Wall Street roars on TACO indications on EU tariffs; US data not great' China data ok but worries about carmakers; Korean sentiment recovers; UST 10yr at 4.44%; gold and oil down; NZ$1 = 59.5 USc; TWI-5 = 67.6

Here's our summary of key economic events overnight that affect New Zealand, with news a relief rally is underway on Wall Street, responding to the delays in tariffs by the US on EU goods.

But first, an update of the overnight dairy Pulse auction where prices for both SMP and WMP slipped although less than the futures market had suggested. The WMP was down -2.7% in USD from the prior week's full event, and a bit more in NZD. To be fair both prices had risen sharply since April but this pullback still leaves it in a rising trend despite today's adjustment.

Data releases resumed in the US after their weekend holiday with durable goods orders pulling back in April after the unusually strong March gains. The pullback was largely in line with what was expected however, -6.3% lower than the prior month but up +2.7% from a year ago. Perhaps worryingly, excluding aircraft orders, nomn-defence capital goods barely budged in April, a sign that boardrooms remain skittish about future investment.

That was matched by the Dallas Fed's May factory survey where activity was reported flat with a decline in new orders.

But consumers seem happier, according to the Conference Board's May survey of consumer sentiment. But it was a survey taken before the latest US threats on the EU, so there is a sense of 'relief rally' here after the China tariff pullback. However, despite the month-on-month gain, this indicator is still tracking lower on the longer term, still lower than year-ago levels.

Sentiment will be challenged again soon. There were a couple of housing indicators out overnight, and both recorded falls in American house prices. The FHA one was spun as an improvement, but it wasn't. The S&P/Case-Shiller one was a gain but a tiny one and the least since mid-2023.

The bond market isn't feeling any better. The latest US Treasury 2 year auction, although as well supported as usual, brought a median yield of 3.90%, up from 3.74% at the prior equivalent event a month ago.

And we can note that pricing for Trump Media shares, a marketplace that basically attracts investors who are supporters, is doing terribly. TMTG is down -11% today, down -33% so far this year, down more than -50% from a year ago. To rescue itself, it says it wants to raise US$2.5 bln to shift into crypto investing. It is an idea not going down well with shareholders.

Across the border, core Canadian business activity is struggling a bit too. April wholesale trade was down -0.9% from March. That is kind of a lot for a one-month impact, one that records the initial tariff-war skirmishes.

Across the Pacific in China, profits at industrial firms rose +1.4% in the first four months of 2025 compared to the same four months in 2024, picking up from +0.8% growth in the January–March period. For April alone, that was a rise of +5.2% from April 2024. Having noted that, April 2024 was a weak base.Still, given the trade challenges, and that China's factories are still very export oriented and vulnerable to trade war risks, this has to be seen as a good result in the circumstances.

And we should start to keep an eye on China's carmakers. It is attracting increasing scrutiny because the economic fundamentals seem to be leaking away and quite fast. It could be another 'property development' industry failure, and could have just as large consequences if it wobbles too. They have no problem making cars, and good ones. But not only are they making more than the world needs, there are serious questions as to whether they can sell them for more than they cost to make.

We should probably note that South Korean consumer sentiment jumped in May, rising back to levels that were common in November 2024 and prior. The ugly confusion period when its president went full-Trump and tried a palace coup (which resulted in impeachment, one that was upheld by the courts) is now behind it and Koreans are breathing easier. The rule of law won against a power grab. South Koreans will vote in a snap presidential election on Tuesday, June 3.

And still in South Korea, they should join the CPTPP and diversify its trade as part of the bloc in the face of US uncertainties, a senior trade ex-minister is saying. (New Zealand runs a huge trade deficity with Korea.)

In the EU, consumer and business sentiment basically held steady in May, according to the latest update. The trade wars are not yet unnerving the Europeans.

The UST 10yr yield is now at 4.44%, and down -6 bps from yesterday. The key 2-10 yield curve is flatter at +47 bps. Their 1-5 curve is now inverted by -11 bps. And their 3 mth-10yr curve flatter at +16 bps. The Australian 10 year bond yield starts today at 4.32% and down -6 bps from yesterday at this time. The China 10 year bond rate is up +1 bp at 1.70%. The NZ Government 10 year bond rate is now at 4.59% and down -3 bps.

Wall Street is up sharply today following their holiday with the S&P500 gaining a full +2.0% on the futures-signaled relief rally. Overnight, European markets were mixed with Frankfurt gaining +0.8% and Patis unchanged. Tokyo ended its Tuesday trade up +0.5%. Hong Kong rose +0.4% but Shanghai slipped -0.2%. Singapore ended up +0.5%. The ASX200 was up +0.6% at the end of Tuesday trade while the NZX50 gained +0.3%.

The price of gold will start today at US$3,302/oz, and down -US$38 from yesterday.

Oil prices are down -US$1 at just over US$60.50/bbl in the US and the international Brent price is still just under US$64/bbl.

The Kiwi dollar is down at 59.5 USc, a -½c retreat from yesterday at this time as commodity currencies are out of favour today. Against the Aussie we are down -20 bps at just on 92.3 AUc. Against the euro we are holding at 52.5 euro cents. That all means our TWI-5 starts today still just over 67.6 and down -30 bps from yesterday.

The bitcoin price starts today at US$110,309 and up another +1.2% from yesterday. Volatility over the past 24 hours has been modest at just on +/-1.2%.

Check back with us at 2pm for the RBNZ's May Monetary Policy Statement and OCR review. As you will know by now, 'everyone' expects a -25 bps cut. But the outlook from there is reasonably clouded, so Governor Hawkesby's analysis at 3pm is keenly awaited. We will have full coverage.

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