Here's my summary of the key events overnight that affect New Zealand, with news some key US markets are also seeing a surge in foreign house buying.
But first, today's dairy auction was almost a non-event. Prices changed very little and volumes were modest. Overall, prices are up +0.2% in USD terms, down -0.7% in NZD terms. WMP prices are up +0.3%. Of special note however is that the price of butter rose +3.4% to US$6,004/tonne, the first time ever it has reached that level in theses GDT auctions and is +160% higher than their low point in August 2015. Dairy fats are back in favour. Cheddar cheese also rose to their highest level since May 2014.
In the US, they are seeing a "massive surge" in foreign demand for houses, pushing up prices in key cities. In all, foreign buyers and recent immigrants purchased US$153 bln of residential property in the US in the year ended in March 2017, nearly a 50% jump from a year earlier. The biggest buyers remained the Chinese, but the surge was fueled by the Canadians who piled in in a big way. Buyers from China, Canada and the UK represent half of all this activity.
Japan is the front line for fighting deflation. They have growth and now stable consumer prices finally, but that is after massive monetary policy responses fighting deflationary effects. But they, and the world, face a new threat: e-commerce, otherwise known as the Amazon effect. Consumer prices are under attack from a much more efficient way of delivering consumer goods. The Bank of Japan is likely to lower its forecast of inflation in its upcoming monetary policy report. Targeting inflation is increasingly looking like a last-century approach. And in Sydney, a former RBA board member is arguing that the world's central banks should switch to a system of using official interest rates to target nominal income growth to ensure huge household and government debt burdens are unwound safely. "[Y]ou can still have the same credibility if you do have a very explicit income target, which is really growth plus inflation," he says.
Major US bank Citigroup has announced it will be decamping from London to Frankfurt in response to Brexit. This will just be the start of these types of decisions and this announcement comes at an uncomfortable time for the British who are just now getting down to brass tacks in their discussions with Brussels.
In New York, the UST 10yr yield has continued its slide lower and now at 2.26%. These declines are mounting up; it is down -10 bps in two weeks although it is still up +10 bps in a month.
The price of oil is up today and is now at just under US$46.50 a barrel, while the Brent benchmark is now just under US$49. However, another OPEC country says it will break the output cut deal they agreed just last month.
The price of gold is up too, this time by another +US$8 at US$1,241/oz.
And the US dollar is struggling, making the Kiwi dollar look good at 73.6 USc. But we are lower on the cross rates at 92.9 AU¢, and at 63.6 euro cents. As a result the TWI-5 index will start today at 76.6.
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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