Here's our summary of key events over the weekend that affect New Zealand, with news dominated by people power in Hong Kong.
But first, the trade war is opening a new front. India imposed higher retaliatory tariffs on 28 American products including agricultural products, following the American withdrawal of a key tariff status for India.
The US now has started tariff battles with six major economies: China, Japan, Canada , Mexico, the EU and now India. And all have retaliated.
In Hong Kong overnight there were more huge protests, and there are shaking the Hong Kong government. This time "nearly 2 million people" turned out yesterday, almost double last weekend's protest. The Government apologised for the way it had handled the proposed law and withdrawn it.
And it triggered Hong Kong business flight. The wealthy were reported to be moving personal wealth offshore the rendition law progressed. All eyes will now be on Beijing's response and until that is clear, money flight may continue.
In China, their retail sales also grew more than expected, up +8.6% in May from the same month a year ago. But that came as industrial production rose just +5.0% over the same period - a 17 year low - and less than the +5.4% gain expected.
And taxes are not flowing into the Central government's coffers as fast these days. In fact, fiscal revenue is in decline. Some of that is because of tax cuts and year on year, tax revenue is down -7% in May. But more concerning, their GST revenues were down an eye-catching -20% in May, the weakest level in 20 years.
In the US, data out over the weekend was mixed, but dominated by good retail sales in May that were +3.2% higher than the same month a year ago. That data was also revised higher for the prior month, suggesting a pick-up in consumer spending that eased fears their economy was slowing down in the second quarter.
But American business inventories are climbing, up +5.3% from May 2018.
And consumer sentiment dipped, down more than -2% in a month and now actually lower than this time last year. "Tariffs as well as slowing gains in employment" were cited as the underlying reasons for the pullback. But with today's upbeat retail data, we seem to have a spending boost despite growing concerns. Perhaps some of that higher spending is to pay for tariffs?
Deep inside American businesses, things may not be so rosy. A business conditions index compiled by Morgan Stanley dropped by the most on record to the lowest since 2008. Indicators from services to manufacturing and hiring all cooled, dragging the headline index to "13", far below the "33" threshold consistent with positive real economic growth. And tariffs look like they will hasten the downsizing of bricks-and-mortar retail.
American agriculture is doing it tough too with both tariffs and weather problems.
The Russian central bank has cut its benchmark interest rate by -25 bps to 7.5%.
In Argentina, their electricity network collapsed over the weekend, leaving tens of millions without power and infecting neighboring countries.
In Australia, residential auction success rates have jumped to over 65% for the first time in a year. Last week's good results follow a holiday-affected set of good results, but this one after clear air from the holiday and the RBA rate cut. There does seem to be a clear turn up in the Australian house market.
But in rural Australia, the extending drought will mean that in some key areas winter crops are just not being planted.
The UST 10yr yield is at 2.08% and almost the same as at this time last week. Their 2-10 curve is now at +24 bps but their negative 1-5 curve is wider at -18 bps. The Aussie Govt 10yr is under pressure at 1.37% and an -11 bps fall over the week. The China Govt 10yr has risen +2 bps over the week to 3.28%, while the NZ Govt 10 yr is down -6 bps this week, now at 1.67%.
Gold is unchanged US$1,341/oz.
US oil prices are little-changed overnight. They are now just on US$52.50/bbl. The Brent benchmark is now at US$62.
The Kiwi dollar is out of favour this morning at 64.9 USc and that is actually back near its lowest level since October 2018. On the cross rates we are also softer at 94.5 AUc. Against the euro we are at 57.8 euro cents but that is down -1c in a week. That all pushes the TWI-5 down to 69.9.
Bitcoin has been volatile overnight and is currently much higher to start this week. It is now at US$9,054 and +14% higher than its low point in the past seven days. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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