WMP prices drop more than -7%; US factory activity rises, car sales up; US personal loans leap; ASIC raises flags on credit card debt standards; UST 10yr at 2.83%; oil and gold up; NZ$1 = 67.5 USc; TWI-5 = 70.9

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Here’s our summary of key events overnight that affect New Zealand, with news of an unexpectedly large fall in dairy prices.

Today’s dairy auction has brought prices in US dollars down a bit over -5%. In New Zealand dollars however prices are down about -3% as the lower exchange rate has cushioned the drop. Volumes on offer and sold were the highest in 2018 but were lower than the equivalent auction a year ago. The big mover was WMP which fell -7.3% in US dollars, -6.9% in New Zealand currency, and a large fall whichever way you look at it. Worse, today’s fall is the third consecutive drop, and the eighth in the past ten auctions. The declines are starting to mount up now with overall prices now down -7% since February and of course most of that came today. A drop like this, if it is sustained, could well trigger a revision in farm gate payout price forecasts.

In other news, we should note that trading on Wall Street was limited in a short, perfunctory session ahead of tomorrow’s US national holiday. The S&P500 is down -0.5% today.

In the US, factory activity rose for the second straight month but part of that was because manufacturers were scrambling to move goods ahead of threatened tariffs. Excluding aircraft however, the rise was less than for May. Separately, official data confirmed the earlier flash result that May durable goods orders actually declined.

American car sales in June came in unexpectedly strong, and rising demand for SUVs is behind the trend. There may also be some advance buying ahead of tariffs and the expected higher costs that they will bring.

And new data out shows that America’s appetite for personal loans surged to a record this year and are their fastest-growing consumer-lending category. Outstanding balances rose +18% in the first quarter to US$120 bln. Fintech companies originated 36% of total personal loans in 2017.

Yesterday, the Shanghai stock exchange closed up marginally, halting the sharp selloff we have seen there recently. Tokyo also managed to avoid another serious drop.

In Australia, regulator ASIC has been investigating their AU$45 bln credit card market. They have problems with bank’s responsible lending assessments for credit cards can be improved and found many customers have cards that don’t suit their behaviours. “We are concerned about the amount of problematic debt we found,” they said. Their review did not address the level of interest rates being charged.

The UST 10yr yield has fallen sharply today and now at 2.83%, down -5 bps in New York. The Chinese 10yr is at 3.51% (up +2 bps) while the New Zealand equivalent is now at 2.81%, also down -5 bps.

Gold has turned back up today, up +US$11 in New York to US$1,253/oz in New York.

US oil prices remain high and firm, and now just over US$74/bbl. The Brent benchmark however is also firmer, now at US$77.70/bbl. And, a working carbon capture plant with zero emissions is being touted in Texas.

The Kiwi dollar starts today ½c higher at 67.5 USc. On the cross rates we are little changed however at 91.5 AUc and at 57.9 euro cents. That puts the TWI-5 at 70.9. We should also note that the Chinese central bank is moving to support their currency, after a recent sharp depreciation.

Bitcoin is now at US$6,577 and little changed from this time yesterday. The Indian Supreme Court has backed their central bank, virtually outlawing cryptocurrency trading.

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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Source: CoinDesk

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