US service sector growth beats expectations, jobs growth does not; China cuts reserve ratio, on tax warpath; UST 10yr yields rise again; gold and oil fall; NZ$1 = 73.7 USc, TWI = 77

Here's my summary of the key issues that affect New Zealand overnight with news that China is taking action to bolster is sagging growth.

But first, growth in the American services sector rebounded modestly in January, though companies reported the weaker growth of new business according to two separate reports out overnight. Both reports came in better than markets were expecting.

Weaker growth was also the theme of the ADP Employment report which showed that fewer new jobs have been created in January than markets expected. This is a pre-cursor report for this weekend's key non-farm payrolls report.

Also overnight, China signaled new worries about its slowing economic growth as it moved broadly to free up more money for banks to lend by cutting its reserve ratio requirement by 0.5%. This could be a prelude to more measures to pump up Chinese economic growth.

In other news from China, a long-standing law, widely ignored, is starting to be enforced requiring individuals and companies to pay domestic taxes on income earned outside the country. This is sure to echo here in New Zealand but the bite will be less than otherwise because we do have a double-tax treaty with China. Chinese taxpayers will get a deduction in China for taxes paid here.

In Australia, their service sector contraction stabilised in January. And in separate news, the Australian Bureau of Statistics has had to make a second major and embarrassing revision to its data methods, this time on how it records first-home buyer lending commitments, and comes after the bureau admitted late last year that its estimates for seasonally adjusted unemployment were seriously out of whack.

And in Victoria, the new Labor government has abolished regulation of building site labour unions. This has raised eyebrows (and ire) because the announcement was hidden deep within a press release on whooping cough.

In New York, benchmark UST 10 year bond yields are up yet again today, now to 1.82%. And late yesterday afternoon New Zealand swap rates - which had sunk for most of the day - took off higher with a definite steepening bias. Five year swaps are up +4 bps, 10 yrs are up +9 bps this morning.

The oil price slipped overnight, now back down to US$49/barrel with Brent crude at US$55/barrel. Prices sank because American data showed that crude supplies grew more than expected last week and are sitting around 80-year highs. And a key consumer is using a lot less energy since at least 1975.

Gold is up marginally to US$1,264/oz.

We start today with the New Zealand dollar noticeably higher following Wheeler's speech yesterday. It is up to 73.7 USc, at 95 AUc, and the TWI is now at 77.

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

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