US firms fear tariff impacts; China firm stress sees debt levels rise; Argentina says deficit-busting plan popular; Westpac culls property investors; UST 10yr at 3.08%; oil leaps, gold holds; NZ$1 = 66.5 USc; TWI-5 = 70.1

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Here’s our summary of key events overnight that affect New Zealand, with news oil prices are on the move up today.

Firstly, Wall Street is broadly lower today. Both those rising oil prices and rising political risk in the US are shifting investors to a risk-off mood.

And that is despite the Chicago Fed’s national activity index being unchanged in August, and holding at levels that indicate solid growth in the American economy. And that was backed up by the Texas regional survey, although many of those surveyed are fearful of what the trade war will do to them. The Texas survey dipped when a rise was expected.

In China, and before the latest heavy US tariffs kicked in, a major regular survey indicates that manufacturers are under increasing stress. An “explosion” in corporate borrowing that isn’t being captured by official government statistics is the key indicator.

And a further escalation of the trade war between Washington and Beijing to include sanctions on financial products or transactions could trigger a financial crisis in China, Chinese researchers warned in a report. The ‘report’ itself has been withdrawn from direct access due to its sensitive nature.

ECB boss Mario Draghi said overnight the bank would push ahead with plans to phase out its QE program as wages and inflation pick up across the eurozone. His remarks pushed the euro higher against the US dollar. In fact, more analysts are concluding that the euro could be the big winner in the US:China trade clash.

In Argentina, President Macri is pushing ahead with an austerity approach and says he wants the country to never again default. He says he has broad support for his plan to rid themselves of budget deficits. If he can pull it off, he will also win substantial IMF backing.

In Australia, one second tier bank boss is saying that house prices will retreat over the next two years. And Westpac is reported to have sent a one-page letter to all its ‘risky property investors’ giving them one month to find another lender amid growing concerns about the impact of rising rates, falling values and oversupply. You can do that when almost all your lending is on variable rate terms.

The UST 10yr is up +1 bp and now at 3.08% and their 2-10 curve is now just under +27 bps. The Aussie Govt 10yr is at 2.71%, up +1 bp, the China Govt 10yr is at 3.71%, unchanged because of their public holiday, while the NZ Govt 10 yr is at 2.69% and down -1 bp.

Gold is also unchanged at US$1,199/oz in New York.

US oil prices are up sharply today and now just over US$72/bbl which is more than a +US$1/bbl jump. But they are up much more internationally with the Brent benchmark leaping more than +US$2/bbl to over US$81/bbl and a four year high. American sanctions on Iran are causing the shift. Separately, there has been a major new discovery of gas reserves in the North Sea.

The Kiwi dollar is slightly softer at 66.5 USc. On the cross rates we are also a little softer at 91.6 AUc, and at 56.5 euro cents. That puts the TWI-5 at 70.1.

Bitcoin is now at US$6,645 and little changed from this time yesterday. This rate is charted in the exchange rate set below.

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 ».

Daily exchange rates

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USD 

NZD

End of day UTC
Source: CoinDesk

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