US growth picks up; US farm incomes rise; Mexico raises growth forecast; China banks boom; German inflation rises; UST 10yr yield at 2.15%; oil and gold lower; NZ$1 = 72 US¢, TWI-5 = 74.3

Here's my summary of the key events overnight that affect New Zealand, with news of improving data in some of the world's largest economies.

Firstly in the US, we get the August non-farm payrolls report on Saturday. Today we got the data from the pre-cursor ADP series and that was notably strong, with +237,000 new private sector jobs created. That is the best result since March, although over the past year, this unofficial data (of actual payrolls, unlike the NFP which is a 'survey') has reported stronger results than the official one. Markets had expected the ADP data to report +185,000 new jobs.

Also strong than expected has been the second estimate of US GDP. It came in at +2.6% in the flash estimate. Markets expected a small improvement to +2.7%, but it has been reported with growth as +3.0%. That is actually a big uplift. It has been driven by personal consumption which was originally reported as +2.8%, was expected to be revised to 3.0%, and has actually come in at +3.3%. This is perhaps even more impressive than the GDP data. However, markets are completely unmoved by the data.

The US Department of Agriculture said net farm income will rise to US$63 bln, up +3% from a year earlier but still just about half of 2013’s record US$124 bln.

South of the border, their central bank has raised its growth forecast and said that inflation is likely to be lower than previously expected. One reason is that it no longer expects the worst-case scenarios for American-Mexico relations.

In China, two of their huge state-owned banks both reported faster profit growth - on the back of funding a resurgent housing sector. And HNA Group's financing costs more than doubled during the first half of the year, signaling the conglomerate’s US$45-bn-plus acquisition spree since 2015 is catching up with the company.

The pace of inflation in Germany has picked up in recent weeks, now at +1.8% pa. That is what markets expected from this report. In July, it was +1.5%. That takes them closer to the ECB target of 2%. Price rises for food and power were above the German average, rent increases were below.

In Auckland, our courts are to be a battleground between Credit Suisse and a Georgian billionaire.

In New York, the UST 10yr yield is pretty much unchanged from yesterday at 2.15%. The US bond market may be facing a political risk from the current Republican push for tax 'reform'. Their chairman of the House Ways and Means Committee, said he wants to limit companies’ ability to deduct interest payments from taxable income to pay for tax cuts. If enacted, that will push borrowing offshore and erode the competitive advantage of the mammoth American bond market.

The price of crude oil has slipped again and is now just under US$46 a barrel, while the Brent benchmark is just under US$51. This is despite a big drop in reported US crude stocks. And despite reports that it may take months to restart full shale production in Texas.

The price of gold has fallen today, down -US$8 to US$1,306/oz.

And the Kiwi dollar has fallen as well on a stronger greenback, now just under 72 US and its lowest level since early June. On the cross rates we are still at 91.1 AU¢ however, and 60.5 euro cents. And the TWI-5 index is now at 74.3.

If you want to catch up with all the changes on yesterday we have an update here.

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