US C/A deficit falls; jobless claims fall; Hong Kong in sharp downturn; EM leverage keeps rising; AU banks world's top return; UST 10yr yield 1.90%; oil up, gold surges; NZ$1 = 68.5 US¢, TWI-5 = 71.6

Here's my summary of the key events overnight that affect New Zealand, with news of no sign of any reductions in emerging market debt, one of the world's key risks.

But first, on Wednesday the New Zealand current account deficit came in improved at -3.1% of GDP. Today we got data in the US of their current account deficit which also decreased. Their's is -2.8% of GDP.

We also saw a small rise from last week's five month low of the number of American who filed for jobless claims, bedding in the improvements in their labour markets. This adds to a streak of low claim levels that is the longest in more than 40 years.

But that key labour market is not at full vitality yet: The number of people hired into a new job or quitting an old job both declined in January, despite the US 4.9% unemployment rate. Still, American job openings are at an historically high level. A few days ago, we reported strong factory gains in the NY Fed's region. That is backed up today by a similar rebound in the Philly Fed region.

In Hong Kong, they are experiencing some of its harshest economic conditions in two decades, with the current downturn in property and retail sales “worse” than during the SARS epidemic. That's according to one of the country's richest investors.

And a major review of emerging market debt paints a worrying picture. Leverage continues to rise in these risky markets - across all sectors, rising +$1.6 tln to $62 tln in 2015, and that's over 210% of GDP. While this was a slower pace of accumulation than in 2014, refinancing risk has risen. Of course, China is the dominant member of 'emerging markets'.

In Australia, analysis by the Reserve Bank of Australia shows (p26) return on equity of the big four banks averaged about 15% by the end of 2015, beating Canada's banks on about 14% and well ahead of US and European banks, which all had ROE below 10%. The New Zealand components of these banks supply even higher ROE returns than their Australian parents.

In New York the benchmark UST 10yr yield retraced yesterday after the markets considered the US Fed's review and press conference statements, and in mid-day trade today is at 1.90%. CDS risk premiums are falling. In fact, the sovereign CDS spreads for New Zealand have fallen almost -30% from the beginning of February. Australasian investment grade spreads have fallen -16% (held up by Aussie miners in the category).

The oil price is up sharply today and is now at US$40/barrel in the US, while Brent is just over US$41/barrel. OPEC is meeting and the risk is that they will somehow agree to output restraint. At the same time, petrol demand is rising in the US.

The gold price has shot higher today, up US$34 and is now at US$1,264/oz.

The NZ dollar is also higher after yesterday's better-than-expected GDP result and it starts today at 68.5 US¢, at 89.6 AU¢, and at 60.5 euro cents. The TWI-5 index is just on 71.6, yet another impressive and consecutive 100 pt gain. The currency market is making a chump of Graeme Wheeler and his rate cuts.

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

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