Here’s my summary of the key events overnight that affect New Zealand, with news bank funding costs are facing a tight spot.
But first, official data on the US services sector for Q2 is surprisingly positive. Total revenue at service firms rose +4.3% in the June quarter compared with a year earlier. That compares very well with the +3.5% growth in the first quarter and this year and the +2.2% growth in the final quarter of 2015. It was the strongest year-on-year revenue gain since the end of 2014.
In Europe, the ECB disappointed markets by keeping its interest rates unchanged and leaving the door ajar for more stimulus. But that was about all; it gave few hints about its next move. Markets had expected a more decisively dovish position.
In China, export growth rose in August but that was due to a weaker yuan. Imports however rose for the first time in nearly two years, and perhaps that suggests domestic demand may be picking up. In US dollar terms, their trade surplus narrowed somewhat. A faster pace of import growth will be welcomed by its trading partners.
And in Australia, a new report is warning of the effects of Chinese language online media and their drive to keep immigrant communities tied to news and views that reflect Beijing’s world view. Official Chinese ‘soft power’ efforts are being directed to try and avert local assimilation. Fortunately the Report finds the efforts are likely to fail.
In New York the UST 10yr yield is back up, now to 1.59% today. Actually, there is action also in Libor markets as well. In less than a month, new rules for money market funds will come into force and these funds are shifting their focus to holding Government securities rather than corporate paper. That means that some aspects of bank funding will have fewer sources. Markets are reacting by driving up the interest rates in Libor. They have risen more +50 bps in the past year, and the cost of currency swaps has risen even more. Many analysts think we are only part way through these hikes. This shift could have a direct impact on NZ bank funding – if bank treasurers have left their capital raisings to the last minute.
The oil price has risen again today, this time by about US$2, with the US benchmark price now just under US$47.50 a barrel, while the Brent benchmark just under US$50 a barrel. Smaller than expected American inventory levels are behind today’s move.
The gold price however is lower by about US$8, now just over US$1,336/oz.
The New Zealand dollar has slipped overnight on USD strengthening. It’s now at 73.9 US¢, 96.7 AU¢ and 65.7 euro cents. The TWI index is now at 77.
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 ».