Dairy prices drop again; US CPI rises again; China electricity use drops; RBA worried about China; UST 10yr yield 2.30%; gold and oil fall; NZ$1 = 64.6 US¢, TWI-5 = 70.4

Here’s my summary of the key events overnight that affect New Zealand, with news commodity prices are in a bear market.

Oil, gold, iron ore, copper are all lower. And that includes dairy products.

Today’s GlobalDairyTrade auction saw prices fall another -7.9% in US dollar terms, -4.8% in New Zealand dollar terms.

The crucial whole milk powder price is down -11%.

That’s the third fall in a row on the lowest volumes since June.

We will now see analysts cutting their farmgate payout forecasts for this season and the screws will turn harder on the dairy sector.

Prices are back to where they were in September, although they are still a third higher than the lowest point in August.

In other news, American consumer prices rose in October after two straight months of declines as the cost of healthcare and other services rose, crucial evidence of firming inflation for the Fed.

Other data out in the US showed that manufacturing output rose in October, although ‘industrial production’ declined on a sharp fall for ‘mining’ (oil output). The rise in factory output of consumer goods, and of construction, were healthy, and there was a growth in capacity utilisation, according to the Fed data. There is nothing in today’s data releases to dissuade the Fed.

In fact, there are growing voices being raised that the Fed may have waited too long to start raising rates.

In China, data out today shows that electricity consumption dipped -0.2% in October. Despite that, the Chinese president is claiming that the country will post strong 7% growth in the current year.

In Australia, their Reserve Bank released the minutes of its last meeting, the press release of which was mildly upbeat. But the slowdown in China and the rest of Asia remains their biggest concern, while at home weak wages and continued falls in mining-related investment will prove the heaviest drags on growth, they say. Despite a moderately upbeat assessment of global conditions, the RBA said the “outlook for the Asian region, particularly China, remained one of the key uncertainties in forecasting global growth”.

In New York, the UST 10yr yield benchmark has risen purposefully today, now at 2.30%. Equity markets are higher too on stronger earnings reports.

But the US benchmark oil price is lower today, now just under US$41/barrel, while the Brent benchmark is under US$44/barrel. The weight of output rising faster than demand is keeping a sinking lid on energy prices. And maybe the Paris attacks will accelerate the drive to wean ourselves off of oil faster.

And even gold can’t win a trick; it is down sharply, now at US$1,068/oz.

The New Zealand dollar starts today lower at 64.6 US¢. Against the Aussie it is at 90.8 AU¢, and is at 60.8 euro cents. The TWI-5 is at 70.4.

If you want to catch up with all the local changes yesterday, we have an update here.

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

Daily exchange rates

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