Higher US wages lower productivity; IMF warns Fed; China to free TD rates; Brazil raises again; Greece won't pay; new enquiry into conduct of Aussie banks; NZ$1 = 71.2 US¢, TWI-5 = 75.2

Here's my summary of the key issues from overnight that affect New Zealand, with news of a new enquiry into the conduct of Aussie banks.

But first, American productivity rose in the March quarter from a year ago but fell from the previous quarter - mainly because wages have started rising faster than output and first quarter output took a tumble due to weather and USWC strike action. The results surprised markets.

And they will have been noted by the Fed who have been looking for signs of quickening rises in payrolls. It bolsters their case for raising rates (another reason equity markets were uneasy). Tomorrow's non-farm payrolls report will be crucial data for their next meeting which is still two weeks away.

Equity and bond markets were somewhat surprised at the news. Also uneasy is the IMF who have publicly asked the Fed to delay raising rates until 2016. They worry about the flow-on impact of falling bond values and rising interest costs, especially in Europe, although they couched it as needing to 'wait for greater signs of wage or price pressure' in the US.

Rising interest rates are also on the agenda in China who said overnight that it is about to remove the interest rate ceiling its banks can pay for deposits as part of the 'opening up' of its economy.

In Brazil their central bank has raised interest rates for the sixth straight time, and their OCR is now up to 13.75%. They are struggling to contain stagfation - that is inflation without growth - and are shrugging off growing discontent over higher borrowing costs as it fights regain investors trust and confidence.

In Europe, Greece defiantly announced it won't (or can't) make this week's €300 mln payment to the IMF and that it will bundle all its June payments together and pay at the end of the month.

In Australia, there is to be a new Senate inquiry into the way banks and others allegedly 'engineer' defaults of clients to sell them up, even though they have never missed a payment on their debt. It is to be led by a senior Government senator.

In New York, the UST 10yr benchmark yield is holding at its higher level in today's trading. It is now down just -2 bps to 2.34%.

The US oil markets are lower again today with the US benchmark price now back at US$58/barrel again, and Brent crude is at US$62/barrel.

The gold price is down another $8 to US$1,176/oz.

The New Zealand dollar is also lower this morning, currently at 71.2 US¢, at 92.6 AU¢, and at 63.3 euro cents. The TWI-5 is at 75.2 and its lowest level since September 2013.

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 »