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US car buyers ignore NAFTA politics; South Africa powerplay; iron ore futures sink in China; China bank assets soar; Greece in trouble again; UST 10yr yield at 2.37%; oil unchanged, gold up; NZ$1 = 70.5 US¢, TWI-5 = 75.2

US car buyers ignore NAFTA politics; South Africa powerplay; iron ore futures sink in China; China bank assets soar; Greece in trouble again; UST 10yr yield at 2.37%; oil unchanged, gold up; NZ$1 = 70.5 US¢, TWI-5 = 75.2

Here's my summary of the key events overnight that affect New Zealand, with news of some unsettling developments around the world.

But firstly in the US, it is not just setbacks on their domestic program for the new Trump Administration, the evidence on the trade front seems to be going against them as well. American CEOs are ignoring the NAFTA threat and raising output at their Mexican facilities. Mexico actually recorded an unexpected trade surplus in February. That was driven largely by rising demand for pickups and SUVs, and Mexico’s share of North American automotive production topped 20% through two months. American voter-consumers are not joining in any trade boycott, and carmakers notice this sort of behaviour.

In South Africa, a powerplay is unfolding between the President and his finance minister. The finance minister has been recalled 'immediately' from an investor roadshow in London. The President wants banks to support businesses owned by his friends, the Gupta brothers, but the finance minister is seeking a court decision against the move; a decision on that is imminent. Markets punished the SA currency on the development.

In China, iron ore futures sank to their lowest in more than six weeks, extending a five-day losing streak as speculative investors continued their exodus amid mounting concerns about demand, and growing stockpiles at major ports.

And staying in China, official data shows that bank 'assets' grew more than +6% in the three months to December. This data has not been published for a full year yet, but a +6% rise in just 90 days indicates just how fast credit is expanding in the Middle Kingdom. Total commercial banking 'assets' now exceed US$877 bln, 76% of which are lending, 11% were bond investments, and 13% were banks equity investments in other enterprises.

In Europe, trouble is growing in Greece again. Their beleaguered banking system has taken a fresh hit from the country’s shaky bailout talks this year, registering its worst deposit outflows since the height of its debt crisis in the summer of 2015.

In New York, the UST 10yr yield is down a little today and is now at 2.37%. Local swap rates are falling again, and flattening. In fact the 2-10 curve is at its flattest level in a month. And given today's Wall Street shifts, they are likely to fall and flatten again today.

Oil prices are essentially unchanged at just under US$48 for the US benchmark, while the Brent benchmark is still under US$51 a barrel. Data shows that American oil and gas producers are protecting themselves from lower prices with financial hedges.

The gold price is up US$6 to US$1,254/oz. In Germany, thieves have stolen a 100kg C$1 mln gold coin in a brazen heist.

And the New Zealand dollar starts today holding on to yesterday's small gains against the greenback at 70.5 USc. On the cross rates the Kiwi dollar is at 92.5 AU¢, and against the euro is at 64.9 euro cents. The NZ TWI-5 index is at 75.2.

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

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

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2 Comments

South Africa really is becoming a shambles.

Everything from its rugby team , to mining , to social issues , violent criminal behaviour , widespread graft and mainstream politics .

I see that BHP plans to and has started to strip its not-insignificant mining interests in South Africa into another new entity , rather than have them tainted by the corrupt nonsense taking place there .

Their share price is being punished, inter alia , for its South African connections , and some under-performing assets in Australia

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That is what happens when the existing power structure is pushed out.
And amateurs take over running a country.
A free for all. Best to bail out of situations like that.

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