American household debt only grows modestly; China's lockdowns causing widespread stress; Japan's households glum; Australian activity improves; UST 10yr 2.99%; gold and oil lower; NZ$1 = 62.9 USc; TWI-5 = 70.4

Here's our summary of key economic events overnight that affect New Zealand with news China's drive for zero Covid is forcing a mounting economic toll, one that will be felt worldwide soon.

But first, American household debt rose to a record US$15.8 tln in the first quarter driven almost entirely by a +US$250 bln increase in home loan balances, but the rise was the smallest in a year and new mortgage and car loan originations declined for a third straight quarter. Home loans now account for 71% of all household debt, the highest share in roughly a decade. Total household debt only stands at 66% of annual economic activity (GDP). In New Zealand, that same level is 75%.

There was another well-supported US Treasury bond auction earlier today, and the median yield rose from 2.68% a month ago to 2.74% today.

In China, their pandemic lockdown controls are sharply undermining economic activity. One indicator - the sale of cars - is down by more than a third in April, the steepest retreat ever. The overall economic impact of China's pandemic response is massive.

Others have noted that the economic stresses are showing up in mixed messages from the Beijing leadership - a truly unusual sign of diverging policy tensions at the top.

The iron ore price took a tumble yesterday on low Chinese demand. Oil prices did too.

Meanwhile, China is making progress in finding alternative sources of iron ore than importing from Australia or Brazil. It's not a game-changer yet, but the efforts are growing.

In Japan, the Russian invasion seems to have snuffed out household spending plans. Household spending dropped by -2.3% in March in real terms from the prior year, although that was less than market forecasts of a -2.8% fall. The latest figure marked the first decline in personal consumption since last December, as consumers were wary of rising living costs and despite some easing of pandemic restrictions.

In Germany, economic sentiment as measured by the ZEW survey got a little less glum in May, but they are still weighed down by the implications of the Russian invasion on their doorstep.

There are reports that Germany is getting ready for a retaliatory shutoff of Russian gas, a move that would hurt the world's fourth largest economy.

Aussie business confidence fell in April from March, perhaps due to their election campaign uncertainties. But business conditions improved as surveyed by the NAB Monthly Business Survey.

Australian retail volumes rose despite very strong inflation and falling consumer confidence in the March quarter. While large household savings buffers, low unemployment and growing wage pressure should hide negative impacts on spending of both inflation and rate hikes in the short term, analysts there will be watching consumption closely in the coming months for signs of headwinds.

The UST 10yr yield starts today down another -7 bps since this time yesterday at 2.99%. The UST 2-10 rate curve is flatter at +36 bps and their 1-5 curve is also flatter at +97 bps. Their 30 day-10yr curve is also flatter at +244 bps. The Australian ten year bond is now at 3.47% and down -6 bps. The China Govt ten year bond is little-changed at 2.83%. And the New Zealand Govt ten year is down a marginal -1 bps at 3.81%.

Wall Street is staging a small recovery after the deep recent sell-off, up +1.2% in afternoon trade today. But that still means it is down a net -2.2% since the start of this week. Overnight, European markets closed up +0.7% on average. Yesterday, Tokyo ended down -0.6%, Hong Kong was down -1.5%, and Shanghai actually rose +1.1%. The ASX200 ended down -1.0% and the NZX50 was down -1.3%.

The price of gold starts today down another -US$13 since this time yesterday at US$1845/oz.

And oil prices are sharply lower again today by -US$2.50 at just under US$99.50/bbl in the US, while the international Brent price is now just over US$102.50/bbl.

The Kiwi dollar will open today another -40 bps weaker again at 62.9 USc and another near two-year low. The devaluation since the start of April is now up to -9.8%. Against the Australian dollar we are slightly weaker at 90.7 AUc. And against the euro we are also sharply lower at 59.7 euro cents. That all means our TWI-5 starts today at 70.4 and its lowest since mid February. On a TWI-5 basis the devaluation since the start of April is now up to -5.8%.

The bitcoin price is +1.4% higher than this time yesterday at US$31,684. Volatility over the past 24 hours has been very high again at just over +/- 4.8%.

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