Here's my summary of the key events overnight that affect New Zealand, with news of worrying financial stresses in China.
Today's dairy auction brought something of a surprise result. Analysts who had been watching the derivatives markets had expected to see a -5% fall, but have been treated to a +1.7% rise instead. WMP actually rose +2.9%. These rises were not quite as much in New Zealand dollars but they were rises nonetheless. Before the NZX opens today, Fonterra will also announce their half year financial result and given their share price ($6.22) has moved little since mid January, investors are not expecting anything out of the ordinary.
In the US, their current account deficit for the December quarter came in lower than expected. It is now running at -2.4% of GDP (and that compares with New Zealand's at -2.7% and Australia's at -4.6%).
In China, the risk of social unrest over soaring property prices has grabbed the attention of policy makers. Big Chinese cities have launched a new round of lending curbs and purchase restrictions in an effort to cool overheated property markets. Even the official media is warning that some cities are in a bubble. Sky-high prices in cities including Beijing, Shanghai and Shenzhen are stoking anger, even among relatively well-off professionals.
And China is facing unrest in its financial markets as well. Their central bank had to inject hundreds of billions of yuan into the financial system after some smaller lenders failed to make debt payments in the interbank market. These injections followed missed interbank payments from rural commercial banks on Monday.
More countries are banning Brazilian meat imports and that is extending the squeeze on supplies. Beef prices are rising.
In New York, the UST 10yr yield has slipped another -8 bps today and is now at 2.42%. CDS spreads are still falling. In fact our banks are facing the narrowest spreads in more than 9 years and as key index dipped below 80.
Oil prices are softer today yet again and now just under US$47.50 for the US benchmark, while the Brent benchmark is under US$51 a barrel. Goldman Sachs analysts say in a research note that new production projects and a fresh shale boom could boost oil output by a million barrels per year and result in an oversupply in the next couple of years.
The gold price however is up US$9 to US$1,242/oz.
And the New Zealand dollar starts today just a little bit higher at 70.6 USc. On the cross rates the Kiwi dollar is at 91.5 AU¢, and against the euro is at 65.2 euro cents. The NZ TWI-5 index is at 75.3.
If you want to catch up with all the 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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