Wall Street goes risk-off; Japan machine tool orders drop; China C/A may be in deficit; yuan management gettting tricky; US deficit issues grow; UST 10yr at 3.19%; oil up and gold down; NZ$1 = 67.3 USc; TWI-5 = 72.1

Here's our summary of key events overnight that affect New Zealand, with news that stresses are building in China, and therefore in countries that trade with them.

Firstly, we should note that it is a Federal holiday in the US for Veterans Day, but Wall Street is open and down -1.2% in limited trading, but in a risk-off mood.

Japanese machine tool orders fell -1.1% year-on-year in October after rising +2.9% in September. This is the first decline since November 2016 and is because orders from China have been weak.

And these trends are worrying officials in Tokyo. Prime Minister Abe is calling for a new public works spending program to stimulate their economy as concerns heighten there about global risks.

Shanghai equities market was up +1.2% yesterday and the rises were across the board. In Shenzhen, their market rose +2.4%.

This is despite growing evidence that China may in fact have a current account deficit in 2018, the first in 25 years. A large deficit in Q1 2018 has been offset somewhat in both Q2 and now with data just published for Q3. But that still leaves a year-to-date deficit of about -US$12 bln and it is not clear it will all be overcome in Q4. This is an event that will have significant implications for China and especially its currency. It is being driven by their internal reform process to try and shift away from investment and export led growth, to consumption growth. And the demands to keep spending to keep the trade war impacts from becoming social destabilisers is a new reality for them. The implications for the rest of the world are equally important. China isn't about to become a debtor nation any time soon, but the ascent of current account deficits bring that closer.

And that may bring temporary currency support for the Chinese yuan. Such a move is being feared in Australia. The last time the Chinese let their currency 'relax' they lost almost US$1 tln in currency reserves, so this is a very high risk area if they get setting wrong.

In the US, they are staring a new reality in the face - that their massive debt will need massive interest servicing, especially if benchmark bond rates keep on rising as their gross debt balloons.

The UST 10yr yield are still at 3.19%. Their 2-10 curve is now just below +26 bps. The Aussie Govt 10yr is at 2.74%, down -1 bp, the China Govt 10yr is at 3.50% and unchanged, while the NZ Govt 10 yr is at 2.83% and that was up +1 bps overnight.

Gold is down yet again and now to US$1,203/oz. That is a -US$6 drop overnight.

US oil prices are marginally firmer today and now just under US$61/bbl. The Brent benchmark is now over US$71/bbl. Interestingly, there is some speculation that Saudi Arabia might actually pull out of OPEC. If it did, that would upend oil markets. That said, it doesn't actually seem likely any time soon. And Saudi Arabia is talking up the prospect of new cuts to production there.

The Kiwi dollar will start today at 67.3 USc and little changed, and keeping pace with a rising greenback.. On the cross rates we are a little firmer at 93.5 AUc, and stronger at 59.8 euro cents. That puts the TWI-5 up to 72.1.

Bitcoin is now at US$6,365 and up +0.5% overnight. 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 ».