Here's our summary of key events overnight that affect New Zealand, with news markets are ignoring the deepening standoff between the US and China on trade.
But first, there was another dairy auction overnight where 39,143 tonnes were sold into a falling market. That volume was +15% higher than the same auction a year ago but prices came in -15% lower on that basis. Compared with the previous auction, prices were -1.3% lower in USD terms, -1.75% lower in NZD terms. The key WMP price was -1.8% lower. This overall result was not as tough as the derivatives market was signaling, but it isn't positive either, and will put downward pressure on farm gate milk payout prices. It is now eight consecutive auctions where we have not had an increase and it is starting to mount up, building to a -19% fall in that time. In NZD, that decrease is less at -10% reflecting the declining Kiwi dollar.
The Americans have pulled the trigger on another US$200 bln of tariffs on imports from China, making these goods more expensive for their consumers (whether they end up buying them from a Chinese supplier, or a local American one). These new taxes will become effective on Monday, September 24, 2018.
China's retaliation hit US$60 bln on trade, and they have limited options to go higher by tariffing US goods. But they could tariff their exports to the US, hitting them in key consumer places that would hurt and for which the US has few practical alternatives - at least for a couple of years. Rare earth metals don't appear on the US tariffs and are another key card for China. It is likely that key US policy advisers views that "China is out of bullets" is just wishful and shallow thinking. And their expectation that a deal in the future is coming is equally wishful now.
Equity markets in China seem unfazed by the US actions, rising an impressive +1.8% in Shanghai after the American announcement. Today, even Wall Street is up, but a more modest +0.7%.
And in China, their African Swine Fever outbreak is widening. The seriousness for China is growing.
In a new report, Moody's is saying that global car sales will be stable in the year ahead, and this is despite rising tariffs on cars between the US and China. They see much smaller growth in China (+2%), but growth none-the-less, and they see declines in the US (-1.5%). They see small growth in both the EU and Japan, big growth in India, and surprisingly, growth in other emerging markets as well.
In Ireland, Apple has paid the Irish government almost NZ$20 bln, money that the EU ruled the tech giant owed due to illegal tax breaks. In return the Irish Government is supporting Apple in their appeal of the EU tax case.
In Canada, household debt growth is slowing sharply. In fact, it's at a 20 year low. Canadians are apparently repairing their personal balance sheets, all together and quite quickly. But there are concerns that this new effort may slow their economic growth.
In Australia, their largest bank has said it is pulling back on making property loans for self managed Super funds, a move that will worry the real estate industry.
And at their Financial Services Royal Commission, a leading insurer has admitted it misled more than 2 mln customers about its travel insurance product. Allianz travel insurance is sold in New Zealand under a number of brands.
The UST 10yr is up today at now just on 3.05% and actually a three month high. One thing markets do see from the US:China trade escalation is higher US inflation, and therefor higher Fed rates, sooner. Their 2-10 curve is wider at +25 bps. The Aussie Govt 10yr is at 2.66% (up +3 bps), the China Govt 10yr is at 3.67% and up +1 bp, while the NZ Govt 10 yr is at 2.63%, up +2 bps.
Gold is down -US$4 today at US$1,197/oz in New York.
US oil prices are up today and under US$70/bbl. The Brent benchmark is now under US$79/bbl.
The Kiwi dollar is starting today unchanged at 65.8 USc with no reaction to the dairy auction. On the cross rates we are marginally softer at 91.3 AUc, and unchanged at 56.4 euro cents. That puts the TWI-5 at 69.6.
Bitcoin is little changed at US$6,324. This price is tracked in the currency charts below. The New York Attorney General has issued a report saying crypto markets are very vulnerable to manipulation.
This chart is animated here. For previous users, the animation process has been updated and works better now.
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