US construction spending weak; Wall Street down; trade talk resolution closer; China suppresses World Bank report; tariff impacts; Fonterra outlook downgraded; UST 10yr 2.73; oil stable and gold drops; NZ$1 = 68.1 USc; TWI-5 = 72.7

Here's our summary of key events overnight that affect New Zealand, with news all about tariffs and their real impact.

But first, American construction spending unexpectedly fell in December from the prior month as investment in both private and public projects dropped. A small rise was expected. Year-on-year there was a rise but it is the lowest in seven years. Many observers now expect that to lower the Q4-GDP growth rate from the initial +2.6% estimate already made. Forecasts for Q1-2019 are now under 2.0%.

Maybe Wall Street is noting this sort of data. In mid-day trade today it is down -1.1% and dropping. The prospect of a bad trade deal between China and the US is also turning them off. China sees "important progress" being made in those talks.

Yesterday however, Asian equities were up strongly with Tokyo up +1.0%, Hong Kong up +0.5%, and Shanghai up +1.1%. Following them, European markets were up about +0.6%. But Wall Street isn't following today.

China talks up its current process of market 'reform' - but it is holding up a report on its economy, written in conjunction with the World Bank, as it tries to tone down recommendations about reforming its SOEs and allow more market-led principles to reign. The report, titled “New Drivers of Growth in China,” has been ready for a year, but Chinese authorities have not permitted its release.

The American tariff war against its trading partners, particularly China and the EU, cost American companies and consumers US$4.4 bln a month in 2018, according to researchers from the New York Federal Reserve, Princeton and Columbia universities. They concluded that those who were exposed to the duties overseas “paid none of the bill”.

Locally, ratings agency Fitch has lower the Outlook on Fonterra from Stable to Negative. It didn't change the rating of 'A'. This follows last weeks profit downgrade and Fitch now says Fonterra has "structural issues that it needs to address to retain the defensive traits that have underscored its historically strong business profile".

The UST 10yr yield has slipped -3 bps today to 2.73%. Their 2-10 curve is back to +18 bps while their negative 1-5 curve has almost vanished. The Aussie Govt 10yr is up +1 bp to 2.18%, the China Govt 10yr is up a similar amount to 3.21%, while the NZ Govt 10 yr is up +3 bps to 2.23%. Local swap rates rose marginally, although more so at the long end.

Gold has fallen again, down to another -US$6 to US$1,287/oz. Recall, this price was at US$1,344 two weeks ago so it has tumbled -4.2% since then.

US oil prices are little-changed today at US$56/bbl while the Brent benchmark is just on US$65/bbl.

The Kiwi dollar is at 68.1 USc and little-changed from yesterday. On the cross rates we also little changed at 96.1 AUc. Against the euro we are marginally firmer at 60.1 euro cents. The TWI-5 is now at 72.7.

Bitcoin is softer at just under US$3,700 and a drop of about -2.5% since this time yesterday. 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 ».