Lame Fed signals have big impact; US jobless jump; US housing starts dive; EU finds bond cartel; China PMIs mixed; credit raters satisfied with NZ; UST 10yr 2.64%; oil and gold up; NZ$1 = 69.2 USc; TWI-5 = 73.1

Here's our summary of key events overnight that affect New Zealand, with news markets are waiting for officials to make up their minds. In Australia it is Hayne, in the US it is trade with China.

Yesterday, the US Fed actually made a nothing-decision, but it has had a huge impact all the same. Bond yields have fallen as investors prepare for a downturn, and the NZD has risen as the greenback has been sold off. But equity markets quite like the do-nothing signal. Essentially, the US Fed has abandoned its rate normalisation track, halting at 2.50% when markets had expected rises in 2019 to go at least to 3% and probably higher. The assumptuions of their reduction on the stimulus reservoir are up in the air. Oddly, they put out a special note saying their long-run track hasn't changed. Markets have assumed otherwise. The implications will be wide and international.

The number of Americans filing applications for unemployment benefits surged to near a 1½ year high last week, but analysts dismissed the jump as a one-off and said temporary factors, including a partial government shutdown, were to blame.

Data is starting to be released after the shutdown. Today November new home sales data showed a solid jump from October, but to levels that are -7.7% lower than the same month in 2017.

And a key regional Mid-West PMI has tanked in January, down to its lowest level since 2017.

In Europe, the EU has said it will charge eight unnamed banks with operating a cartel in trading euro zone government bonds between 2007 and 2012, years when the financial crisis dragged down banks and countries. Traders at the banks exchanged commercially sensitive information and coordinated trading strategies on the euro-denominated bonds, mainly through online chatrooms, they allege.

And the EU, including Germany, France and Britain, have set up a special payment platform to keep trade with Iran intact despite Washington's sanctions. That's unlikely to go down well in Washington.

The EU has also said GDP growth in the area was sharply lower, but still positive, in the fourth quarter of 2018. But Italy fell into recession as output shrinks.

In China, next week is Spring Festival, a week of public holidays - and a mass migration back to family villages. But those working in factories may not be feeling so happy. The official factory PMI contracted in January, the second straight month of decline. Those in the service sector will be feeling better however. According to that measure the expansion is solid and improving.

Iron ore prices keep on rising.

In Australia, all eyes are on the weekend release on the Hayne Report. This is important to them as new analysis shows that the major banks are rejecting up to half of all home loan applications amid uncertainty around the new rules expected for the finance sector.

The credit rating agencies have been reviewing their sovereign ratings for New Zealand. The key rating is AA. S&P has raised the outlook from Stable to Positive. Fitch has left its outlook at Stable.

Wall Street is moderately positive today, with the S&P500 up +0.7% in afternoon trade. Europe was generally firmer overnight and yesterday Asian markets closed up as well, strongly so in Japan and Hong Kong - although Australia took a pre-Hayne dip.

However, the UST 10yr yield is -9 bps lower today to be just on 2.64%. Their 2-10 curve is just on +16 bps. The Australian Govt. 10yr yield is at 2.23% and down -2 bps. The China Govt. 10yr yield is down -1 bp at 3.13%, while the New Zealand Govt. 10yr yield is down a sizable -7 bps to 2.28%. New Zealand swap rates fell yesterday as well.

Gold is up another +US$10/oz to US$1,320 and that is a eight month high.

US oil prices have risen again today, up to just on US$55/bbl while the Brent benchmark is just on US$62/bbl.

The Kiwi dollar starts today much higher at the 69.2 USc level, a gain of nearly +1c. On the cross rates we are a little firmer too at 95.1 AUc, and stronger at 60.4 euro cents. And that has the TWI-5 up at 73.1.

Bitcoin is only marginally lower today at US$3,404. This rate is charted in the exchange rate set below.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».