Global stocks fell sharply overnight with a fall of more than 2.5% as doubts weigh over the US-China trade truce. Confusion set in on trade talks as to what was actually agreed with a lack of detail from the Chinese side. A Chinese official said they will “wait for leaders to return” on Thursday before publicizing details. Both sides have 90-days to come to an agreement.
NZ Dairy Auction: Prices Up, Volumes Down
The Global Dairy Trade auction resulted in higher milk prices overnight, a surprise result following seven consecutive falls. The GDT Price Index rose 2.2% with an average selling price of $2819 per tonne, whilst volumes were down 15.2% from the previous auction. Fonterra will update their farm gate milk price forecast tomorrow with a number of analysts expecting them to cut their payout forecast.
RBA Holds Interest Rates
The Reserve Bank of Australia left interest rates on hold yesterday at the record low 1.5% as expected. Noting that inflation remains low and stable, employment is growing, and economy improving, but the improvement will be “gradual”. Almost 50% of economists expect the cash rate to remain on hold for at least another year.
US Treasury Yields Invert
The spread between 3-year and 5-year Treasury yields dropped below zero yesterday, with the gap in interest rates 2-year (2.80%) and 10-year (2.90%), narrowing to its smallest spread in more than a decade. Markets have traditionally considered an inversion of the 2-10-year spread to be a signal of an economic slowdown with central bank officials using this to gauge risks of a recession. Investors will continue to watch this closely.
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