Here's our summary of key events overnight that affect New Zealand, with news bond markets are marking down American prospects sharply today.
But first, the S&P 500 hit a new record high after Fed Chairman Powell noted American economic strength and said the central bank's gradual interest rate hikes were the best way to protect the economic recovery. And he said more rate hikes are likely, over and above the two already penciled in for later in 2018. He also said he sees few signs of overheating. This was a direct pushback against the comments of the US President, and equity markets liked it, but the bond market not so much.
US durable goods orders fell -1.7% in July from June and a much bigger fall than markets were expecting. But they were up +8.6% above the same month a year ago.
Mexican GDP fell in the June quarter, also by more than markets were expecting. It was down -0.2% from the first quarter, but up +2.6% from the same quarter a year ago.
In Washington, trade talks between the US and China failed to produce any visible sign of progress, reducing the prospects of a deal soon. Meanwhile in China, authorities are trying to stop the yuan falling too fast so as to curb any prospect of capital flight.
China is also worried about the rise of Scott Morrison as Prime Minister of Australia, fingering him as an anti-Chinese influence.
The UST 10yr is unchanged today at 2.82% but their UST 2 yr is up firmly and that has put their 2-10 curve under +20 bps for the first time since July 2007. Given it was at +26 bps at the start of the week, this is a fast, sharp move and not a welcome one. The Aussie Govt 10yr is at 2.54% (unchanged), the China Govt 10yr is at 3.64% and down -2 bps, while the NZ Govt 10 yr is at 2.60%, unchanged.
The VIX has barely moved this week and is currently at 12 ignoring the political and trade risks, and almost exactly at the average index level over the past year of 12. The Fear & Greed index has moved firmly over to the 'greed' side with a +14% shift.
Gold has had a good move up, this time by +US$20 from yesterday and is now just on US$1,205/oz in New York.
US oil prices are higher today from yesterday and now just over US$68.50/bbl. The Brent benchmark is now just over US$75.50/bbl. The US rig count dropped sharply off its recent high.
The Kiwi dollar is ending the week a little firmer than at this time last week at 66.9 USc. On the cross rates we are now at 91.3 AUc, and at 57.6 euro cents. That puts the TWI-5 at 70.6 and comfortably above its recent three year lows. Against the British pound, we are at a nine week high.
Bitcoin is now at US$6,617 and +2.0% higher for the week.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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