Leading central banks upbeat, ECB pushes for power in London, major trade deal to be signed between EU and Japan, Italian bank bailout costs billions, US banks pass stress test; UST 10yr yield 2.14%, oil and gold higher, NZ$1 = 72.8 US¢, TWI-5 = 77.2

Here's my summary of the key events from over the weekend that affect New Zealand, with news major central banks are being urged to press ahead with interest rate rises. 

The Bank for International Settlements, an umbrella body for leading central banks, says global growth has nearly bounced back to normal, with sentiment improving over the past year. It recognises some pockets of risk remain due to high debt, low productivity growth and dwindling policy firepower. Yet it says policymakers should take advantage of the improving economic outlook and the fact it isn't having much of an effect on inflation, to accelerate the "great unwinding" of quantitative easing programs and record low interest rates.

The European Central Bank is making its hardest push yet to get the authority to oversee the trading of derivatives and other securities in London, even after Britain leaves the European Union. It wants the bank’s statutes changed to give it more power to take over the role. Currently 100 billion euros of euro-denominated derivatives are cleared in the UK each day, with the Bank of England largely responsible for overseeing this. The ECB’s move shows how Brexit could force a realignment of financial markets and undercut London’s status as a global trading centre.

The European Union and Japan are close to sealing one of the largest trade agreements ever. Together making up a quarter of the world’s economy, the deal will further isolate the US. It will also act as a symbol of free trade in a time of backlash against globalisation. The deal’s expected to be signed in coming weeks.  

The 34 largest banks in the US have passed the first part of an annual stress test, as the Fed has found they’d all have enough capital to survive a severe recession. Banks and their investors are hopeful improved finances will prompt the Fed to allow them to use more capital for stock buybacks and dividends, especially as the Trump administration is keen to relax financial regulations. The Fed will release the second part of its bank review on Thursday (NZ time).

On the flipside, Italy has begun winding up two stricken banks, in a deal that could cost the Italian Government up to 17 billion euros. The good assets of the Veneto-based banks will be transferred to Italy's top retail bank, Intesa Sanpaolo. However the cost of recapitalising the banks is costing taxpayers three times more than initially expected.

Finally, house prices in the US are hitting new highs, as demand remains strong and inventories tight. The median sales price of a new home topped a record in May, while purchases of new homes rose 2.9% to an annual rate of 610,000.

In New York, the UST 10yr yield ended last week a tick lower at 2.14%, and the slippage is now starting to add up.

Oil prices remain low, but have gained some ground. The US crude price is at US$43 a barrel, while the Brent benchmark is at US$45.50.

The price of gold is up too by US$10 and will start the week at US$1,256/oz.

The New Zealand dollar is up to 72.8 USc, thumbing its nose at the RBNZ's wishes. On the cross rates we are higher at 96.3 AU¢, and 65.0 euro cents. The TWI-5 index is back up to 77.2 where it was at this time last week.

If you want to catch up with all the changes from Friday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».