Investors worry the US is about to score an own goal

<p>Kia ora,</p><p>Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the international edition from Interest.co.nz.</p><p>And today we lead with news global investment sentiment is weakening as the Americans look ready to score an own goal.</p><p>The US debt negotiations are getting sillier. But at least they are still talking. While the White House is offering a spending pause, congressional Republicans are hardening their demand for deep cuts - but just not in spending that will affect their favoured programs or districts. It looks increasingly likely there will be a government shutdown in early June. They have had them before under Clinton and Obama, but never against Republican presidents. (The largest increase in US government debt occurred under Trump.)</p><p>Unnoticed at this time is that the US <a href="https://www.reuters.com/markets/us/us-regional-banks-rise-attempt-shake-off-crisis-confidence-2023-05-15/" target="_blank"><strong>regional banking crisis seems to be over</strong></a>.</p><p>But US <a href="https://www.mba.org/news-and-research/newsroom/news/2023/05/24/mortgage-applications-decrease-in-latest-mba-weekly-survey" target="_blank"><strong>mortgage applications fell</strong></a> yet again last week and benchmark rates rose by more than +10 bps to almost 6.7% plus points. None of this suggests the American housing market is out of its now long-running funk. Apart from a brief pandemic uptick, you have to go back to the Obama years to find a period of steadily rising mortgage demand.</p><p>The release of the <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20230503.pdf" target="_blank"><strong>May FOMC minutes</strong></a> showed Fed officials uncertain about how much more policy tightening may be still be required and many focused on the need to retain their options for changed in policy direction. Some members saw the need for more rate hikes while others anticipated tha