Canada CPI rises; Mexico & the EU update trade deal; EU confidence higher; India bonds hit hard; China property lending up +20%; UST 10yr at 2.96%; oil unchanged and gold down; NZ$1 = 72.1 USc; TWI-5 = 73.5

Here's our summary of key events over the weekend that affect New Zealand, with news both oil prices and bond yields are rising in tandem.

But first, Wall Street has closed lower at the end of last week with most benchmark indexes shedding almost -1%. Tech stocks fared worst.

In Canada, their consumer prices rose +2.3% on a year-on-year basis in March, following a +2.2% increase in February. This was the largest such increase since October 2014. But excluding petrol, their CPI rose +1.8%, matching the gain in February.

The EU and Mexico have announced a major update to their existing free trade pact signed in 1997, a development that will allow almost all goods, including agricultural products, to move between Europe and Mexico duty-free. That will include dairy products.

The EU's latest survey of consumer sentiment moved slightly higher for April, holding the elevated levels seen in 2018, the highest since the survey began in 2005.

In India, markets reacted aggressively with bonds being hit hard as unexpectedly hawkish central bank minutes were released. They add to higher oil price pressures and suggesting that higher official interest rates are just around the corner. The rupee fell to its weakest in more than a year.

In China, lending to the real estate sector is exploding. In the March quarter of 2018, lending by banks on property was up more than +20% year-on-year reaching a massive US$5.4 tln (or about 45% of GDP - but even so, that is far lower than the 85% level in New Zealand).

The US may be excluded, but Australia thinks the UK is showing "real interest" in joining the TPP.

In a televised interview, incoming RBNZ Governor says New Zealand’s banking sector doesn’t share the cultural problems that are coming to the surface at the inquiry into misconduct in Australia’s financial industry. He also doesn't see local instances of failure that are being reported in Australia. New Zealand's principles-based regulation is proving a far better framework than Australia's prescriptive, rule-bound system (which just asks to be gamed).

The UST 10yr yield is still rising and now at 2.96% (+4 bps). The flattening track of the US 2-10 rate curve is is on hold. The Chinese 10yr has paused its steep downward track and now at 3.54% (+1 bp) while the New Zealand equivalent is at 2.89% (up +2 bps).

Gold is at US$1,355/oz in New York, and down -US$10.

Oil prices are basically unchanged and now still just over US$68/bbl and the Brent benchmark just over US$73.50/bbl. The North American rig count moved even higher last week. And the US President sharply criticised OPEC, blaming them for the higher recent prices. It has had no impact on them however, leaving oil at three year highs. Trump may not have any impact on oil prices, but markets know that oil prices and US bond yields tend to go in the same direction.

The Kiwi dollar is starting the week at 72.1 USc and that is now a substantial retreat over the last week; it was 73.6 at this time last week, so a fall of -1½c. On the cross rates we are at 93.9 AUc and 58.6 euro cents. That puts the TWI-5 at 73.5 and -100 bps lower in a week. The pressure of the relative strength in our Government bond yields is being relieved in our exchange rate. The problem for us is that higher US-based oil prices and a lower exchange rate will make imports more expensive.

Bitcoin is now at US$8,928 which is a strong +8% rise from this time on Saturday.

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