Dairy prices hold; Trump threatens more tariffs; China angry now; equity and bond markets drop; US housing starts rise; Aussie housing markets fall; UST 10yr at 2.89%; oil and gold lower; NZ$1 = 69 USc; TWI-5 = 72.6

Here's our summary of key events overnight that affect New Zealand, with news of growing turmoil in markets and trade worldwide.

But first, today's dairy auction brought mixed results. Overall prices were -1.2% lower in US dollar terms with both WMP and SMP prices slipping about -1% each. But with the Kiwi dollar dropping just under 69 USc, the change in NZ dollars was a small +0.7% gain in overall prices. Today's movements won't be changing any farm gate payout forecasts on their own, and prices are still in the tight range we have had pretty much since late 2016. Given what is happening with other commodities and the escalated threats to world trade, today's result is remarkably sanguine.

President Trump said he is readying another US$200 bln in Chinese goods for new 10% tariffs - if Beijing retaliates against his previous tariffs hike. China has already said they will, calling the American move 'extortion'. Beijing is angry now.

Wall Street stocks are falling with the Dow down more than -1%, turning negative for the year. The sharp escalation in the US-China trade dispute is unnerving investors and there is a growing risk-off tone to trading. The greenback rose but bond yields sank.

And Chinese investors are rushing for the exits; more than one third on equities on the Shanghai exchange fell by the maximum -10% and were suspended from trading for the day. The Shanghai SSE index was down -3.8%. It was no better in Japan, where the Nikkei was down a chunky -1.8%. Hong Kong split the difference, being down -2.8%. The NZX didn't fare much better, being down -1.2% yesterday. It was a sea of red in stock markets around the world overnight. Your KiwiSaver values will have taken a hit.

American housing starts rose more than analysts expected in May. They were +4.6% above the April level and +8% higher than the same month a year ago. They are now at their highest level since 2007, driven by a construction rebound in parts of the country that have lagged for much of the economic recovery, as well as an extended apartment building boom.

China's reform moves in its corporate financing sector will be complicated by the trade dispute and stock market reaction. Bond defaults are up as regulators pressure the sector to clean up its act, but they were not counting on systemic pressures at the same time. How many defaults they can tolerate in this time of stress is uncertain. Until now, new corporate bond issuance has been high. Debt levels are China's economy Achilles heal.

Just how nervous policy makers are at present was emphasised overnight with the ECB chief saying they could delay their tapering if things get too wobbly. This is why bond yields have tanked overnight.

And in case you missed this yesterday afternoon, house prices are falling in Australia's largest cities. Sydney recorded the third consecutive quarter of falling property prices (-1.2%) and the first annual price fall (-0.5%) since the March quarter 2012, while Melbourne property prices fell -0.6%, the first quarterly price fall since September quarter 2012. Brisbane and Perth house prices also fell. ANZ says the Sydney fall is on the way to a cumulative -10% drop from the peak.

The UST 10yr yield is down to 2.89%, a -4 bps fall. The Chinese 10yr is at 3.61%, also down -4 bps, while the New Zealand equivalent is now at 2.88%, down -4 bps as well.

Gold is down another -US$3 in New York today, at just US$1,276/oz.

Oil prices are down sharply in the US by nearly -US$1/bbl today with the US price is now just on US$65/bbl. The Brent benchmark has changed very little however, still at US$75/bbl.

The Kiwi dollar will start today just under 69 USc as the greenback strengthens. But on the cross rates we are firmer at 93.5 AUc, and 59.6 euro cents. That keeps the TWI-5 at 72.6 and still in its very tight June range.

Bitcoin is virtually unchanged today at US$6,719.

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