Wall Street drops; global service PMIs rise; China threatens US grain trade; UST 10yr 2.80%; oil down and gold up; NZ$1 = 72.8 USc; TWI-5 = 73.9

Here’s our summary of key events overnight that affect New Zealand, with news of markets fretting about what the immediate future holds.

Losses on Wall Street are piling up. The S&P 500 on track to log its first -5% pullback from an all-time high in more than a year, as a global selloff in equities continued. The S&P500 is down another -2.2% in late trade today. The day’s weakness was broad based, with a majority of S&P 500 sectors down and European and Asian markets finishing sharply lower. Japanese stocks suffered their biggest one-day drop since November 2016.

Meanwhile, the giant American services sector activity grew sharply to a 12½-year high in January, buoyed by robust growth in new orders, according to one closely-watched survey. But another told the reverse story, sinking to a nine-month low. Take your pick.

The Eurozone survey was also very good but it was the only one where where the factory sector outshone the expanding services sector, and putting them at a 12 year high.

The Chinese services PMI rose to 54.7 last month, up from 53.9 in December. It was the highest reading since October 2010 and matched the figure of May 2012. January’s upturn in the services sector was bolstered by new business growing at its quickest pace in 32 months.

The negative US one feeds into the global survey of the services sector and despite the American drag, globally the services sector grew faster in January; in fact it is now at a 26 month high.

Meanwhile, China is flexing its trade muscles in its standoff with the US Administration. Lets hope US farmers are happy to be the fall-guys. In two separate statements, one announcing the dumping investigation and another regarding subsidies, China’s Ministry of Commerce said “preliminary evidence” revealed unfair practices in the export of US sorghum to China. American subsidies have depressed prices for Chinese growers, giving an unfair advantage to American products they say. Since 2013, the Americans have exported over half of its sorghum production and mainly to China. American subsidy-induced over-production is facing a crisis and the relief valve of exports will close quickly as the world tires of ‘America First’ policies. Farm state politicians will face a day of reckoning soon.

The UST 10yr yield is down to 2.80% (-5 bps). The Chinese 10yr is at 3.93% (+1 bp) and the New Zealand equivalent is at 3.00% (-1 bp).

Local swap rates are up again with an even steeper yield curve now at +114 bps, its steepest since March 2017.

Gold markets aren’t closed yet but the price of gold is up +US$2 to US$1,334 in New York.

Oil prices are lower by more than -US$1 with the US benchmark now over US$64/bbl and the Brent benchmark under US$67.50/bbl.

The Kiwi dollar is down again today against a firming greenback and now at just under 72.8 USc. On the cross rates we are holding at 92 AUc and 58.6 euro cents. That puts the TWI-5 at 73.9 and its general level over the past week.

Cryptocurrencies have fallen sharply again overnight, with bitcoin now at US$6,940. Other crypotos are also slumping. The bitcoin price is its lowest since November 15, 2017. China is blocking access to offshore cryptocurrency platforms.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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Source: CoinDesk