US imposes steel tariffs; 'allies' respond; US consumer spending rises; EU inflation up; India growth rises; air travel growth sags; UST 10yr at 2.83%; oil mixed, gold unchanged; NZ$1 = 70 USc; TWI-5 = 73

Here's our summary of key events overnight that affect New Zealand, with news the US has fired the first actual shots in the coming trade wars.

American tariffs on steel have come into effect today and they will mainly hit countries that used to be allies of the US - Canada, the EU, and Mexico. All three have now announced retaliatory tariffs "proportionate" to the American action. They also hit Australia and New Zealand.

Consumer spending by Americans added momentum in April as their incomes continued to rise, a sign consumers could drive stronger economic growth in the second quarter. The PCE inflation measure - the Fed's preferred - rose at a +2.0% pa rate.

And EU inflation was up to +1.9% in May, driven by higher oil prices. That was much higher than the +1.6% rise expected. Their jobless rate was unchanged at 8.5% and that too was worse than expected.

In Canada, lower than expected growth in the March quarter has analysts scratching their heads. Those new mortgage restriction bit hard, restraining consumer spending. Lower export growth also weighed on the result.

Back in the US, their housing market activity unexpectedly slowed in April. After two straight months of modest increases, pending home sales dipped to their third-lowest level over the past year. All major regions saw no gain in contract activity.

India’s economic expansion accelerated to its fastest pace in nearly two years as the effects fade from the government’s crackdown on untaxed cash trading and the adoption of a national unified GST. GDP was up +7.7% in the three months through March compared with a year earlier. That was better than economists’ prediction of a +7.4% gain.

Global air passenger demand (revenue passenger kilometers or RPKs) rose by +6.2% compared to April 2017, which was down from a 12-month high of +9.7% in March. International travel growth is now lagging domestic growth with the internal Chinese (+15.5%) and Indian (+26.4%) markets growing at spectacular rates. International air travel only grew by +4.8% overall, although the Asia/Pacific region was up almost double that (+8.5%).

In Australia, online retail giant Amazon is moving to geoblock Australian consumers from its global sites. It is doing this rather than having collect GST on transactions on those international sites. It is a move that will limit the range of goods available to Aussies on Amazon.

The UST 10yr yield is little changed at 2.83% and down -1 bp on the day. The Chinese 10yr is at 3.65% (up +3 bps) while the New Zealand equivalent is at 2.76% (up +1 bp).

Gold has eased slightly to be just a touch under US$1,300/oz in overnight trading.

Oil prices have slipped back but only in the US market. They are down +US$1.50/bbl to just over US$67/bb, but the Brent benchmark is still at just over US$77.50/bbl.

The Kiwi dollar will start today at 70 USc and its highest in a month. On the cross rates we are also firmer at 92.6 AUc and now just on 60 euro cents. That puts the TWI-5 up to 73 which is a six week high.

Bitcoin is now at US$7,573 which is +3.8% higher than this time yesterday.

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