Dairy prices drop; US car industry smokes expectations; VW faces more accusations; NZ 3rd largest food exporter to China; China growth target lowered; UST 10yr yield 2.20%; NZ$1 = 66.8 US¢, TWI-5 = 71.9

Here’s my summary of the key events overnight that affect New Zealand, with news that dairy prices fell again early this morning in the latest auction.

This fall was -7.4% in US dollar terms, -6.3% in NZ dollar terms. Milk powders fell -8%.

The fall was not a market surprise as it had been well signaled in the NZX derivatives market. But it was slightly larger than expected.

The kiwi dollar fell immediately after the results were posted although it has clawed back about half the fall since.

This is the second consecutive fall following four very strong consecutive rises. Overall, prices have retraced to where they were in September and are probably still below where they need be for economic dairy farming for many in the business.

Elsewhere, the American car industry is on track for a record year of annual sales as the top carmakers reported October sales that far exceeded expectations. However, US general factory shipments nationwide in September were disappointing, dropping for the second straight month.

Speaking of car companies, VW’s cheating is proving even deeper than originally reported. The US EPA has said a much wider range of vehicles are involved with more defeat software found than has been admitted to. The icon SUV Porsche Cayenne and various Audi models are now involved.

An interesting note on a Chinese website shows that New Zealand is now the third largest exporter of food to that country, after the EU and the US, and well ahead of Australia who is sixth. We are playing in a trade with some very large rivals.

And staying in China, their president has said that +6.5% growth is now their bottom line. That level is needed he said to double average income by 2020 over 2010 levels. It might be a tough ask as their economy slows as it transitions to a consumer-led basis.

In New York today, the UST 10yr yield benchmark rose further and is now at 2.20%. Markets are starting to believe a rate hike is coming from the Fed in December. NZ swap rates rose in sympathy yesterday and will probably do so again today. Rate rise noises are also coming from the UK.

The US benchmark oil price has also risen today, now at US$47/barrel, and the Brent benchmark is at US$50/barrel.

However. the gold price has fallen sharply, now at US$1,118/oz.

The New Zealand dollar starts today lower on the dairy auction results at 66.8 US¢, at 93.1 AU¢, and at 61 euro cents. The TWI-5 is at 71.9.

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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