US PCE inflation signals little-changed; India's GDP growth impresses; Japan reports good data; China factories contract unexpectedly; Australia eyes minimum wage change; UST 10yr 4.50%; gold and oil lower; NZ$1 = 61.4 USc; TWI-5 = 70.7

Here's our summary of key economic events overnight that affect New Zealand, with news inflation's rocky roads are smoothing out in some places but not everywhere you look

First in the US, PCE inflation steadied at 2.7% in April from the same month a year ago, and the monthly rate held at +0.3%. But the core PCE price index, the Fed’s preferred gauge to measure inflation, rose by +0.2% from the previous month in April after a +0.3% increase in March, the slowest increase so far in 2024, and below market expectations of a +0.3% rise. Even though these changes were actually tiny, the easing bias did move financial markets (and probably by more than they deserved).

The monthly rise in personal consumption expenditure was pretty tame in April, and was matched by an equally tame monthly rise in personal disposable incomes.

American petrol pump prices are now lower than a year ago, as weakness and oversupply spread in global oil markets. OPEC is about to meet. (The EU is getting the same lower price advantage.)

Meanwhile the Chicago PMI in its midwest heartland manufacturing zone sagged rather more than expected in an unexpected signal. It is now at a 4 year low.

Canada said its Q1-2024 GDP expansion was +0.4% to be +1.7% higher than year-ago levels. But a -25 bps rate cut to 4.75% is still expected on Thursday this coming week.

India's Q1-2024 GDP expansion came in larger than expected at +7.8% higher than year-ago levels. Analysts were expecting a +6.7% expansion, but it has maintained the "about +8%" rate they have delivered for four consecutive quarters now. Over the past year the expansion is +8.2%. Given India's rising heat and water stress levels, it is hard to be confident it can maintain that level of expansion for long.

India's gigantic nation election cycle is ending this weekend, and the nationalist BJP Party is expected to win again.

Japanese retail sales made good gains in April, up +2.4% from a year earlier and above the +1.9% rise expected. But some of this was catchup from the modest +1.1% rise in March. But Japanese industrial production was little-changed in April, a hesitation after their large +4.4% rise in March from February. Still, they have some more recovery required to peg back the prior declines.

After two months of small expansions, the official China factory PMI contracted in May. A small expansion was expected again in May, so this will be a disappointment. Meanwhile their official services PMI is still expanding, but at an unchanged and low rate.

The EU reported that Euro Area inflation rose to 2.6% in May, boosted by services (+4.1%) and restrained by low oil and energy prices (+0.3%). Their core inflation rate therefore is rising, up +2.9%.

The bromance between Europe and China seems to be be fading fast. Reports out today say that major carmaker Great Wall Motors has closed its EU headquarters and released all its employees in a major pullback from is European ambitions. Apparently product acceptance in these markets was surprisingly weak. And Chinese EV battery makers are reassessing their grand expansion plans there too.

In South America, it is becoming clear that a major Spanish bank, Santander, has been hacked and banking records of 30 mln customers are now available on the 'dark web'. The bank acknowledged the hack a couple of weeks ago, but the size of the breach is only now becoming apparent.

In Australia, announcements are expected this week on updating their minimum wage from July 1, 2024, currently AU$23.23/hour (NZ$25.15). Many expect the rise to be +4%. Given that CPI inflation is 3.6%, such a change may be seen to undermine their progress in getting inflation down there which may encourage the RBA to dig its toes in.

The UST 10yr yield is now at 4.50% and down -6 bps from yesterday. But that is up +5 bps for the week, but down -17 bps from the start of May. The key 2-10 yield curve inversion is little-changed at -38 bps. Their 1-5 curve is deeper at -66 bps. And their 3 mth-10yr curve inversion is also marginally deeper at -85 bps. The Australian 10 year bond yield is now at 4.46% and down -1 bp from yesterday. The China 10 year bond rate is little-changed at 2.33%. The NZ Government 10 year bond rate is down -9 bps bps at 4.87%. A week ago this rate was 4.84%, a month ago it was 4.96%.

Wall Street has ended today with a late surge on the S&P500, up +0.8%. That locks in a flat week, but also a strong +5.2% rise for the full month. Overnight European markets barely changed. Yesterday Tokyo ended its May with a +1.1% rise to limit is weekly drop to -0.7%. But it was up +0.6% for the month. Hong Kong ended its Friday down -0.8% on the day, down -2.8% for the week, but down a lesser -0.7% for the month. Shanghai was down -0.2% yesterday while Singapore rose +0.4%. The ASX200 ended its Friday trade up almost +1.0% to be down only -0.4% for the week, and up +1.7% for the month. The NZX50 ended its Friday trade up a spectacular +2.7% on the day to be up +0.7% for the week and taking it back to the same level it started the month.

The Fear & Greed index has moved back into the "fear" range as risk appetites ease further. This is where it was a month ago.

The price of gold will start today down -US$17 from yesterday at US$2326/oz. And that is -US$8 less than a week ago, but +US$32 higher than at the start of May.

Oil prices are down -50 USc at just under US$77/bbl in the US while the international Brent price is down -US$1, now just on US$81/bbl. These levels are -US$1 lower than where they were a week ago, down more than -US$4 from where we were at the start of May.

The Kiwi dollar starts today marginally firmer from yesterday at just under 61.4 USc. That is nearly +¼c higher that a week ago, +2½c higher than at the start of May. Against the Aussie we are nearly +¼c firmer at 92.4 AUc. Against the euro we are also marginally firmer at 56.6 euro cents. That all means our TWI-5 starts today at just under 70.7, up +10 bps from yesterday and a week ago, up +190 bos from this time last month.

The bitcoin price starts today at US$67,245 and down -3.2% from this time yesterday. From this time last week, this price is down -2.5%. From the start of May, up +11.6%. Volatility over the past 24 hours has been moderate at just on +/- 2.1%.

Also note, Monday is a public holiday in New Zealand.

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