US jobs gains beat estimates; trade tensions rise; mortgage bond fund quality suffers; Vancouver taxes fail; India milk production leaps; UST 10yr 2.90%; oil and gold drop; NZ$1 = 69.8 USc; TWI-5 = 72.8

Here's our summary of key events overnight that affect New Zealand, with news the US Fed has reinforced reasons to raise rates again soon.

Firstly, in the US, nonfarm payrolls rose by +223,000 in May, exceeding estimates handily. The jobless rate fell to 3.8%, the lowest rate in eighteen years. Wages rose +2.7% but their participation rate barely moved at a low 62.7%.

Wall Street rose about +1% on the news, news that was released by the US President early in a tweet, breaking market rules for sensitive data. He did it purposefully.

But rising wages and trade tensions will make for an uncomfortable position for many American businesses. The higher costs they will have to pass on will be both infationary, and make them less competitive on the world stage.

Those trade tensions are in the open now with both Canada and Mexico. Also with the EU who are taking the Americans to the WTO over the unilateral steel and aluminium tariffs.

In Vancouver, it now seems clear that new taxes and buyer restrictions has done virutally nothing to improve housing affordability, and arguably have made things worse. Those measures may have made the situation even less flexible. A new study now says the only thing that is likely to change their dire affordability issues is more housing supply.

In China, new research reveals the role their Government plays in massaging market activities. Things are fixed, in the way many outsiders assume.

Back in the US, a Moody's report shows commercial mortgage bonds are getting stuffed with the lowest-quality loans again, just like prior to the 2008 financial crisis. They warn this US$½ tln market may be headed for harder times, again.

In parts of Europe, Visa is having issues processing customer transactions, forcing missions of merchants to require cash to complete store sales. At least the merchants will be saving on Visa's high processing fees.

In Spain, their prime minister has lost a vote of confidence in their parliament. However, this is not expected to alter Spain's commitment to the EU. That is unlike Italy where a new anti-euro coalition is now expected to form a new government.

In Turkey, there is talk of an IMF bailout. But they will be hard negotiations because Turkey's government has been ignoring IMF warnings recently.

New Zealand may be the world's largest dairy exporter, but India is the world's largest dairy producer. Milk production is growing more than +6% pa there, and a new Government report suggests that this could rise to growth of +9% pa by 2020. Indian milk production increased by almost +25% in the 2014 to 2018 period. Meanwhile, New Zealand production will likely flat-line of even reduce. India currently produces eight times more milk than New Zealand does.

The UST 10yr yield is up by +3 bps to 2.90% as markets see Fed hikes are now more certain. The Chinese 10yr is down to 3.65% (unchanged) while the New Zealand equivalent is at 2.77% and that is also unchanged from where we left it yesterday.

The VIX is back into a normal range at 13.6, similar to where it was this time last week. The average index level over the past year is 12. The Fear & Greed index is bang on neutral at this time.

Gold markets have closed at US$1,293/oz in New York. That is a -US$7 drop since this time yesterday.

Oil prices are again down sharply, this time by more than -US$1.50/bbl and are now just under US$65.50 and the Brent benchmark is now just under US$76.50/bbl. The US rig count inched higher again. And here is an international comparison of retail petrol prices.

The Kiwi dollar is ending the week at 69.8 USc and that is about a +½c gain on the week. On the cross rates we are lower at 92.3 AUc and higher at 59.9 euro cents than this time last week. That puts the TWI-5 at 72.8, lower than where we left it last night, but up over the past seven days.

Bitcoin is down again and now at US$7,430 and virtually the same level it was a week ago. Volatility seems to be receding in this market.

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