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US house sales cool; Greece waits; HSBC's 'shame'; China's new airplane; more AU bank advice scandals; swaps rise; NZ$1 = 75.3 USc, TWI = 78.7

US house sales cool; Greece waits; HSBC's 'shame'; China's new airplane; more AU bank advice scandals; swaps rise; NZ$1 = 75.3 USc, TWI = 78.7

Here's my summary of the key issues from overnight that affect New Zealand, with news of Greece on tenterhooks.

Firstly, in the US, existing home sales for January cooled compared to December and were at their lowest rate in nine months. Still, the pace was higher than the same month a year ago for the fourth straight month.

Staying in the US the latest Fed region factory surveys out overnight were mixed; they were improving in the Chicago area but there was a no growth in the Dallas area - the oil patch. The Richmond Fed will report later today and that is expected to be a positive survey.

In Europe we are waiting to hear details of the Greek plan. But trouble is brewing in the neighborhoods of Athens as the extent of the climb-down sinks in. It's a potentially explosive case of grand over-promising, under-delivering.

Giant global London bank HSBC has reported a -17% fall in annual pretax profit and cut its profit targets, saying allegations its Swiss business had helped customers to dodge taxes had brought shame on the bank. But as this quote shows, it still seems to think what they did in the past was acceptable back then. "The recent disclosures around unacceptable historical practices and behaviour within the Swiss private bank remind us of how much there still is to do and how far society’s expectations have changed in terms of banks’ responsibilities." Society's expectation have not changed at all - facilitating tax rorting was never acceptable. The bank's boss has NZ$10 mln of his own money in a Swiss account of the bank. There is still deep-seated denial at the very top of this bank and that is hugely concerning for a bank with assets of NZ$3.5 tln and leverage of 13.2 times. It is a bank that is systemically important on a global basis, and the most charitable interpretation in all this is that it is run by arrogant managers in London and Hong Kong.

In China, there has been a development to tuck away for future reference. It has started assembly of its first medium-range commercial jet, the C919, to compete with Boeing and Airbus. The domestic market will need more than 5,000 of these types of planes over the next 20 years, a market worth more than NZ$1 tln. The C919 already has orders for 450 aircraft. You will be flying in one in the not too distant future.

In Australia, NAB chief executive Andrew Thorburn will have to face questions at a Senate inquiry as soon as next week following revelations of misconduct in the bank’s financial planning division, and the sacking of 37 of its financial advisers. This scandal comes after rival CBA is going through a similar advice scandal. "Banks" and "advisors" seem to be a very problematic mix.

The UST 10yr yield fell back overnight to 2.07% in New York. We start today with our swap rates for terms 2 - 10 years higher by about +3 bps and the flat curves we noted a month ago have now disappeared.

The crude oil price, however, starts today lower again at US$49/barrel with Brent crude down a tick to US$59/barrel.

The gold price is virtually unchanged at US$1,198oz.

The New Zealand dollar is moving up and is now at 75.3 USc, up ½c at 96.5 AUc, and the TWI is at 78.7.

If you want to catch up with all the changes on Friday, we have an update here.

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

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14 Comments

I wonder if one weekend in the next six months, the drachma will be reborn. I understand such a move cannot be given months' notice in advance. Maybe the barriers or costs to such a move, although not obvious, are too high.
If no such change, then the new Greek government has most certainly over promised.

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I read somewhere that to print some billions of notes will take a few months and  I would think  trying to keep that fact hidden somewhat difficult.   To start with where would they print? I cant see it being done in Greece, cant be done in the EU without the EU noticing.

So time and location not the cost to do it?

I wonder who will blink first?

NB what does the present Greek Govn have to lose? It either gets what it wants out of the EU, or its toast electorally speaking it has no where to go. Its also a pretty left wing Govn, hence I suspect it will have a rather stiff spine as a result.

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The Grexit Dilemma: What Would Happen if Greece Leaves the Euro Zone?

 

http://www.spiegel.de/international/europe/what-a-grexit-would-mean-for-greece-and-for-europe-a-1019542.html

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or their bikes or trains, i wouldnt get on one of their planes that is for sure.

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what's wrong with their trains?

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quality control.

same as the planes, I wouldnt get on the new high speed chinese trains.

 

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Do you ever leave the house or is that too dangerous for you? How about driving on nz roads?

 

Chinesse high-speed trains shift 2.5million people per day, the death toll AFAIK is 40 in 2011.

 

I quite happily travel on them, it's a joy to travel at 300km/h in comfort from city centre to city centre.

 

 

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Yes, sure, NB I think NZ drivers are generally awful.

The thing is I recognise the risks of some things and hence avoid them if there is a less risky alternative (all else being equal) ie there are always tradeoffs.

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Their iPhones are pretty flash and just about every other "high-end western" product that's developed there too. I think their planes will fly just fine.

Boeing = Nokia - Irrelevant in a few years.

 

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Those high end products are made there cheaply due to labour conditions, but as developed and designed by westereners and under very strict quality control managed and overseen by westerners. The second you step away from supervising the chinese they will substitute and lower material and build quality to lower cost and get it out the door. Check out the Hep A tainted frozen berries, Melamine in milk, cars and bikes made with the thinnest possible steel. Try pursuing the supply chain into china and finding any responsibility for warranty or redress and you see the complete disdain with which the manufacturers and local authorities view outsiders once they have been paid.

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"The domestic market will need more than 5,000 of these types of planes over the next 20 years,"

interesting how many ppl are only considering BAU and for ever growth as the norm.

By 2035 we will be down 33+% of our present oil output, ergo oil will be so expensive that the airplane industry will in effect be a lot smaller, many of the companies long bankrupt. Airplane travel will be like it was in the 1940s and 1950s something the top few % do.

 

 

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"Banks" and "Advisors" are indeed a very problematic mix David.

In New Zealand we should not let banks, and some other institutions into the Kiwisaver role.   Too many internal conflicting interests.

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A recurring theme, and unfortunate as our banks and their banks are joined at the hip and have the same head.

Its a shame to see such otherwise wholesale techniques go retail.

no conflict no interest, hi ho, hi ho, they say.

 

 

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