Here's our summary of key events overnight that affect New Zealand, with news markets are in retreat worldwide.
Firstly, today's dairy auction has brought sinking prices. In fact it has now been 14 consecutive auctions since we have had a rise and prices are now back to where they were in August 2016. Since May prices have fallen -20% so we are in a bear market for dairy products. Since the previous auction two weeks ago we are down -3.5% in US dollar terms and down -5.7% in New Zealand dollar terms. Powder prices haven't fared as bad as some other products; for example AMF is down -9.4% since the last auction, butter is down -9.6%. All up, these are large falls and this result will weigh heavily of farm gate milk pricing forecasts, and more so because the New Zealand dollar is relatively strong at present.
US housing starts have come in weak as well. For October they are -2.9% below the same month a year ago and even below some weak analyst expectations. Building permits fared even worse, coming in -6.0% lower than the same month a year ago.
A clutch of American retailers reported poor results and together with yesterday's news from Apple that they have cut order sizes for their new iphone, that was enough to send Wall Street into reverse. In mid-day trade, the S&P500 is down -1.2% and recall it was down -1.7% yesterday. The drop is now a significant -2.9% just in one and a half days trading this week. In fact, all 2018's equity market gains have now been erased. Yesterday, Shanghai fell -2.1%. These are large short-term retreats indicating rising investor risk-aversion.
In China, the government's rescue plans for private industry financing is being gamed by some large investors who see a way to rid themselves of stocks which have little upside. This comes even as the Chinese government is allowing tax payments to be deferred by companies under severe liquidity stress.
In Australia the IMF has said the balance of risks to Australia’s economy are “tilted to the downside” due to a deteriorating global outlook, urging the central bank to keep interest rates low. And the RBA has kept rates unchanged, even as it notes the the reverse of the IMF position, saying the Aussie economy is doing well and the risks of inflation are to the upside.
And staying in Australia, it is being reported that internet traffic heading to Australia from the US and Europe was diverted via mainland China by state-owned China Telecom over a six-day period last year, in what some experts believe may have enabled a targeted data theft. China claims it was a simple operational mistake, a claim few believe. And Australia has blocked a deal by a Hong Kong company to acquire a major Aussie pipeline business on "national security" grounds.
The UST 10yr yield is starting today a tad lower at 3.05%. However their 2-10 curve slipped -4 bps to +25 bps as short-term Treasuries rise. The Aussie Govt 10yr is at 2.70% and up +2 bps, the China Govt 10yr is at 3.39%, up +1 bp, while the NZ Govt 10 yr is at 2.74% and up +2 bps.
Gold is unchanged at US$1,222/oz.
US oil prices are taking a thrashing today, down almost -US$3/bbl to new lower levels at just over US$54/bbl. The Brent benchmark is now just over US$63/bbl. These levels are the lowest they have been in 15 months;
However, the Kiwi dollar is starting today little changed at 68.2 USc. On the cross rates we are up to 94.1 AUc and the highest since April, and at 59.9 euro cents. That puts the TWI-5 at 72.7.
Bitcoin is sharply lower again today, now at US$4,511, another -US$500 lower than this time yesterday and another -11% dump in a day. At one point it dropped to US$4,280. Losses now exceed -25% in a week. 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 ».
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