US personal incomes rise, factories grow; Aussie factories still shrink, house prices fall, consents dive; NZ$1 = US$0.845, TWI = 79.0

Here's my summary of the key news over the long weekend in 90 seconds at 9 am, including news of rising worldwide factory confidence.

But first, in the US, personal income rose 0.3% in April as expected. However, personal spending on consumption disappointed markets, falling by 0.1%. Industry needs American consumers spending, not saving. This consumption is 70% of US GDP and is the engine of world trade.

The latest American consumer sentiment report came in below expectations at 81.9. In contrast, the Chicago PMI jumped to 65.5 in May, well above the market expectation of 61.0 and the April outcome of 63.0, on much stronger orders.

Nationally, US factories expanded at a faster pace in May (and confirmed here), while factory growth eased in Europe, pulled down by France.

The latest PMI data for Australia was also out yesterday and while much improved it still shows their manufacturing sector is declining - just at a slower pace. The seasonally adjusted index rose 4.4 points to 49.2 to remain just below the 50 point expansion level. There was a decline in confidence following the Federal Budget, although there were rises in production and new orders in the month. These sub-indexes improved to 51.6 points and 55.1 points respectively, both very strong. Employment however contracted further in May, as did deliveries, inventories and exports.

China's official PMI, the one geared toward larger state-owned enterprises, was also out overnight with small but positive rises as factories expanded in May at their fastest pace in five months. This, along with the good US data, helped raise global equities with most markets higher.

RBA will review its 2.5% cash rate target later today, but no change is anticipated by the markets.

That key policy rate may not stay stable however if yesterday's dive in building consents and business inventories are to set a pattern for 2014. They were pretty ugly pieces of data for Australia.

Yesterday, it was reported that home prices in Australia's eight biggest cities fell 1.9% in May, the biggest monthly drop since December 2008. All major cities except Darwin and Canberra recorded declines, with Melbourne seeing the biggest drop of 3.6%. This is more of an issue given one analyst's revelation overnight that 95% of all extra credit extended by banks since mid 2012 has financed residential or commercial property.

Today, both gold and oil are down, both quite sharply. Oil is under US$102/barrel in the US benchmark despite 'driving season' demand, and gold is now down to US$1,242/oz, its lowest in four months.

Even lower, CDS spreads are touching their 5 and 6 year lows in both the US and Europe respectively for investment grade bonds.

In trading today UST 10 yr bond yields have jumped back to levels they were at early last week. They are now at 2.54%, eight basis points higher that when we last looked on Friday.

On the exchange rate, we start the week noticeably lower. The NZ dollar is currently at 84.5 USc a three month low, at 91.4 AUc and the TWI is now at 79.0.

If you want to catch up with all the changes from Friday, we have an update here.

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