all the local changes from 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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At least the US has standards for underwriting residential real estate unlike NZ ( Comptroller’s Handbook A-RRE ). Here in NZ it has clearly been the wild west for lending (as evidenced by NZ banks lending at high LVRs against pitiful rental yields, and very high DTIs (>5))

What China actually means is that it doesn't want the US to fight back in the trade war that it has undertaken for decades. The aggressor always calls for calm after acting.

Yes AK 79, There can never be 'win- win' betwixt those two states. The Clinton democrats, the Bush republicans and Obama (gleefully) sold out their nation to communists. If Trump turns words into action (like dropping US corporate taxes to 15% - just watch the hot stashes flood home!), It will all be sad movies for commo China; with their half a billion displaced persons camped on the factory job eastern states, there will, over time, be chaos.

A very Merry Christmas to all your team at interest.co.nz. too.
Look forward to the New Year which I hope is going to be a great one for all Kiwis.