Here's our summary of key events overnight that affect New Zealand, with news investors are realising they may have over-reacted on Tuesday.
Equity markets are rising again having apparently shaken off the concerns that caused the rout. The S&P500 is up +0.8% so far today after being up +1.5% yesterday. These rises come after a -6% cumulative fall from this time last week so today's level is still -3.8% net down.
Spurring the realignment higher is the realisation that the world economy is not is bad shape at all, certainly not enough to justify a -6% fall. Another separate question is whether equity indexes should have been that high in the first place. If not, a fall and maybe more could seem quite justified. And today bond prices are being pushed down again by same market forces that triggered the turmoil. This time, however, acceptance that yields are on the way up.
But the notion that the world's economy is actually in reasonable shape is reinforced by the latest building permit data out of Canada - even in the depths of winter, approvals came in much stronger than markets were expecting.
Even the US Congress seems to have reached a two year budget deal, averting a shutdown. But it still must pass votes and there is opposition on the left and right. Substantial new debt will be required.
In China, a senior official has indicated that the Government's grip on foreign currency outflows is to be loosened. It is going from 'tight' control to 'neutral'. And somewhat related, we should note that the exchange rate between the Chinese yuan and the US dollar is at its strongest point since 2013 at 6.2882 yuan to the US dollar (but at 4.57 yuan to the NZ dollar, it is not so impressive). The point is, the Chinese are letting the Americans devalue without responding so far.
And staying in China, the manipulative, secretive and generally dodgy boss of HNA is claiming that there are manipulative, secretive and dodgy moves out there to undermine his company, all part of a giant anti-China conspiracy, apparently.
In Germany, four months of post-election wrangling is coming to an end with a grand coalition finally agreed. Angela Merkel remains as Chancellor.
The UST 10yr yield is up strongly to 2.84% (+6 bps). Yesterday ended with the Aussie 10 year at 2.83% (+1 bp), the Chinese 10 year at 3.90% (-2 bps) and the New Zealand 10 year at 2.98% (-2 bps). It would not be surprising if all three took today's cues from Wall Street and moved up again today. But the New Zealand rates will have the extra influence of the RBNZ MPS positioning to contend with.
Gold continues to be shunned, even in volatility. This morning it is at US$1,318, -US$10 lower than yesterday.
Oil prices are down sharply with the US benchmark now over US$61.50/bbl and the Brent benchmark over US$65.50/bbl. Both are a drop of more than US$1.50/bbl and this has probably been triggered by fast-rising US petrol inventories.
The currency markets are sailing on as it nothing has really happened in the past week. The Kiwi dollar is at 72.8 USc. On the cross rates we are little changed at 92.8 AUc and 59.3 euro cents. That leaves the TWI-5 at just on 74.1, where it was yesterday and its general level for most of 2018.
Bitcoin is rising again, in fact it is up significantly. Remember Tuesday it dipped under US$6,000 and then rose to start yesterday at US$6,917. Today it is at US$8,328, a gain of +US$1,410 in 24 hours or +20.4% - which is an impressive one-day move in anyone's language. And that is despite China now blocking access to offshore cryptocurrency platforms and the BIS calling it 'a bubble, a ponzi scheme, and an environmental disaster'. And India is going after tax on cryptocurrency profits.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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