Here's our summary of key events overnight that affect New Zealand, with news investors are suddenly heading for the exits, seeking safety.
Volatility returned to Wall Street with a vengeance overnight with the VIX jumping a 24 day high, and the UST 10yr benchmark bond yield slumping to a 45 day low. Driving the mood swing was downbeat guidance from JP Morgan, and rising worries over the Italian situation. Wall Street is having its biggest one-day drop in a month.
The Dow is down almost -2%, the S&P500 down more than -1.5%. These are major retreats in confidence by equity markets. They come after -½% falls in Asian markets yesterday, and more than -1% falls in Europe but the later Wall Street dump will likely add to drops in Asia again today. Australia and New Zealand won't be immune.
The American drop came after data was released showing consumer confidence actually rebounded in May, but households were a bit pessimistic about their short-term income prospects even as they expected strong job growth to persist. And house prices keep rising faster than expected, driven by low inventories of houses for sale.
But, then the White House seemed to double down on its anti-trade agenda, particularly targeting China. The Chinese aren't happy.
In Italy, the head of their central bank warned overnight about the risks of losing their "asset of trust" (see p19). He has hit the nail firmly on the head there. It is a comment that has not gone unnoticed by markets who have trashed their bonds today, suspecting the voters of Italy have already damaged that trust. The spillover to Wall Street was swift. And the stakes for the euro are rising.
In Australia, consumer confidence has taken a "substantial" tumble, driven by homeowners concerned about falling house prices in Sydney and Melbourne. It fell by -3.2% last week, falling for the first time in seven weeks.
And the unintended consequences of the Hayne Royal Commission are starting to be realised by the wider community. There is a growing understanding that its approach may actually trigger something worse that what was set up to fix.
The UST 10yr yield has slumped to 2.79% down -14 bps as Wall Street reopened after their long weekend break. The Chinese 10yr is at 3.64% (unchanged) while the New Zealand equivalent is at 2.76% (up +2 bp). I doubt either of these levels will hold today given the changed Wall Street mood.
Gold is up another +US$6 to US$1,303/oz in overnight trading, a modest rise in the circumstances.
Oil prices are marginally firmer and holding at the new lower level. They are now just over US$66.50/bbl in the US and the Brent benchmark is now just over US$75.50/bbl. In China, natural gas prices are rising as regulators push energy companies to reduce coal use.
The Kiwi dollar will start today just under 69 USc. But on the cross rates we are also weaker at 91.9 AUc and 59.8 euro cents. That puts the TWI-5 down to 72.2.
Bitcoin is now at US$7,504 ending a four day weakening run and is now +3.7% higher than this time yesterday.
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The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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