Powell is short, sharp and clear; equity markets recoil; US inflation eases; US sentiment improves; California sets a hard end to ICEs; China struggles with heat; UST 10yr 3.03%; gold down and oil unchanged; NZ$1 = 61.4 USc; TWI-5 = 70.5

Here's our summary of key economic events overnight that affect New Zealand, with news equity markets dived as the US Fed boss delivered news that ameliorating symptoms are out and fixing the root causes are in.

In a short, blunt speech at Jackson Hole, Fed boss Powell reinforced the American central bank is very focused on getting inflation back to its policy range and will tolerate the 'pain' that may cause. He essentially said the choice they face is some short pain now, or much larger and long term pain if they leave the pressures unaddressed.

Now the battle against excessive inflation takes priority over the short term economic expansion. His speech is a good example of why monetary policy decisions have been handed to technocrat experts, rather than left to politicians.

And perhaps inflation is retreating somewhat. The US PCE measure fell in July from June, but from a year ago it is up +6.3% in July, but that is less than the +6.8% level recorded in June.

The same data shows the American consumption impulse easing fast. In fact incomes rose faster than expenditures in July, and only for the second month in the past 12 have we seen that.

American consumer sentiment improved in August, driven by the expectation that future prospects are brighter. But overall sentiment is still lower than year-ago levels.

The state of California has rolled out new rules that will make it impossible to sell anything but electric cars in that state within 12 years. California is the largest US state with a population of almost 40 mln. But much more than that, its air quality regulations are globally influential, and these new rules will be a tipping point for all vehicle manufacturers. ICE will fade quickly now, pretty much in the same way that cellphone quickly grew to dominance. This trend will not wait until 2035 however. It goes into effect for the 2026 model year, when carmakers are required to have a third of new sales be of zero-emission vehicles in California. This signal is clear. Manufacturing logistics may be a looming issue, but a spurt of innovation is probably about to happen.

Staying in the US, the first estimates of the annual crop inspection tours show that the soybean harvest should yield normal results, but the corn harvest is likely to come in -4% lower than earlier official USDA estimates. As corn is their largest crop, this will have global implications. The corn price rose on the news and it had only recently come off its all-time high.

In China, they have an even more serious crop problem. While there has been some new rain in parts of the south, it isn't enough and it isn't hitting most key agricultural areas. It is hard to overstate the impact this is likely to have on their rice and vegetable crops generally. China is facing a tough food supply problem. More rain now is probably too late to save most damaged crops. We will have a thoughtful article tomorrow on how China is confronting these challenges, including the roll of some large, opaque 'strategic reserves' of food they have.

Food production is one thing, electricity production is another and China's southwest is doing it hard at present.

In China's northeast, two more local banks are about to be declared bankrupt. They aren't the first.

In Australia, their avocado industry is also doing it hard, with a serious over-supply and very low prices. They want the Government to bail them out, at least try to force Japan to open up to Aussie avocados.

The UST 10yr yield starts today at 3.03% and little-changed from this time yesterday, and after Powell's speech. Bond markets are satisfied they had priced in what the Fed is trying to achieve. The UST 2-10 rate curve is also unchanged at -35 bps. Their 1-5 curve is also stable at -16 bps. But their 30 day-10yr curve is now at +68 bps and quite a lot flatter than this time yesterday. The Australian ten year bond is down just -1 bp at 3.61%. The China Govt ten year bond is up +1 bp at 2.68%. And the New Zealand Govt ten year will start today down a minor -2 bps at 3.87% and now off its two month high.

Wall Street however didn't find much to like in the Powell speech however and hadn't priced it in. It is down a massive -3.4% in Friday trade for a weekly fall of similar proportions. Overnight (and the Powell speech came in late trade) European markets closed lower with London down -0.7% and Frankfurt down -2.3% to book-end these results. Yesterday and ahead of the Powell speech Tokyo closed up +0.6%, Hong Kong closed up +1.0%, while Shanghai fell -0.3%. The ASX200 ended its Friday session up +0.8% to limit its weekly loss to -0.2%. The NZX50 ended its Friday down -0.2% and taking its weekly loss to -0.7%.

The price of gold will open today at US$1738/oz which is down -US$20/oz from this time yesterday.

And oil prices start today at just under US$93/bbl in the US which is a minor slip, while the international Brent price is still just over US$99/bbl.

The Kiwi dollar will open today at 61.4 USc and -1c lower than this time yesterday. That's its lowest since mid-July. Against the Australian dollar we are down to 89 AUc and a new low against the Aussie since October 2017, a 5 year low. Against the euro we have fallen more than -¾c to 61.6 euro cents. That all means our TWI-5 starts today at 70.5 and a -80 bps overnight fall although only a marginal slip since this time last week.

The bitcoin price is now at US$20,682 and down a chunky -4.1% from this time yesterday. Powell didn't help. Volatility over the past 24 hours has been high at just on +/- 3.2%.

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