US strongarms Canada after doing deal with Mexico; US threatens WTO; Argentina gets IMF’s “full support”; India growth rises; China PMIs rise; EU challenges Aust; UST 10yr at 2.86%; oil softer, gold firmer; NZ$1 = 66.2 USc; TWI-5 = 70

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Here’s our summary of key events overnight that affect New Zealand, with news the Americans are trying to bully their trading partners.

Talks between Canada and the United States to update the North American Free Trade Agreement soured sharply over the weekend after the US President said a pact would be on American terms, and Ottawa stood firm against signing “just any deal.” The key sticking point is whether Chapter 19 will survive. That is a section that resolves disputes over arbitrary tariff actions by the other party. The US wants freedom to break the agreed terms without consequences; Canada is wary of giving the dominant party such leverage. It looks like there will be no agreement soon and Canada may in fact get shut out. It all may depend on Mexico’s attitude to the US threat of a Canada exclusion.

And the US is threatening to pull out of the WTO, also over the restriction of having to go to arbitration for disputes.

Emerging market troubles are spreading. The dramatic interest rate hike in Argentina on Friday failed to stop the rout of its currency. Turkey is facing a faster falling currency as well. And Indonesia and Brazil are watching their currencies fall to fresh lows. (One consequence might be rising demand for gold.) But on Saturday the IMF has pledged “full support” for the Argentina government and that has staunched their bleeding, for now. All this comes as the US and China seem to be making no progress at all in their trade dispute.

India has reported its economy grew at the rate of +8.2% in the June quarter. That was up from +7.7% in the March quarter, and well above analysts expectations. And it is their ninth quarter of growth gains.

In China, their factory activity expanded faster in August than July according to official data, and to be fair that is matched by private surveys. But the absolute level of factory expansion is pretty modest. And the sub-category “new export orders” in the index reveals a fall, which may be telling. The service sector expansion also picked up and that is growing at a much more healthy rate.

Chinese appliance manufacturer Haier has reported first half profits up +10% on a +24% rise in mainland Chinese sales and a +2% rise in international sales. Those international sales account for 40% of their revenue and include the US GE Appliances brands, and New Zealand’s Fisher&Paykel brands.

New Australian energy policies promoting coal-fired power plants to “get power prices down” may well cause them real trouble with their free trade deal aspirations. The EU is saying the level of Aussie coal exports is a “red line for us” and the proposed EU-AU FTA may be stillborn.

The UST 10yr is lower at 2.86% but their 2-10 curve is back out to +23 bps. The Aussie Govt 10yr is at 2.52% (down -3 bps since Friday), the China Govt 10yr is at 3.60% and down -4 bps, while the NZ Govt 10 yr is at 2.56%, down another -2 bps. New Zealand swap rates are also lower with the 2 year now at 1.98%, a -5 bps fall in the past week and a -16 bps fall over the past month.

Gold is marginally firmer from Friday and is now just on US$1,201/oz in New York, up +US$2.

US oil prices are marginally softer and now just under US$70/bbl. The Brent benchmark is now just over US$77.50/bbl.

The Kiwi dollar is starting the week at 66.2 USc. On the cross rates we are at 92 AUc, and softer at 57 euro cents. That puts the TWI-5 at 70 and -50 bps lower over the past week.

Bitcoin is now at US$7,275 and rising +3.3% over the weekend. That makes it the highest level in a month. This price is tracked in the exchange rate chart below.

This chart is animated here. For previous users, the animation process has been updated and works better now.

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

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USD 

NZD

End of day UTC
Source: CoinDesk

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