Dairy prices slip again; Powell positive and on track; US industrial production up; same in Canada; China new home prices rise; UST 10yr at 2.86%; oil stable and gold down; NZ$1 = 67.8 USc; TWI-5 = 71.4

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Here’s our summary of key events overnight that affect New Zealand, with news markets are watching the real economy, sidelining the crazy political rhetoric.

But first up today there was another dairy auction. That brought prices that were -1.65% lower overall in US dollar terms, down -2.1% in New Zealand dollars. That is now the eighth fall in the last ten auction events and takes prices to -10% lower than they were at this time last year. But it is not all bad; 80% of the product sold was powders, and WMP actually rose in price by +1.5% while SMP rose by +0.8%. It was the fats that took the beating; AMF was down -5.2% from the last auction, butter was down -8.1%, and cheese was down -3.3%. Even though volumes for these weren’t large it was enough to push the overall index lower. While this auction by itself won’t change any farmgate payout forecast, the relentless small series of declines is adding up and that will be encouraging the sharpening of pencils.

Markets were more influenced by the comments of the US Fed chairman. He said in testimony before Congress he sees the United States on track for years more of steady growth. He reaffirmed that the gradual path for rate hikes is what he favours. But he was challenged by senators worried the Trump administration’s trade policies were already damaging businesses in their districts.

Wall Street is up but by less than +0.5%. But yesterday, Hong Kong and Shanghai tumbled, both down about -1%. (Tokyo however saw good gains, up +0.4%.)

In the real economy, Fed data on American industrial production in June came in marginally better than was expected, and better than for May.

Canada also reported industrial production data and that too was better than analysts expected.

In Tokyo, Japan and the EU signed a new FTA, one that eliminates most bilateral tariffs. This is actually a big deal, even though today’s event is largely ceremonial.

And for all the threats to trade, we should remind ourselves that airfreight volume growth is high and rising. And the traditional Baltic Dry shipping index is also rising, near its one year high and more than double where it was two years ago.

In China, and for the fourth month in a row, new home prices rose and are rising at an accelerating rate. They are now going up at their fasted pace in nearly two years.

The UST 10yr yield is at 2.86% and unchanged. But the 2 year is firmer, meaning the 2-10 curve has now shrunk below +25 bps. The Chinese 10yr is at 3.50% (down -1 bp overnight) while the New Zealand equivalent is now at 2.91%, up +5 bps.

Gold has been jolted lower by -US$11 and now at just on US$1,228/oz. That’s its lowest in more than a year.

US oil prices are unchanged and have stabilised at their new lower level of US$68/bbl. The Brent benchmark is now just on US$72/bbl.

The Kiwi dollar is starting today a little firmer at 67.8 USc. On the cross rates however we are also marginally firmer at 91.8 AUc, and at 58.2 euro cents. That puts the TWI-5 up to 71.4. Yesterday’s CPI data and today’s dairy price slip are having no impact on our currency at all.

Bitcoin has taken off this morning and is now at US$7,338 which is a gain of US$670 in 24 hours or +10% since this time yesterday. No-one quite knows why. But ideas floated is that the person juts appointed today as the new CEO of Goldman Sachs has been positive about cryptos. And giant asset manager Blackrock has also taken a shine to this asset class. Today’s surge has the price back of NZ$10,000 for the first time in more than a month.

This chart is animated here. For previous users, the animation process has been updated and works better now.

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

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