Here's our summary of key events overnight that affect New Zealand.
US stocks have plunged on concerns of a strengthening dollar, Turkey’s currency crisis and global trade tensions. The S&P 500 is down 0.69%, Dow 0.48% and Nasdaq 1.16%.
The Turkish lira gained overnight, with Turkey’s banking regulator publishing new rules to support the currency. These include limiting offshore access to Turkish liquidity by imposing stricter leverage ratios on swap transactions to stop foreigners shorting the lira (as explained by ANZ economists).
The regulator has also made it easier for lenders to be more flexible with Turkish companies struggling to repay debt. According to Bloomberg, Turkish companies have US$217 billion of foreign-currency debt outstanding.
Qatar has also announced it will invest US$15 billion in Turkey to help avert a financial crisis.
Meanwhile the Turkish President’s diplomatic feud with Donald Trump has intensified, with Turkey announcing it will impose a new spate of tariffs on US goods, in retaliation to US sanctions.
Turning to data now, US retail sales rose more than expected in July as households spent more on cars and clothing. Sales increased by 0.5% month-on-month, and 6.4% year-on-year. With unemployment low and the effects of tax cuts being felt, consumer confidence is elevated.
Turning to the US’s industrial production, the Federal Reserve’s latest data isn’t quite as upbeat. Industrial production edged up 0.1% in July after rising at an average pace of 0.5% over the previous five months. The rate of manufacturing production growth also slowed to 0.3%.
The annual inflation rate in the UK has picked up for the first time since November, in line with expectations. The Consumer Price Index (CPI) was up 2.5% in July, an uplift from 2.4% in the three months prior. Higher prices were largely driven by higher transport costs. The Bank of England expects inflation to settle to just above its 2% target in two years' as it gradually increases interest rates. Yet ANZ economists say that with underlying inflation near target and Brexit uncertainty lingering, the Bank doesn’t need to take action anytime soon.
House price growth in the UK has slowed off the back of prices falling in London. Average prices grew by 3% in the year to June, a slowdown from 3.5% in May. London prices fell by 0.7% year-on-year - the most dramatic rate in nine years. Nonetheless, month-on-month, average prices across the UK have been tracking up since March, having hovered at a similar level during the seven months prior.
The UST 10yr is down 4bps to 2.86%.
Gold has fallen to US$1,177/oz.
US crude oil is lower at US$65/bbl, while the Brent benchmark is at US$71/bbl.
The Kiwi dollar is slightly weaker at 65.7 USc, 90.7 AUc and 57.9 euro cents. The TWI-5 is down to 69.9.
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