Here's our summary of key events overnight that affect New Zealand, with news that bitcoin has crashed, down more than US$3,000 on the day.
First up however, dairy prices took a good jump in today's GDT auction. Overall they were up +4.9% on a weighted average basis in USD (although only up half that at +2.45% in NZD). But most individual key components recorded good gains; WMP is up +5.1%, SMP up +6.5%, cheddar cheese is up +5.2% and butter is up +8.8%. The reason is the lower volumes on offer. Fonterra advised a -6% fall in milk production in December although total season milk volumes will only be down -3% in New Zealand. That brought out the bidders - there was the highest number in more than three and a half years. For farmers unaffected by dry conditions, especially those with irrigation, they will get the best of both worlds - high production and higher prices. This is when irrigation really pays off.
China's dairy industry is the world's third largest (after India and the US) and they Ministry of Agriculture has been checking the quality of their fresh milk, which they now say has "never been better than today". ;)
And China has recorded its first drop in outbound direct investment since 2009. This comes after officials tightened up criteria in response to the activities of companies like HNA who have contributed to a surge in fund outflows and rapid depreciation in the yuan.
China's Dagong Global Credit, has downgraded the American sovereign credit ratings from A- to BBB+. Dagong cited reasons including “deficiencies in the current US political ecology” and American tax reforms that “did not attack the root cause of the unsustainable debt-driven economy of the US” and instead “directly reduce the federal government’s sources of debt repayment.” So far, the action has mainly drawn smirks from outside China.
But the American's are closer to debt default with no deal to raise their [self-imposed] debt limit. Markets expect an extension, just like every other time, but with the extreme level of toxic partisanship in Washington under this Administration it isn't so clear.
In Germany, tens of thousands of industrial workers are on strike in support of trade union demands for a +6% pay rise, and reduced weekly working hours. Employers, which includes major car makers, are offering about +2%.
In Australia, interest rates for savings accounts have been trimmed over the holiday break. Fortunately, the same banks who operate here did not do that on this side of the ditch. Not yet, anyway.
The UST 10yr yield is up +1 bp at 2.56% today. The equivalent 10yr China sovereign bond has held at its much higher level and is unchanged at 4.02%. The equivalent NZ 10yr sovereign bond is up +1 bp at 2.90%.
Oil prices have slipped a little today with the US benchmark now just under US$64 a barrel, while the Brent benchmark is now over US$69.50.
Gold is also lower, down -US$7 to US$1,334/oz.
The Kiwi dollar is down more than -½c to 72.7 USc returning to where it was before the US holiday. On the cross rates it is at 91.4 AUc, and against the euro at 59.4 euro cents. That puts the TWI-5 back at 74.2.
Bitcoin has fallen sharply over the past 24 hours by a massive -US$3,000 to US$11,161, a -20% slump. That takes the price back to where it was on December 4, 2017. Growing regulatory pushback is behind the reassessment, especially in Japan, Korea and China where the exuberance was most pronounced.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».