Fed minutes show uncertainty; US jobless claims fall; OECD downgrades growth forecast; China increases deficit-spending; Aussie jobless grow; UST 10yr yield 1.80%; oil up, gold down; NZ$1 = 66.3 US¢, TWI-5 = 70.9

Here's my summary of the key events overnight that affect New Zealand, with news another major analyst has downgraded world growth prospects.

But first, the US Federal Reserve released the minutes of its last meeting in late January, the one where it confirmed its rate-rising ambitions. But these minutes show officials increasingly reluctant to raise short-term interest rates at their March policy meeting, and possibly beyond. The key issues were stock market turbulence, China’s dimming outlook and indications that inflation could stay at low levels longer than expected.

Separately, the number of Americans filing for unemployment benefits unexpectedly fell last week, pointing to labour market strength that could keep Federal Reserve interest rate hikes on the table this year.

The OECD has downgraded its world growth forecast to +3% for 2016, the same level as achieved in 2015. It said trade and investment are weaker than expected. Sluggish demand is leading to low inflation and inadequate wage and employment growth. The downgrade in the global outlook since their previous one in November 2015 is broadly based, spread across both advanced and major emerging economies, with the largest impacts expected in the United States, the euro area and economies reliant on commodity exports, like Brazil and Canada. Compared with all this, New Zealand's current track looks quite good. They see China's growth at +6.5% this year, falling to +6.2% in 2017.

China is moving to ease its fiscal policies, raising its deficit-spending appetite. It had a fiscal-deficit-to-GDP ratio of 2.3% in 2015 and expects that to jump to 3.0% in 2016, a level it acknowledges is a danger and a 'red line'. But it needs to cut taxes, it says. It also can't help poking more funds into infrastructure projects; it approved 21 more in January, worth about NZ$12.5 bln.

In Australia yesterday, their January unemployment rate was reported at 6.0% on a seasonally adjusted basis, up from 5.8% the previous month and 6.3% in January 2015. But the actual, raw data shows the rate jumping to 6.5% in January from 5.5% in December. It's a volatile labour market across the ditch.

In New York the benchmark UST 10yr yield is higher by +2 bps at 1.80% in mid-day trading this morning. Yesterday, local rate curves steepened and are likely to steepen further today.

The US oil price is up slightly to US$31/barrel while Brent is just under US$35/barrel. Not only are American inventories higher than expected, actually at an 86 year high, Iraq is following Iran in rejecting commitment to the OPEC-inspired idea of an output freeze.

The gold price is marginally lower today at US$1,210/oz.

The NZ dollar is still trading in that narrow range, now at 66.3 US¢, at 92.7 AU¢, and at 59.7 euro cents. The TWI-5 will start today at 70.9.

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 ».