China-US talks imminent; trade signal noises rise; US inflation low; world factories in decline; China rethinks housing signals; big new multilateral trade deal; UST 10yr 2.01%; oil down and gold unchanged; NZ$1 = 67.2 USc; TWI-5 = 70.7

Here's our summary of key events overnight that affect New Zealand, with news markets are on tenterhooks over the G20 talks.

At the G20 Summit, the US-China trade talks haven't yet started between the two leaders. But is becoming clear that the 'best-case' outcome will only be - more talks. However the Chinese are sending positive signals; the Americans reported a large soybean sale to China in a surprise deal yesterday.

But in something of an interesting counter signal, Apple said it is shifting the production of the only model it makes in the US, the Macbook Pro, to China. And most Americans, and by a substantial margin, doubt the Administration's tariff strategy, although it is a highly partisan issue.

The Australians signaled that they will be throwing their weight behind the TPP and the RCEP if the Americans and Chinese can't agree to work together. The RCEP includes China and India, although the TPP doesn't, but it does include Japan. Neither include the US.

The inflation measure the US Fed watches closely, core PCE (personal consumption expenditure) came in for May at 1.6%, unchanged from April. Analysts had expected a minor dip, but that didn't happen. In any event, it is still below the Fed's target and it isn't moving.

Another closely watched index is the Chicago Purchasing Managers survey and that fell into contraction in June for the first time since January 2017. This is just another in the set of regional factory surveys showing American manufacturing is either without any growth or is in contraction. The most telling aspect is that new orders are falling.

These pullbacks haven't yet flowed through to consumers yet, although the latest sentiment survey seems to have topped out. And it is those on higher incomes who are reporting the most concern about the future, the surveyors said.

And it is more than just the US; the trade tensions are generating a global slump in factory activity.

The latest update of the Bank of Canada senior loan officers survey paints a picture of a tough lending environment there, even if it did ease slightly in June.

In China, the central bank authorities are jawboning banks to be restrained in their mortgage lending, despite recently officially easing lending conditions in many smaller cities. That easing brought a quick rise in prices in May that is obviously worrying them. This latest pullback has seen Chinese mortgage rates rise from 4.9% to about 5.15%

Japan vehicle production has recovered somewhat, according to the April data released overnight which showed a +4.7% year-on-year gain .And May industrial production rose more than expected in Japan, reducing the year-on-year decline to its lowest level in two years.

The EU and a group of South American countries have agreed a large multilateral trade deal, apparently the largest one the EU has ever done. (It took 20 years of negotiation.)

In Australia, new RBA data shows that lending to businesses and property buyers grew only marginally in May, while the fall in personal loans got deeper. In fact, Australian housing debt grew just +3.7% in the years to May - the slowest annual growth rate since records started in 1976.

The S&P500 looks like it will close today up +0.6%, but over the week it will record a small loss of about -0.4%. European markets ended their week much more positively however, up more than +1% on the day. For the week, the DAX was up +0.7%. Yesterday, Asian markets all ended lower on the day, as did the ASX200 (-0.7%). But the NZX50 bucked that trend, up +0.7% on Friday to cap a +1.7% rise for the week. The weekly change in Australia was a drop of -0.5%. For Shanghai, it was a -0.8% drop, for Tokyo it was a +0.2% weekly gain, while for Hong Kong it was a +0.5% rise.

The UST 10yr yield is now at 2.01% even and down -5 bps from the same as at this time last week. Their 2-10 curve is now at +26 bps and their negative 1-5 curve is at -18 bps. The Aussie Govt 10yr is at 1.34% and a +3 bps rise over the week. The China Govt 10yr is up +3 bps over the week to 3.28%, while the NZ Govt 10 yr is up +6 bps this week, now at 1.60%.

Gold is little-changed overnight but up +US$12 in a week and is now at US$1,410.

The VIX volatility index is now at 16 and that is just on its yearly average. The Fear & Greed index we follow is neutral, just like it was last week.

US oil prices are sharply lower today on demand fears. They are now just on US$58/bbl, a drop of almost -US$1.50/bbl overnight. The Brent benchmark is however little changed at US$66.50. The US rig count is unchanged this week. Oil prices are vulnerable to a G20 stalemate.

The Kiwi dollar is up +125 bps in the past week against the US dollar. You may recall it rose +105 bps in the prior week. We seem to be in a strong firming phase and back to levels we last saw in April. It is now at 67.2 USc. On the cross rates we are also firmer over the week at 95.7 AUc. Against the euro we are up +121 bps in a week at 59.1 euro cents. That all pushes the TWI-5 up to just under 71.7. We aren't yet at the same type of firming we got in October and November 2018 when we firmed a full +8%, but we might be starting along a similar track.

Bitcoin has had another strong but crazy week running consistently above US$10,000 and rising as high as US$13,845. Given that at this time last week it was at US$9,908, that is +/-20% over the week, extreme volatility in any language. Today it is at US$11,963.44 or NZ$17,816. 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 ».