Relief rallies end quickly. And so it was this morning in the US and in Asia as markets sold off again. The Fairfax business pages talked breathlessly about the $55 billion gain in value on the ASX in the past two days. Tomorrow they could very well be talking about another day of red ink after the two-day boomlet came to a sharp halt in US markets this morning. Instead of carrying on with the market surge — in which our market rose 2.1% yesterday, Tokyo more than 7%, Hong Kong more than 4% and Shanghai more than 2% — markets are now looking at a rather large fall after Wall Street fell more than 1%.

This morning the ASX fell 2.2% in the first half hour, wiping out yesterday’s gain and Tokyo was down 3.4%. Not even an interesting new product launch from Apple could stop the rot (Apple shares lost 2%). The Aussie dollar, which jumped to around 70.60 US cents yesterday, retreated just as quickly this morning and was down nearly a cent and well under 70 US cents. Gold lost US$15 an ounce and is now hovering on the edge of US$1100 an ounce and oil fell nearly 4% to close to US$44 a barrel. The so-called “risk-on rally” evaporated more quickly than it had developed in Asia Tuesday and yesterday. The expected rate cut by the Reserve Bank of NZ helped our dollar lower this morning. So all eyes will again turn to Shanghai to see if the sell-off in the US re-infects that fragile market, or whether the Chinese government’s talk of a “proactive” fiscal policy (more stimulus spending) continues to hold back the bears. — Glenn Dyer

Kiwi rate cut despite Auckland boom. Normally a central bank monetary policy statement containing the sentence “House prices in Auckland continue to increase rapidly and are becoming more unsustainable” would presage a rate rise, not a rate cut, but that’s what we got this morning from the Reserve Bank of NZ (the third in a row this year). So the bottom line is that the Kiwi central bank must be so concerned about the health of the country’s economy (especially from the damage weak commodity prices) that it is prepared to wear the Auckland house price bubble to help the rest of the country. Measures aimed at controlling some of that boom in Auckland start next month, but will take several months to have a real impact. And the RBNZ made it clear it will go on cutting rates.

Once again the contrast with the situation in Australia is quite telling. While the Kiwi economy seems to be heading for a bust, with the central bank cutting rates to cushion the fall, the Aussie economy remains in low gear, but still growing albeit rather fitfully, and not in need of a rate cut. — Glenn Dyer

Apple’s surprise. Amid all the expected gloss of the new improved iPhone 6 models, iPad, new operating systems and a new Siri-driven Apple TV, (none of which really set the fans alight, unlike the introduction of the 6 model phone a year ago), Apple snuck in a non-tech surprise — its own monthly installment program for purchasing iPhones, like the programs by US major phone companies like T-Mobile and Verizon, are now offering. For a monthly fee starting at US$32, phone buyers will get a iPhone, unlocked (they can choose their own carrier) AppleCare+ and the right to change phones after every model update.

This puts Apple in control of its relationship with consumers by cutting out phone companies currently charging those monthly fees. And it builds a base of users and steady buyers. It also underwrites each model revamp and is also a tacit acknowledgement that producing stunning new iPhones every one to two years is going to be tough, so it will be better to have a steady, reliable customer base wanting the updates. These offers will also produce a regular cash flow from customers taking up this offer. — Glenn Dyer

Oil Search, oil wish. According to media reports, the bosses of Woodside and Oil Search meet in Sydney on Sunday, to discuss $11.6 billion offer from Woodside for Oil Search. Oil Search wants more and will offer Woodside the exclusivity it wants to negotiate, in exchange for a higher premium than the 13% on offer. No premium (i.e. higher price), no exclusivity, and the door could be opened to ExxonMobil to launch a bid. Exxon is the largest shareholder in the US$19 billion PNG LNG project that has turned Oil Search into a rose, after years of being a wallflower. Analysts at Oppenheimer in New York reckon Exxon needs a deal to boost its performance. Woodside’s $11.6 billion offer is one of the largest in the sector this year, ranking second in some tables after the US$60 billion takeover of BG Group by Shell. — Glenn Dyer

Peter Fray

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