US sentiment slips; US govt deficit rises; IMF warns China on corporate debt; Chinese sentiment rises; UST 10yr yield 1.64%; oil lower, gold higher; NZ$1 = 70.6 US¢, TWI-5 = 74.2

Here's my summary of the key events over the weekend that affect New Zealand, with news of a huge Chinese debt distortion that worries policy makers.

But first, American consumer sentiment is a little lower in June, but not because of their own individual situation. According to a survey out over the weekend, they rated their current financial situation at the best levels since the 2007 cyclical peak, largely due to wage gains. Prospects for gains in inflation-adjusted incomes in the year ahead were also the most favorable since the 2007 peak, because pay is rising at +2.5% at a time of low inflation. But they seem to be losing a little confidence in the future. Most now do not think the American economy is as strong as it was last year nor do they anticipate their economy will enjoy the same financial health in the year ahead as they anticipated a year ago.

In fact, lower corporate profitability raised the US Federal Government deficit in May. But the shift is minor and won't really change the -2.8% of GDP level it is currently running at, a level easily accommodated.

In China, shifts there are not minor. The IMF has issued a stark warning about the risks of their corporate debt. The IMF wants to see immediate steps to tackle rising corporate debt or they will face worrying “dangerous detours” during the country’s transition to a consumption-oriented economy. Others have pointed out that as much as US$1.3 tln in loans extended to borrowers don’t have sufficient income to cover interest payments. China has accumulated debt faster than any country over the past decade, climbing to almost two and a half times their annual GDP.

But that debt binge is helping many Chinese feel better about their economy and their own prospects. And it is helping many Australian mining companies feel better about the immediate prospects too.

Today is a public holiday in Australia. And locally we are expecting the REINZ house price data for May to be released sometime today. But later in the week there will be some important economic data released. There is another dairy auction, New Zealand Q1 Balance of Payments data followed by Q1 GDP, and on Thursday Janet Yellen and the US Fed will be reviewing their policy rate.

In New York, the benchmark UST 10yr yield fell again on Friday and is now down at 1.64%.

The oil price is little changed. The US benchmark is marginally lower, now just over US$49/barrel and the Brent benchmark just over US$50/barrel.

The gold price is marginally higher at US$1,273/oz.

And finally, the NZ dollar starts today a little lower at 70.6 US¢, at 95.6 AU¢, and at 60.7 euro cents. The TWI-5 index is now at 74.2.

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

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