Global equity markets nosedive; China support measures fail; UST 10yr yield 2.01%; oil falls under US$38/bbl; NZ$1 = 65.2 US¢, TWI-5 = 68.9

Here’s my summary of the key events overnight that affect New Zealand, with news of a nosedive in financial markets.

They plunged when holiday-mode northern hemisphere markets opened after a near -9% dive in China shares and State support measures failed, but commodities and the US dollar recovered initial losses and Wall Street staged a striking comeback in the middle of the day in a volatile session after European markets closed. The session started badly with the Dow opening an unprecedented 1,000 points lower, staged its comeback, but late in the session the weakness has returned.

The sell-off seems to have little to do with the US or EU economies: it’s all about China and ’emerging markets’.

This is where we are at now:

The S&P500 is down -4.2% from where it closed on Friday on Wall Street. This is after it was down -7% at one point.

The oil price is now under US$38, about as low as it has been in the past few days. It’s under US$42 on the Brent benchmark. Copper has been another big casualty. But dairy prices only show a small adjustment. These will be worth watching today.

Gold is at US$1,153, and not displaying any additional inverse reaction which seems unusual. Bond demand seems to be taking up the role.

The NZD is at 65.2 USc although it was lower two weeks ago. It briefly hit 62.4 USc and at one point there were no bids for the Kiwi dollar. Things seem to have normalised now although the TWI has settled at 68.9, a three year low.

In New York, the UST 10yr yield benchmark has fallen as investors buy bonds, now at just 2.01%. This is its lowest level since the end of April.

Sharply lower equity prices will have an impact on KiwiSaver fund values.

All this seriously clouds the impending US Fed decision on September 18, although it probably cements in another OCR cut by the RBNZ on September 10.

The New Zealand dollar starts today lower at 65.2 US¢, at 90.7 AU¢, and a lot lower at 56.3 euro cents. The TWI-5 is at 68.9, down -200 bps from this time yesterday.

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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