Fed claims rate hikes on track; US durables orders and confidence stay high; China defends crisis action; ACG gets high bid; UST 10yr yield 2.18%; oil and gold up; NZ$1 = 64.5 US¢, TWI-5 = 69.2

Here’s my summary of the key events overnight that affect New Zealand, with news a bumpy ride in China may be a standard part of the future.

But first, American inflation will likely rise as pressure from their currency diminishes, according to Fed heavyweight and Vice Chairman Stanley Fischer. This will allow the Fed to raise interest rates gradually, he said in a speech careful not to overreact to the Chinese slowdown. This has been a clear signal the Fed will be sticking to its hike plan.

Backing him up have been comments by both the ECB and a Bank of England official.

In fact, US data shows new orders and shipments in the important durable goods report out over the weekend – for July – were holding after recent gains, or growing.

US consumer confidence levels remain high in August, down slightly from July as you might expect given the China wobble news, but still very much higher than a year ago.

China has defended the way it handled the crisis of the past few weeks. Investors are nervous. But, speaking to former Australian prime minister Kevin Rudd on CNN, a senior minister said when there is “systemic risk to the financial system, we must take action”. And he promised more ‘restructuring’ of the world’s second largest economy. Limits are being placed on their enormous local authority debt levels. China will be a source of uncertainty for some time yet, it seems.

On a separate note, an interesting insight into what New Zealand’s education sector businesses might be worth has had some light shone on it over the weekend. Auckland-based Academic Colleges, a private secondary school operator founded by Dawn Jones and John Graham, has apparently attracted a private equity bid of NZ$500 mln, a price that is 12 times EBIT, on the basis of expansion opportunities into South East Asia. Kiwi reputation in this sector is clearly worth a lot.

In New York, the UST 10yr yield benchmark held at 2.18%. In Shanghai, China’s money-market rates fell as the PBoC’s fifth interest-rate cut in nine months showed signs of success in bringing down borrowing costs after recent cash injections failed to do so. China has also dropped its long-held loan-to-deposit ratio requirement.

The US oil price is again sharply higher, back to US$45 a barrel. Brent crude is back up at US$50 a barrel in a second day of a frenetic short-covering rally. Violence in the Yemen, a storm in the Gulf of Mexico and refinery outages are helping extend the biggest two-day rally in six years. An expectation that China is back under control, and the US economy is on track, is raising the demand for commodities. (After markets closed, Egypt announced the discovery of a huge new gas field.)

Gold has risen as well, now to US$1,133/oz.

The next dairy auction is due on Wednesday morning and markets are signaling higher prices again.

The New Zealand dollar starts the week at 64.5 US¢. It is at 90.4 AU¢, and 57.9 euro cents. The TWI-5 is now at 69.2.

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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for(i=0;i

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