US expanding modestly; Ireland reports stunning growth; China imports fall sharply; Malaysia cuts rates; Japan cuts growth forecast; UST 10yr yield at 1.47%; oil down, gold up; NZ$1 = 72.8 US¢, TWI-5 = 76.4

Here’s my summary of the key events overnight that affect New Zealand, with news of some stunning economic ‘growth’ in Ireland.

But first, the US Fed’s important Beige Book survey is out today and that shows the American economy is expanding at a modest pace.

In Europe, Ireland has stunned the international community by reporting a real GDP growth of – wait for it – +26.3% from 2014 to 2015. Much of this growth was because they have been a beneficiary of US tax inversion deals. Although employment has not changed significantly, the Irish Government says, the newly recovered wealth means public expenditure cuts are now off the agenda. Apparently, tax advantaged deals can pay off big for a small country. However, the Irish central bank has raised concerns over what has been dubbed “leprechaun economics”.

China reported a slightly better trade balance overnight. Exports were lower in US dollar terms, down -4.8% at about market expectations, but imports fell -8.4% and much more than the -6% expected. Lower oil imports which were down -22% year-on-year in June were a big factor.

But oil wasn’t the only item of their imports to drop. In fact cargo volumes through China’s ports grew at the slowest pace in seven years in the first half of 2016, according to an industry report that showed the country’s trade slump hitting its biggest gateways. China port container volumes rose just +2.5% in the January-June period from a year ago, and the ports of Shanghai and Shenzhen – China’s two biggest sites for imports and exports – both saw container traffic decline -1%.

The central bank of Malaysia unexpectedly cut interest rates late yesterday, their first reduction in seven years. The -25 bps cut takes their overnight policy rate to 3.00% and follows other countries in the Asia-Pacific region such as Indonesia, India and Singapore who have each recently eased monetary policy settings to help defend economic growth.

And in Japan, their government has cut its growth forecast sharply amid speculation it may soon unveil a new stimulus package to support an economy which is seen as “ailing” due to a very strong currency. GDP is now expected to grow by just +0.9% this fiscal year, down from a January estimate of +1.7%. Their inflation forecast was also downgraded to a rise of +0.4%, versus an earlier projection for +1.2%.

Back in New York, UST 10yr yields have slipped slightly today and are now at 1.47%. Overnight, there was a raft of European bond auctions and Germany sold 10-year debt at a negative yield, becoming the first eurozone nation to do so and setting a further milestone in the relentless fall of government bond yields across the world.

The US benchmark oil price is down as well, shedding more than US$2, now just under US$45/barrel and the Brent benchmark is just over US$46/barrel. The American government stunned the oil market with a set of bearish inventory data that added to concerns over a global glut of oil. In fact, it is becoming clear that North American on-shore shale resources are now the low-cost production sources, trumping ocean drilling.

The gold price is up, now at US$1,337/oz.

The NZ dollar starts today marginally softer at 72.8 US¢, is at 95.7 AU¢, and at 65.6 euro cents. The TWI-5 index is at 76.4.

If you want to catch up with all the local changes on Friday, 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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