US retail sales weak; US inflation expectations low; China car sales slump; Japan and Germany report low key data; Wall Street strangely ebullient; UST 10yr 2.64%; oil up and gold down; NZ$1 = 68.3 USc; TWI-5 = 73.1

Here's our summary of key events over the weekend that affect New Zealand, with news of a range of data that is turning decidedly ugly.

First, US retail sales have come in with a very small gain in January, which is better than the decline the month before. In fact, the December decline was widened with revised data, while the January rise represents only a +2.3% gain year-on-year. These levels don't indicate a strongly growing economy. Sharply lower car sales in January drove the result. The latest measure of business inventories show a significant rise, up +4.8% year-on-year. That is a big rise, up by almost +½% of GDP in a year.

A NY Fed survey shows that American consumers expect prices to rise more slowly, a decline in inflation expectations that likely reinforces the official Fed reluctance to hike rates further in the meantime.

Car sales in China continued their downhill run into February, falling for the eighth consecutive month. Vehicle sales in February - a period that includes the Spring Festival holiday - totaled 1.2 million, down a chunky -17% from a year earlier.

And Japan's machine tool orders slumped as well. They fell -29% in February from the same month a year ago, the fifth straight drop, and the rate of decline is getting steeper as overseas demand for these investment goods dries up.

In Germany, plunging car output drove an unexpected drop in production of German goods in January and an industry body cut its 2019 growth forecast, adding to signs that trade war tensions and unease about Brexit are weighing on Europe's largest economy. And the German government has apparently cut its in-house growth outlook to +0.8% from +1.0%, the second reduction in less than two months. They follow others.

And this is despite a very large flow of funds out of the UK and into Europe ahead of a hard Brexit. A new study shows that more than NZ$1.5 tin has already flowed, equivalent to "about -10% of the UK's banking assets". The main destinations seem to be Dublin, Paris and Frankfurt.

And Turkey is in recession shrinking by -2.4% in the fourth quarter of 2018, from the previous quarter. This follows a -1.6% drop the previous quarter, making two quarters of falling growth - the definition of recession. (Turkey is the world's 18th largest economy.)

You wouldn't know any of this from equity market movements. Today Wall Street is up +1.3% in a risk-on shift in sentiment. That follows a +0.7% rise on most European markets. And they followed strong gains yesterday in Tokyo (+0.5%), Hong Kong (+1.0%) and Shanghai (+1.9%). Perhaps markets sense the US-China trade talks will end well. Perhaps they are blind to the economic data. Or perhaps they sense major new money printing is on its way. Who knows? It is hard to find any analysis that can reconcile investor mood and the global economic data trends.

The UST 10yr yield is a little firmer today by +1 bp and is now at 2.64%. Their 2-10 curve remains at +16 bps while their negative 1-5 curve is at -8 bps. The Aussie Govt 10yr is down -1 bp to 2.02%, the China Govt 10yr is up +1 bp to 3.17%, while the NZ Govt 10 yr is also up 1 bp to 2.11%. The New Zealand 10 year swap rate is at a record low again of 2.37%.

Gold is lower, down to US$1,292 and a -US$6 fall since this time yesterday.

US oil prices are now just over US$56.50/bbl while the Brent benchmark is just over US$66.50/bbl. That's a small rise overnight. The United States will drive global oil supply growth over the next five years, adding another 4 mln bbd to the country's already booming output, the International Energy Agency said.

The Kiwi dollar is at 68.3 USc and a little firmer. On the cross rates we have gained on the Aussie and now at 96.8 AUc which is its highest level since September 2016. Against the euro we are up to 60.8 euro cents. That puts the TWI-5 at 73.1.

Bitcoin is marginally softer at US$3,844. This rate is charted in the exchange rate set below.

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