Here's our summary of key events overnight that affect New Zealand, with news Aussie bank strength is no longer world leading.
But first, today's dairy auction brought yet another small decline and they are now mounting up. This is the fourth in a row and the eighth in the last ten auctions. Since this time last year, overall prices are down -14%. Since the start of 2018 they are down -6%. We are back to prices last seen in October 2016. The key milk powders are down a little less than the overall in today's auction. Overall in NZD, prices are actually -2.2% lower than the last auction. New season farmgate milk payout estimates are already looking shaky. Volumes sold overnight at auction were a high 41,981 tonnes, the highest since August 2015 and +10% more than at the equivalent auction a year ago.
In the US, the Federal Reserve Chairman noted a "remarkably positive outlook" for the American economy that he feels is on the verge of an "historically rare" era of low unemployment and tame prices.
While China might be on holiday, Hong Kong is not, and yesterday their stock market took a major dive, down -2.4% on the day. A lot of Chinese companies are listed there and investors are nervous about China's immediate economic prospects, especially its export prospects. Beijing may be able to control the narrative inside the country, but this is where the real sentiment shows up.
We should also note, that yields on Italian bonds took off sharply higher again yesterday as doubts quickly overwhelmed last week's more sanguine views. Italy's new government's cavalier attitude to debt and deficits is a growing risk to the euro.
In a largely optimistic statement on monetary policy released late yesterday, the RBA said business conditions were positive while public infrastructure investment and resource exports helped Australia's strong annual economic growth of 3.4%. But they noted that a key uncertainty is the outlook for household consumption. Growth in household income remains low and debt levels are high. They kept their policy rate unchanged at 1.5%.
There is a widely held goal for Australian banks to be "unquestionably strong", which is defined as having their risk-adjusted capital ranked in the top quarter of all global banks. But while most global banks have been bolstering this measure, the main Aussie banks have been on the defensive responding to other more political distractions. And they have slipped fast on this measure, according to the latest S&P assessment. They are now in the bottom half of these rankings and have a lot of work to do to get back to where they were.
The UST 10yr yield is unchanged at 3.06%. Their 2-10 curve is now just on +24 bps. The Aussie Govt 10yr is at 2.67% (down -1 bp), the China Govt 10yr is at 3.66% (unchanged due to the holiday week there), while the NZ Govt 10 yr is at 2.64%, and also unchanged.
Gold however is rising fast today. up US$13 an now at US$1,202/oz in New York.
US oil prices are unchanged today and still at just over US$75/bbl. The Brent benchmark is now just under US$85/bbl.
The Kiwi dollar is starting today a little lower at just under 66 USc. On the cross rates we are a little firmer at 91.8 AUc, and at 57 euro cents. That leaves the TWI-5 at 70.1.
Bitcoin is now at US$6,510 and and another dip of less than -1% since this time yesterday. This rate is charted in the exchange rate set below.
This chart is animated here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».