England votes; US data positive, markets up; huge VW cheating settlement; McKinsey sees enormous China gains, and risks; UST 10yr yield up to 1.73%; oil up, gold lower; NZ$1 = 72.4 US¢, TWI-5 = 75.2

Here’s my summary of the key events overnight that affect New Zealand, with news of an enormous settlement in the VW diesel cheating case, and an enormous opportunity for China.

Firstly, most media are focused on the Brexit vote in a rain-sogged UK today and voting is about to wrap up. The result will likely be seen in the currency markets first. Bookmaker odds signal Remain. Last minute polling signals the same but with only a slight edge. In the end, it could turnout to depend on how voters turn out in the bad weather, which especially affect ‘Remain’ strongholds in London. That the weather could decide an election is very English. But in the end, no matter what the they decide, it will have little or no lasting impact on New Zealand. Or maybe no impact at all.

What will have an impact here is what is happening at our trading partners in the Pacific.

In the US, the number of Americans filing for jobless benefits fell last week to near a 43-year low. New home sales are running almost +9% above the same month a year ago. American June factory data picked up.

The same factory data does not look too good for Japan, but quite positive for Europe which reached a six month high.

The VW diesel cheating scandal is reaching a conclusion in the US courts where reports say VW will end up paying more than US$10 bln in settlement. Most will go to owners of affected vehicles, each getting about US$5,000. If that becomes the settlement benchmark, the costs could be far higher internationally.

China could add enormous GDP gains which could include more than US$5 tln of new income for households, by 2030, if it can switch to a productivity-led growth model. That is what the McKinsey Global Institute said overnight. It says China risks a hard landing if it persists with investment-led growth, which could push the non-performing loan ratio up to 15% in 2019 from an already troublesome 1.7% now.

In New York, the benchmark UST 10yr yield has extended its rises and this morning is up a further +3 bp to 1.73%.

However, the oil price is up marginally. The US benchmark is now just under US$50/barrel and the Brent benchmark is now over US$50/barrel.

Other commodities, like copper, are up as well. The gains have extended to dairy prices too (at least, in USD).

Gold is down further, now at US$1,261/oz.

And finally, the NZ dollar starts today decidedly firmer in what is now an extended trend, now at 72.4 US¢, at 95.3 AU¢, and at 63.8 euro cents. The TWI-5 index is at 75.2.

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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var timestammonth31 = 2678400000;
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for(i=0;i

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