Dairy prices fall another 5% in NZD; US data positive; new election called in Japan; Indonesia cuts subsidies, raises rates; Beijing house prices fall; NZ$1 = 79.4 USc, TWI = 78.7

Here's my summary of the key news overnight with news of another fall in dairy auction prices.

They were down -3.1% in US dollars and -5.2% in New Zealand dollars, even though volumes sold were much lower. Milk powder prices were especially soft. Prices are now at a five year low. Part of the reason for the fall could be the reported enthusiasm by the Australians to rapidly ramp up dairy production now they have a dairy-friendly Free Trade Agreement with China. Whatever the reason, today's auction results are undermining the expectation by both Fonterra and the Government that these prices would be rising by now off their lows. It is not happening.

In contrast, the data out in the US overnight was reasonably positive. The National Association of Home Builders said its October index rose more than expected on the back of consumer confidence with builders reporting more buyer traffic and signed contracts.

US producer prices are also rising, and also more than was expected.

The confident theme also showed up across the Atlantic, in Germany at least. German investor confidence rose for the first time in 11 months after Europe’s largest economy avoided relapsing into a recession. The improved confidence was helped no doubt by a continuing rise in car sales.

The theme did not extend to Japan, however. Only one day after it was reported that the Japanese economy had slipped back into recession, Prime Minister Shinzo Abe has called an early election to seek a fresh mandate for his economic policies. He has also postponed an unpopular second rise in their GST. There is also a sense that Japanese investors are losing faith that their problems can be solved.

In China, home prices in the capital fell for the first time in almost two years as China’s property slowdown deepened, prompting developers to offer discounts to cut inventories.

In Indonesia, the newly elected government has pushed through increases fuel prices by more than 30% by sharply reducing subsidies on petrol in an attempt to save their economy more than NZ$10 bln next year. And then it raised its official interest rates to 7.75%.

In New York, UST 10yr bond yields are virtually unchanged in mid-afternoon trade, but slightly lower at 2.32%.

The oil price is slightly lower again, now below US$75/barrel with the Brent price under US$79/barrel.

The gold price is marginally lower too, now just on US$1,183/oz. 

The NZ dollar is also basically unchanged from this time yesterday at 79.4 USc, has touched 91 AUc, and the TWI is at 78.7. These are two-month highs and that is despite the weak dairy auction result.

If you want to catch up with all the changes yesterday we have an update here.

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