Here's my summary of the key events from overnight that affect New Zealand, with some big issues to the fore today for food producers.
Firstly, the overnight dairy auction was a bit of a damp squib. Prices in US dollars were down -0.8% but were down -1.5% in NZ dollars. It was the WMP price that weighed on this auction, coming in almost -4% lower and bucking the indication from the derivatives market which thought a small rise was coming. In local currency, we are now level-pegging with prices at the beginning of 2017, but we are still +50% higher than this time last year. It was an auction that saw the lowest volumes purchased in just over a year.
There are major political forces at work in the beef market. Firstly, China has re-allowed US beef back into the country, its first access since 2003. And in India, a new ban on the export of buffalo meat will choke off a huge supply of very cheap product on to the international market. Australia and Brazil will be the main beneficiaries, but New Zealand beef will likely get some impact as well.
And staying in India, they are having remarkable success at taming inflation. About 4 years ago it was running over +10% pa. But the latest data shows it at just +2.2%. One of the key reasons for the change is removing volatility in their food markets.
In China, the latest data shows that the heat is going out of their housing markets. Price growth is either moderating, or prices are actually falling is some places.
In financial markets, the first step is about to be taken to move financial benchmarks away from LIBOR. It will be a slow process however. Contracts based on LIBOR as a benchmark currently exceed US$150 tln.
In Australia, they have cancelled their El Niño climate watch - because the chance of the weather pattern re-emerging soon has evaporated. Ocean temperatures have apparently cooled back to normal ranges.
In New York, the UST 10yr yield is lower today at 2.16%. And across the Pacific, the Chinese 10yr govt bond yield fell again yesterday and the curve inversion widened, with the 2-10 variance now -9 bps.
The price of oil is down more than US$1 today and is now under US$43.50 a barrel, while the Brent benchmark is now just under US$46. That is now a seven month low and the global over-supply shows no signs of ending soon.
And the price of gold is lower as well, down another -US2 to US$1,243/oz.
But the Kiwi dollar is holding its own and still at 72.4 USc. On the cross rates we are higher at 95.6 AU¢, and 65.1 euro cents. Against the British pound, we are up to 57.4 UKp, the highest in more than 3 months. The TWI-5 index is at 76.9.
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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