US factory data weak; Canadian house building data strong; Japan PPI rise eases, machine tool orders fall; China caves on trade dispute with Australia; UST 10yr 3.50%; gold and oil up; NZ$1 = 62.4 USc; TWI-5 = 70.4

Here's our summary of key economic events overnight that affect New Zealand, with news rumours are flowing that China is about to restart some serious stimulus to bolster its stuttering economy. Local stock markets rose sharply on the 'news'.

But first up in the US, the latest factory survey in New York makes grim reading. Activity fell very sharply in May after an unexpectedly strong April survey. It has been an unusually volatile indicator over the past year.

And total American consumer debt rose by +US$148 bln in Q1-2023 to a new record of US$17.0 tln. While this total rise was modest, contrary to the usual pattern of balance decreases in the first quarters, credit card balances reached a record high of US$986 bln, a rise that wasn't expected. Mortgage debt rose on higher mortgage rates accounting for 70% of their total consumer debt. But, new mortgages added were their lowest level since the Q2-2014, and -62% below the same period a year ago.

Delinquency rates across all types of consumer debt remain low by historic benchmarks, but they are rising quickly now.

Meanwhile in Canada, housing start data was unexpectedly strong in April and back to levels they had in 2022.

Producer prices in Japan rose 5.8% in April from a year ago, a slower pace of increase that the 7.4% rate in March. The March to April rate ran at just a 2.0% pa rate. In fact there has hardly been any rise (or fall) since December.

Japanese machine tool orders fell almost -13% in April although that was a slower rate of decline than in March. Foreign orders held up better than local orders.

Yesterday we noted weakness in Indian industrial production in March. Today that is confirmed by deflating manufacturing wholesale prices. In fact, they haven't had them deflate this sharply since 2015 which was the the worst on record. So the current retreat is their second worst since these records started in 2006.

On the trade front, we should note that Brunei has ratified the CPTPP, the last of the original 11 signatories of the trade and investment deal to do so. They took a while; the deal was originally signed in 2018.

And we should note that China seems to have scrapped its embargo on Australian coal with trade surging again - and both countries contributing to a massive increase in CO2 emissions. China is also reported to be ready to scrap its barley tariffs on Australia. It looks like China is caving on all their 'red lines'. Canada, which has similar problems with aggressive Chinese political behaviour, will have noticed.

And in Australia, their Senate inquiry into PwC's tax breach will probably start on June 7. But it has come to light that the firm targeted 23 US tech firms including Apple, Google and Microsoft with a tax avoidance workaround hours after Treasurer Joe Hockey announced a new law in 2015. Fourteen of those firms took up the plan although it is unlikely any knew the advice was based on illegally-sourced information. ASIC is probing PwC's behaviour too. The firm has its own investigation underway, but there are calls for the involvement of the National Anti-Corruption Commission.

The UST 10yr yield starts today at 3.50%, and up +4 bps from this time yesterday. Their key 2-10 yield curve is a bit less inverted at -50 bps. Their 1-5 curve is also a little less inverted at -132 bps. And their 3 mth-10yr curve is slightly less inverted at -210 bps. The Australian 10 year bond yield is now at 3.46% and up +7 bps. The China 10 year bond rate is little-changed at 2.74%. And the NZ Government 10 year bond rate is at 4.11% up +5 bps from yesterday.

Wall Street has opened its Monday session with a modest +0.3% rise on the S&P500. Overnight European markets were also little-changed. Yesterday Tokyo closed up +0.8%. Hong Kong was up a strong +1.8% and Shanghai was up +1.2% both after rumours that new Chinese stimulus was on the way. The ASX200 closed its Monday session up +0.1% and the NZX50 was also almost unchanged.

The price of gold will start today at US$2018/oz, and up +US$7 in a day.

And oil prices are up +US$1 from yesterday to be just on US$71/bbl in the US. The international Brent price is just on US$75/bbl.

The Kiwi dollar is +½c firmer against the USD from yesterday and now just under 62.4 USc. Against the Aussie we are softer at 93.1 AUc. Against the euro we are a tad firmer at 57.3 euro cents. That means the TWI-5 is now at 70.4 and up +30 bps from this time yesterday.

The bitcoin price is firmer again today, now at US$27,467 and up +1.9% from this time yesterday. Volatility over the past 24 hours has remained modest at just over +/- 1.7%.

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