Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).
MORTGAGE/LOAN RATE CHANGES
Heartland Bank raised their fixed home loan rates as well as their floating rate. Details here. The Co-operative Bank actually cut their 6 month and 1 year fixed rate by -4 bps, raised their 3-5 year fixed rates by +16 bps.
TERM DEPOSIT/SAVINGS RATE CHANGES
BNZ joined ASB raising its 6 and 9 month TS rates to 6%, and their 12 month rate to 6.10%. Heretaunga Building Society, also raised rates but not above those main banks. Heartland Bank launched a 5% Digital Call account. More here.
HOUSEHOLD BALANCE SHEETS TAKE A BIG HIT, AGAIN
Statistics New Zealand figures show household net worth fell by a further $33.5 billion in the June quarter, with over half of this due to falls in property values - but our rate of savings increased. Household net worth has dropped by over $250 bln in the past year and a half.
A SPRING IN THE STEP?
BNZ says: "Having been on a slippery slope over recent months, into the red, the service sector PSI managed to right its way back into positive territory in September – albeit only just. The seasonally adjusted reading of 50.7 was clearly better than August’s 19-month low of 47.7. However, it was also clearly south of its long-term average of 53.5. Stabilised but hardly buoyant." But it was the rise in new orders that gave the boost.
A BIG STEP LOWER
September is normally the top month for tractor sales - but it won't be this year. 259 tractors were sold in the month, marginally lower than the 264 sold in August. The September result is -24% lower than in September last year, and -29% lower than the ten year average.
PROFIT UPGRADE
Listed local insurer Tower is feeling relieved. It says premium income is up +17% on both organic growth and "strong customer retention". Premium increases are sticking. It also says its assumptions about claims have been to conservative; they are getting lower-than-expected costs from Vanuatu cyclone claims, favourable foreign exchange rates, and have experienced no large events since May 9. That means they can raise their profit guidance, and away from the prior indication a loss was possible.
UPCOMING
The two big economic data releases over the new few days are: Q3-2023 CPI, dies tomorrow (expect 5.9%), and on Wednesday, another dairy auction. After Fonterra's recent payout forecast upgrade, WMP could shift above US$3000/tonne again for the first time since July. SMP prices might bounce back to June levels. All cheap guesses at this stage however, but based on recent trends in GDP Pulse and auction trajectories.
MORE FUNDING
The Chinese central bank injected ¥783 bln (NZ$183 bln) into their banking system today (Monday) via their medium-term lending facility, but at an unchanged 2.50% rate. This remains the lowest rate on record for a 1-yr MLF. It has fallen steadily from 3.30% in 2019. Today's injection is a third more than the September ¥591 bln.
SWAPS ON HOLD
Wholesale swap rates are probably not changed much today. But the real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is up +1 bp at 5.71% and now +21 bps above the OCR. The Australian 10 year bond yield is back up +3 bps from this morning to 4.47%. The China 10 year bond rate is down -1 bp to 2.71%. The NZ Government 10 year bond rate is down -5 bps to 5.45% from this morning's open, but still above the earlier RBNZ fixing of 5.39% which was down -2 bps today. The UST 10 year yield is back up +4 bps from this morning at 4.66% but that is still lower than Friday's close.
EQUITIES START WEAKER
The NZX50 is off to a weak start after the election, down -0.8% in late trade. The ASX200 is down -0.3% in afternoon trade. Tokyo has opened its week weak, down -1.7%. Hong Kong has opened down -0.1%, and Shanghai has opened down -0.2% at their respective opens. The S&P500 futures suggest that Wall Street will open tomorrow +0.4% higher.
GOLD SLIPS
In early Asian trade, gold is now at US$1922/oz and down -US$11 from today's open.
NZD LITTLE-CHANGED
The Kiwi dollar has risen slightly today, up +¼c to be now at 59.1 USc. Certainly no big 'change of government' bounce. Against the Aussie we have also firmed slightly to 93.6 AUc and against the euro we are firmish at 56.2 euro cents. That means the TWI-5 is little-changed at just under 69.7.
BITCOIN FIRMS
The bitcoin price is a bit firmer today, now at US$27,223 and up +1.1% from where we opened this morning. Volatility over the past 24 hours has been low however at just under +/- 0.9%.
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33 Comments
Meanwhile things are getting "twitchy" in the middle east...
https://www.dailymail.co.uk/news/article-12633237/israel-iran-hezbollah-gaza-invasion.html
We are one miscalculation short of a Middle East firestorm and the next world #oil crisis, Ambrose Evans-Pritchard writes: The strange calm on world oil markets is unlikely to survive blockade of Gaza. The only way to knock out Hamas is house-to-house, block-to-block, urban warfare. The grand bargain between the US, Israel and Saudi Arabia is already a dead letter. This has large implications for oil at a time when the crude market is already in deficit and prices are at the upper band of their historical range. What began last year as a Russian 10-day special operation in Ukraine is morphing into a shadow world war on three fronts, with the West facing an unholy alliance of Russia, China, and Iran, all operating with some degree of collusion. https://telegraph.co.uk/business/2023/ Link
What can Israel really hope to achieve?
Getting rid of Hamas once and for all is a big deal for Israel. They are just going to do it whatever comes their way.
But they can take their time if needed - it is a siege. I suspect they are willing to lose all the hostages, take rockets from Hezbollah and whatever Iran can throw at them.
I have heard there is an expression in Israel that it is necessary from time to time to "mow the grass", and they have all their mowers, whipper snippers, hedge shears, loppers and spray packs ready.
Ask the Brittish how the Irish situation played out? It's only a violent minority, but one which is hidden among the peaceful majority. Armies can successfully fight armies as US v's Iraq proved. Armies can't preveil against populations where your enemy is hidden in the local population.
I suspect they have learned a bit from similar difficult scraps in Lebanon and have convinced themselves they can do it better, and I think they are probably right. They will have drones all over the place sniffing out Hamas. Fallout from civilian casualties will have to be handled as best they can by PR teams in Tel Aviv.
Anyway, they are going to give it a go, at any cost. Hamas is toast in anything remotely like its current form, size and locale.
Israel's history shows them holding no quarter against invasions from the outside, and unlike someone like the US don't have to hold themselves to the same level of international scrutiny in how they conduct themselves (not to say the US is clean).
Hamas' main goal is disruption and disunity for Israel in the region, so their aims aren't of a traditional military victory.
Israel created hamas i don't think they want to get rid of hamas but rather get rid of the palestinians
https://www.timesofisrael.com/for-years-netanyahu-propped-up-hamas-now-…
Statistics New Zealand figures show household net worth fell by a further $33.5 billion in the June quarter, with over half of this due to falls in property values - but our rate of savings increased. Household net worth has dropped by over $250 bln in the past year and a half.
We can anticipate a sharp reduction in conventional financial security in the next decade as the waste is growth / Landfill Economy runs out of cheap materials to throw away and the credit needed to buy replacements for what broke/became obsolete and was tossed out. Financialization and globalization have both hit intrinsic barriers to further expansion and so they're stagnating and reversing. Global asset bubbles inflated by financialization and globalization are bursting and cannot be reinflated a fourth time. Link
It's on like Donkey Kong. Just announced.
China’s central bank is making the biggest medium-term liquidity injection since 2020 [a net 289 billion yuan via a one-year policy loan] stepping up efforts to support the nation’s economic recovery and debt sales.
https://www.bloomberg.com/news/articles/2023-10-16/pboc-ramps-up-liquid…
Nice little diversion from a colleague (ex-Merrill Lynch). Gives you some perspective on the game of mates and rigged markets in our part of the world.
Sometimes things can only be said when you don't work for a large industry corporation.
This might be one of those times.
Qantas has had a notorious 2023, to put it politely. An absolute horror story might be more fitting.
Firstly, it was alleged Qantas engaged in false and deceptive conduct and sold over 8,000 tickets that were already cancelled in its system.
In September, the High Court then ruled that Qantas illegally fired 1700 ground staff and replaced them with contractors during the Covid pandemic.
These actions combined may attract fines and reparations in the order or AUD200mm+.
To further keep Qantas in the headlines, the Prime Minister has been running what many describe as a protection campaign for Qantas, denying Qatar Airlines additional flights and preventing much-needed competition for consumers.
Qantas profits in 2022-2023 were a record AUD2.47bn.
It would be fair to say that very few Australians have been happy with the price of flights and service from our "national carrier" in recent years.
The common thread across all these events?
CEO Alan Joyce.
Seen in close personal circles with the PM, gifting special Club benefits to his son, and a vocal lobbyist to Government, much was overlooked until the High Court decision and then in a matter of weeks, Mr Joyce, paid AUD21.4mm for his services over the year, resigns and skips the country.
I am sure everyone here has read about it all in the Press and can form their own opinions.
Qantas, not surprisingly, has fallen sharply with all this heat and rising fuel costs.
From $6.70 in July, it now languishes at $4.90.
It wasted AUD1bn in 2023, buying back stock at an avg price of $6.19, yet hasn't paid a post-Covid dividend.
So why are analysts so pumped on QAN, with all 17 listed calling prices significantly higher (up to 75%) than current levels?
Just 1 SELL rating?
Could it be that with or without Joyce, the fear instilled in the industry to talk down Qantas might bring reprisals from them or the Government?
How are these professionals serving their clients with rubbish calls and such wildly out-of-market expectations?
Many macro analysts fear significant market headwinds due to high inflation, high rates and growing geopolitical risk.
Yet, the pariah of the Australian stock market, Qantas, is recommended as a "BUY" or "OVERWEIGHT" by the majority of highly-paid Bank and Research house analysts.
Factcheck searching found that on the S&P500, some 55% of analyst ratings are BUY, 40% are HOLD and just 5% are SELL.
This appears consistent in Australia also.
This is a scam that has gone on for decades with little relevance to market performance and should be a focus of ASIC, RBA and ACCC.
No analyst can be that useless to recommend Qantas as a BUY with a target some 40% higher under these circumstances.
Oh but wait, yes they can.
I am reminded of MBS bond ratings prior to the GFC.
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