US optimism up; two track global factory sector; China service sector expands; Aussie election stalemate; The Whale makes big loss; UST 10yr yield at 1.45%; oil and gold higher; NZ$1 = 71.8 US¢, TWI-5 = 75.3

Here's my summary of the key events over the weekend that affect New Zealand, with news of an embarrassing stalemate in Australia.

But first. it is a public holiday weekend in the US, their 4th July weekend and Americans are expected to travel in record numbers aided by low petrol prices and encouraged by growing optimism about their prospects. But their influential markets will be closed until Wednesday our time.

On Friday their time, US Treasuries dipped to historic lows as bond investors made strong gains. At one point, the benchmark 10 year Treasury hit 1.4% and below the previous low point in July 2012 before closing just on 1.45% as they broke for the holiday. Fear about the European situation is the root cause.

And equity investors also ended the week on Wall Street up strongly. The S&P500 was up just below the all-time high that was reached this time last year.

Globally, the manufacturing sector stagnated in June, neither expanding nor contracting. Only a handful of countries registered a solid improvement in operating performance during June, most of which were in the euro area. The US recorded good expansion, along with Russia, Mexico, India, Taiwan, South Korea, Indonesia and Vietnam. The two largest Asian manufacturing nations – China and Japan – both reported contractions in June. Operating conditions also deteriorated in France, Brazil, Malaysia and Turkey. China said its large SOE manufacturing sector also treaded water although it had access to 'credit' (debt) that the private sector didn't. But it reported its services sector perked up somewhat.

In Australia, their Coalition government’s gamble on early elections appears to have backfired, with the results still too close to call and the conservatives struggling to secure enough seats in Parliament to form a government outright. They went to the polls to try and end a stalemate and have ended up in a tighter one. This won't materially affect New Zealand except that it might put downward pressure on the Aussie currency, driving the cross-rate for us higher. Uncertainty in Australia just rose another notch. This election is yet another where the professionals and other insiders misread the electorate mood. Tony Abbott had won an extra 25 seats in the two elections he led while Malcolm Turnbull seems to have lost most of them. Abbott may be back. Sadly, back also is Pauline Hanson.

The RBA does its monthly review of its benchmark interest rate again tomorrow. Before the election, most economists were of the view that their 1.75% rate would stay on hold. Who knows now?

In New York, the benchmark UST 10yr yield dipped then recovered to finish at 1.45%. Credit risk premiums continue their retrenchment including for Australasian investment grade corporate debt. The world's largest pension fund ("the Whale") made a loss of US$43 bln in the June quarter after a shift to more equity investment.

The US benchmark oil price will start the week a little higher, now just over US$49/barrel and the Brent benchmark is just over US$50/barrel.

The gold price has jumped US$29 to US$1,344/oz.

The NZ dollar starts the week higher as well, at 71.8 US¢, at 95.7 AU¢, and at 64.4 euro cents. The TWI-5 index is at 75.3. Watch out for the NZD-AUD rate today as a canary for their political cliffhanger.

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 ».