No US debt deal yet; US data positive except for housing and profits; China loses its recent shine, Singapore & Germany fall into recession; freight rates fall; UST 10yr 3.82%; gold and oil retreat; NZ$1 = 60.6 USc; TWI-5 = 69.6

Here's our summary of key economic events overnight that affect New Zealand, with news that without both the US and China in a healthy economic state, it is hard for the world to prosper. Commodity prices measure that pullback.

As the US heads into its long Memorial Day holiday weekend, negotiators are still unable to sort out their made-up debt limit problem. Credit rating agencies are getting antsy. Stories about a deal being 'close' continue to circulate but that is probably just political spin. Still, at some point they will reach a deal. But even after they do, the costs will linger - probably with a higher risk premium for US debt meaning higher interest rates.

Meanwhile, US initial jobless claims were little-changed from the low 202,000 of the week before. There are still 1.6 mln people on these benefits. This data does not show the expected easing in their labour market.

The Americans released a second estimate of their Q1-2023 economic activity and this revised their initial estimate higher. The US economy grew by an annualised +1.3%, slightly higher than +1.1% in the advance estimate. Consumer spending rose more than originally estimated.

Also improving was the Chicago Fed's National Activity Index which reported a strong improvement, and one that wasn't expected. But it is consistent with the GDP result. The next regional Fed factory survey reported an improvement from their prior one.

US pending home sales disappointed in April however, which isn't anything new for their residential real estate market. They were unchanged in April after a -5.2% slump in March which was the biggest decline since November 2022. Analysts had expected a +1% rise in April. 

Meanwhile US corporate profits fell -6.8% to US$2.3 tln in Q1-2023, the lowest since Q2-2021. Analysts had expected only a -0.9% slip following a -2.7% fall in the previous period. It was the largest decrease in corporate profits since the provision-heavy Q1-2020 when they slipped -7.4%. Then you have to go back to 2009 for a larger retreat. So that paints a picture of an American economy with economic growth but a profit recession. A strong labour market will do that.

Across the Pacific, China's post-pandemic rebound seems to be running out of steam. Yes, they are reporting good year-on-year results but that is only because of a weak base. But their recovery is patchy at best, and their currency is weakening even against a weak USD. They have growing labour problems. And they are no longer the engine other countries in the region can rely on to bolster their activity.

Singapore's economy shrank -0.4% in Q1-2023 after virtually no growth in the prior quarter. It was a worse result than expected. They were weighed down by the manufacturing, wholesale trade, and the finance and insurance sectors, which contracted in response to weakness in the global economy and the electronics downcycle. They say the risks are to the downside from here so they are facing falling into recession in Q2-2023, which of course they are well into.

Germany said its economy is now in a recession. They contracted by -0.3% during Q1-2023 after a -0.5% drop in Q4-2022. Persistent high price increases and a surge in borrowing costs hurt household consumption which shrank by -1.2%. However exports were a bright spot.

Global container freight rates fell a little faster last week, driven as usual by the weakness in the trade from and to China. Freight rates for bulk cargoes, which had been holding up over the past few months, fell as well. They were down -9% in the past week, a chunky decline.

The UST 10yr yield starts today at 3.82% and up +9 bps from yesterday as investors discount US Government debt on the debt ceiling risks. Their key 2-10 yield curve is more inverted at -69 bps. Their 1-5 curve is at -135 bps and little-changed. And their 3 mth-10yr curve is less inverted at -186 bps. The Australian 10 year bond yield is now at 3.74% and up +10 bps from yesterday. The China 10 year bond rate is little-changed at 2.73%. And the NZ Government 10 year bond rate is at 4.44% and up +4 bps bp from yesterday.

Wall Street has opened its Thursday session with the S&P500 up +0.9%. Overnight, European markets all closed lower by about -0.5%. Yesterday Tokyo closed its Thursday session up +0.47%. But Hong Kong was down -1.9% continuing is volatile run. Shanghai ended down -0.1%. The ASX200 ended its Thursday session down a stiff -1.1% while the NZX50 found things much easier, falling a mere -0.1% on the day.

The price of gold will start today at US$1943/oz and down -US$19 from yesterday.

And oil prices are a lot softer from yesterday, down -US$1.50 to be just under US$72/bbl in the US. The international Brent price is now just under US$76/bbl.

The Kiwi dollar is again softer against the USD from yesterday, down -½c and now ay 60.6 USc. Against the Aussie we are down less at just on 93 AUc. Against the euro we are down less again to 56.5 euro cents. That means the TWI-5 is has fallen -30 bps to 69.6.

The bitcoin price is little-changed today, now at US$26,349 and up a mere +0.2% from yesterday. Volatility over the past 24 hours has been modest at just on +/- 1.1%.

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