US consumer sentiment rises but business data weakens; China eases car restrictions further; G20 trade weakens; Aussie mortgage applications jump; UST 10yr 2.26%; oil unchanged and gold down; NZ$1 = 65.5 USc; TWI-5 = 70.4

Here's our summary of key events overnight that affect New Zealand, with news that there are ominous signals coming from the US benchmark bond market.

But first, consumers in the US are reporting rising confidence, defying the trade war gloom of their employers. The strong jobs markets is helping.

The Dallas Fed's survey of factory sentiment fell again, as an example of that fall in business confidence. These businesses are still expanding, but at a noticeably slower pace. But their general business activity index has turned negative for the first time since late 2016. Their outlook index has turned negative too.

And American car sales are expected to drop by more than -2% in May from the year-ago period. Higher prices keep buyers with their hands in their pockets. Higher prices are a direct result of the new tariffs, and it seems consumers don't want to pay them.

China's car sales are also in the doldrums, and we have reported previously that Beijing City is easing ownership restrictions. Now Shenzhen and Guangzhou, both part of the mega-city in the south, are doing the same. These are moves that could have a dramatic effect on industrial production levels as the existing restrictions are very tight. The impact on EVs could be major.

Yesterday, Shanghai's equity index closed up +0.6% although it was much more positive than that for most of the day's trading session. Hong Kong and Tokyo were also up but by a little less. Overnight in Europe, equity markets were mixed, but mostly lower. In trading so far today, Wall Street has the jitters, and is lower, down -0.8% after starting the morning session with good gains. But they are rapidly evaporating into negative territory.

And Government bond yields around the world have dropped to new multiyear lows, especially US Treasuries. It is a clear sign of growing investor concerns that global economic growth is about to weaken.

The OECD is reporting that G20 international trade was weak in the first quarter of 2019. G20 exports rose marginally by just +0.4% quarter‑on‑quarter while imports fell by -1.2%. Compared to the third quarter of 2018, when the first round of new tariff measures affecting US-China trade came into effect, G20 exports are down by -0.8% and imports by -2.7%.

A relatively small improvement in confidence levels in their giant services sector has enabled overall European economic sentiment to record a small rise in May, and in fact that is the first uptick we have seen in a sentiment track that has been relentlessly down since the start of 2018.

Switzerland also reported a modest rise in economic growth in the March 2019 quarter, an upside surprise, up to an equally modest rate of +1.7% pa. Swiss watch exports are up +2.1% in the first four months of 2019.

In Australia, their largest bank and mortgage lender is reporting that incoming home loan applications jumped to a 10 month high in the week following the government's surprise re-election win. This is being seen as another sign of firming conditions in their residential property markets.

Tight supply issues keep on pushing up the price of iron ore and it is now touching US$100 tonne and that is a five year high. Australia is on a winner here. Our big commodity, WMP, is still slipping, down -1% on the derivatives market from last week's auction.

And locally, NZIER says our economic growth is expected to slow over the coming year before recovering from 2020. Their Quarterly Predictions report says annual growth will average around 2.6% over the next five years, a lot lower than the 3.4% average over the previous five years.

The UST 10yr yield is sharply lower at 2.26% and that is a -6 bps drop. Their 2-10 curve is down at +14 bps while their negative 1-5 curve is wider again at -24 bps. The Aussie Govt 10yr is at 1.53% and down -2 bps. The China Govt 10yr is up +1 bp to 3.36%, while the NZ Govt 10 yr is also up +1 bp to 1.78%.

Gold is down -US$7 at US$1,278/oz.

US oil prices are unchanged today and are now still at US$59/bbl. The Brent benchmark is at US$70/bbl.

The Kiwi dollar will start today stable at 65.5 USc. On the cross rates we are also little-changed at 94.5 AUc. Against the euro we are similar at 58.6 euro cents. That leaves the TWI-5 at 70.4.

Bitcoin is virtually unchanged at US$8,721. 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 ».