US trade deficit falls as exports rise; Canada trade deficit falls; US truck orders leap again; Euro yields rise on ECB comments; India raises rates; Aussie growth impresses; UST 10yr at 2.98%; oil holding, gold lower; NZ$1 = 70.3 USc; TWI-5 = 73.1

Here's our summary of key events overnight that affect New Zealand, with news that while trade tensions are rising, key trade deficits are shrinking.

The American trade deficit fell to a seven-month low in April as exports rose to a record high, lifted by an increase in shipments of industrial materials and soybeans. Some of those exports may be the rush before coming tariffs knock them. The goods and services deficit was -US$46 bln in April. But the data also shows some other American trade vulnerabilities. Exports of goods are actually up +11.3% year-on-year in April giving the lie to the Administration's trade claims. Imports of goods are up +8.0%. But on services, exports are now just touching US$70 bln in the month, a new record, propelling their services surplus also to a record. Tariff retaliation against American exports will hurt, and inflict substantial pain.

Their deficit with China decreased -$3.4 bln to -$30.8 bln in April. Although it has taken its toughest trade actions against allies, it seems clear none of them are any threat to the US. The Americans actually runs a surplus with Canada, despite the nonsensical claims otherwise out of the White House.

Canada's overall trade deficit shrank in April too.

Global foreign direct investment fell by almost a quarter last year, as returns for investors declined, slowing also growth in production. Prospects for a pick-up look muted at best.

Demand for heavy freight trucks in the US is rising at an even faster rate. Some call it 'astonishing'. Trucking companies ordered 35,600 trucks in May, more than double the orders from the same month a year ago. That leaves manufacturers with an order backlog of more than 200,000 trucks, or 8½ months of production.

In Europe, investors sold eurozone bonds overnight, thereby raising yields, after senior figures at the ECB made remarks preparing the way for an end to their stimulus program, probably later this year. That leaves Italian bonds looking particularly exposed.

In China, new research shows that their property market plays a much bigger role in their economy than officially thought. Officially, the sector accounts for a bit over 6% of their GDP. But this new research shows it actually was more than 12% in 2016.

And China has released updated information on 50 fugitives suspected of economic crimes, including their names, photos, and possible current whereabouts. The statement shows that 23 fugitives may have fled to the United States, and that Canada and New Zealand are also among the main countries where their fugitives could possibly be hiding. Their report also makes it clear they are using overseas Chinese residents in the hunt for their fugitives, and that China does not recognise overseas laws in their hunt.

In India, their central bank sees inflation rising, mainly because of the cost of oil. It has raised its inflation forecast and now expects price rises to be just under 5% pa. It raised its policy rate by +25 bps to 6.25%.

The Australian economy grew much stronger than expected in the first quarter of 2018, up +3.1% pa compared with growth of +2.4% on Q4-2017. Markets were expecting a growth rate of +2.8%.

Locally, we are expecting the release today of details of the second part of the RBNZ review by the Government appointed working group.

The UST 10yr yield has risen today, now at 2.98% and up +7 bps on the day. The Chinese 10yr is at 3.69% (up +1 bp) while the New Zealand equivalent is at 2.82% (also up +1 bp).

Gold is a little lower overnight, down -US$3 to US$1,295/oz.

US oil prices are lower, now under US$65/bbl, although the Brent benchmark is holding at US$75.50/bbl.

The Kiwi dollar will start today unchanged at 70.3 USc. On the cross rates we are a little weaker at 91.8 AUc, and 59.8 euro cents. That leaves the TWI-5 at 73.1.

Bitcoin is now at US$7,501 which is -1.6% lower than this time yesterday and starting to oscillate around the US$7,500 level.

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