Here's our summary of key economic events overnight that affect New Zealand, with news that bond markets are showing the pressure today with heavy selling and rising yields, in a sign that markets accept that central banks are serious in their inflation fight commitments. Yesterday's Bank of Japan moves aren't helping either.
But first up today we have the final dairy auction for the year and it is also ending on a low note, down -3.8% from the prior event and down -18% from the same event a year ago. In between it peaked +20% in March, and bottomed -18% at this latest event, so finishing in the dumps. WMP fell -4.0% from two weeks ago, and SMP fell -4.8%. The exchange rate has moved little over the past two weeks, so the -3.5% result in NZD is little different to the USD result.
With the milk flow easing off, the combined effect of lower prices on lower volumes will not help our export trade, nor our current account balance. But with borders open and international tourism and education slowly building back, at least there are forces mitigating the hurt this would otherwise cause.
US retail sales bounced back last week, up on a same store basis from the same week a year ago and by a bit more than inflation.
American housing starts were little-changed in November from October and maintaining the expected level. But building consents for residential construction fell away rather sharply, to a rate not seen since June 2020. A small fall back was expected, but they got a rather large fall-back in November. That takes them to pre-pandemic levels as higher interest rates start to bite this sector.
Maybe one reason is that new research shows that American rents are falling fast now, after a fast run-up earlier would have encourages multi-unit housing construction. The usual CPI-version of rents lags new-transaction data because if includes the vast cohort that is stable in their rent situation. This new data focuses on rents for the latest transactions. (see page 20.)
Canadian retail sales recovered in October from the September retreat, and by the level expected. But it is expected to soften again in November.
Bond yields jumped and the yen surged after the Bank of Japan surprised investors by raising the cap on benchmark 10-year government bond yields. They held its key short-term interest rate at -0.1% and that for 10-year bond yields at around 0% during its December meeting by a unanimous vote, but tweaked its yield curve control tolerance range from the current +/- 0.25 percentage points to +/- 0.5 percentage points. This is all aimed at their yield curve management.
But it wasn't expected. It is a doubling down by the central bank, rather than the expected easing off now that inflation is re-emerging in Japan. But clearly they think the recent inflation is only transitory.
Meanwhile, the share of Japanese government bonds held by the Japanese central bank has now topped 50% on a market value basis for the first time, new data showed.
In China, their central bank left its loan prime rates unchanged.
Meanwhile, Taiwanese export orders slumped badly in November, diving -23% from the same month a year ago as the nation feels the effect of the cold shoulder from China.
The Europe, the latest survey of EU consumer sentiment is little-changed, but it remains deeply negative, less so in the euro area.
German producer prices fell more than expected in November, slipping -3.9% from October which was a similar shift the month before. These prices are now 'only' +28% higher than a year ago, a sharp retreat from +34% in October. Recall they maxed out at +46% up in August, so the retreat is turning out to be as fast as the original buildup.
The UST 10yr yield started today at 3.70%, and up another +12 bps from this time yesterday. The UST 2-10 rate curve is less inverted at -60 bps. And their 1-5 curve is less inverted at -86 bps, while their 30 day-10yr curve is much less inverted, now at just -7 bps. The Australian ten year bond is up +9 bps at 3.69%. The China Govt ten year bond is unchanged at 2.91%. And the New Zealand Govt ten year will start today up +10 bps at 4.40%.
Wall Street has opened its Tuesday session up +0.4%. But overnight, European markets were down about -0.5% except London which was up a minor +0.1%. Yesterday, Tokyo too a drubbing yesterday, ending its session down -2.5%. Hong Kong was down -1.3%. And Shanghai fell another -1.1% in its Tuesday session. The ASX200 ended down -1.5% in sympathy and the NZX50 ended its Tuesday session down -1.0% on the same forces.
The price of gold will open today at US$1820/oz and up +US$31 and aided by the Japanese move.
And oil prices start today down -US$1.50 from this time yesterday at just over US$74.50/bbl in the US while the international Brent price is just under US$79/bbl.
The Kiwi dollar opened today at 63.2 USc and down -½c. Commodity currencies are out of favour today. Against the Australian dollar we are unchanged at 94.9 AUc. Against the euro we are more than -½c lower at 59.4 euro cents. We should also note that we are a massive -4.8% lower in a day against the Japanese yen. (see above.) That all means our TWI-5 starts today at 71.6 and down another -80 bps.
The bitcoin price is now at US$16,839 and up +1.2% from this time yesterday. Volatility over the past 24 hours has again been moderate at +/- 2.3%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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Dec 20 (Reuters) - Russia's Transneft (TRNF_p.MM) has received requests from Poland and Germany for oil in 2023, the state oil pipeline monopoly's head told Rossiya-24 TV, adding that supplies via the Druzhba pipeline's southern spur are expected to hold steady next year. Link
Hope those pipes don't freeze up .Russia needs to keep pumping or it's game over.
https://financialpost.com/commodities/energy/frozen-pipelines-expensive…
Guess which country/ies in the Southern hemisphere just threw out the welcome mat for more immigration
Tuvalu ?
I was thinking oz and us (nz). So when everything becomes unbearable in the north they might head south away from the headaches.
Will it add to inflation, probably not. The local populace have put away their wallets and the tourists and longterm arrivals are keeping us afloat right now. And if it adds to inflation, that's also good, lets get used to it as long as it does not surge
... they don't have McDonalds in Tuvalu , so inflation is not a problem there ...
🤔 business opp for IT Man🤣
If only there had been some other energy source than Russia. That time runaway global warming theory played in to Russia's hands.
"The US no longer supports the proposed EastMed natural-gas pipeline from Israel to Europe, the Biden administration has informed Israel, Greece and Cyprus in recent weeks.
...“Why would we build a fossil fuel pipeline between the EastMed and Europe when our entire policy is to support new technology... and new investments in going green and in going clean?”
As said before, Japanese investors are heavily involved in foreign investments and in particular in purchasing highly-rated government bonds issued by the US, European countries, UK and Australia.
By affecting JGB yields and the JPY, the Bank of Japan largely impacted the financials of these gigantic cross-border capital flows in the bond market.The chart below shows how after today Japanese investors won’t find any additional yield by purchasing foreign bonds vis-à-vis JGBs unless they buy Spanish or Italian bonds - which will be under pressure as the ECB tightens policy and embarks in QT.
Now that Japanese investors are getting positively rewarded to keep their cash at home during a global economic slowdown and periods of high macro uncertainty... ...they probably will choose to do that more.
That strengthens the Yen, and negatively affects foreign assets. Link
Silver (up 5% in AUD), gold, the ol' rat poison going wild overight. JPY/NZD down 4%+ at one point.
All from a measly 0.25% shift.
Buy Physical Silver. Its manipulated 400 Paper to each physical oz
Traffic Safety Madness.
And so it continues. Our very short Crescent which many mistake as a cul-de-sac, once again has 4 stop and go men and about a zillion cones because there is a man up a power pole. Every morning the fleet of trucks arrive as this very complex project gets reset.
Thank god they have flouro vests and hard hats, but I'm concerned they have no life jackets. I must call health and safety because these guys should be prepared for anything.
NZ has become a country of over regulated zombies.
With the way things are going in this country, a bullet-proof vest would be more helpful than a hi-vis.
Maybe 'Road To Zero' is really 'Road To Zero Movement'?
... a bullet proof vest plus a machete proof helmet ...
Three men, one up the ladder, replacing the ugly rusty shade. Good. Went out and told him the light bulb had blown. Couldn’t replace, that wasn’t on the job sheet, you see. Yes they had some in the truck, I asked. Three days later another three men and a truck replaced the light bulb. It’s all become scarily pathetic hasn’t it. Thinking about it they were likely contractors, charge for two jobs instead of one then.
Poor baskets standing out there in the heat, dressed to the nines......not a car in site.
Biggest safety risk is heat stroke to the safety team - or should it be the risk creation team - "tiima hanga morearea"
(last month they fixed a small drain..over a week or more..about 12 different trips and different teams, concreters, concrete cutters, pipe layer, digger er uppers, grass seeders.. and of course tima hanga morearea were there in force)
Just as likely they get fed up of being treated like idiots, or constantly having 'productivity savings' heaped on them. It's about the only push back they have, we'll do the job we've been given and no more.
Pretty much. People are rewarded for cost savings these days, not going the extra mile.
Here in the Waimak they mow the road sides at night ... like , when its pitch black ... and they set up a zillion orange flashing lights on the two trucks in front & the one behind ... all these guys & lights ... and one poor schmuck on the mower , trying to cut grass in the dark ...
... is that safe ? ... is that a cost saving ? ... WTF !!!
I heard from a private civil contractor that a lot of the time they make more money from the traffic management than they do digging the trench and installing the services.
You sound like every customer that never wants to pay for scaffolding ever.
My neighbour has avoided putting in a driveway for his new build for 2 years because, despite being a 14 house cul-de-sac, getting in the truck will require a traffic management plan being submitted to the council and paying for the stop-go signs etc.
Trouble is every time I read something like this I think of the three men killed on the matata straight and the lack of temporary infrastructure to slow down the idiot driver.
So vulnerable and so many idiot drivers
Yes, our driving attitude has a lot to answer for. The common theme on Facebook traffic updates pages is an outright anger for slow drivers and how they cause all the accidents because they won't pull over to let high speed Harrys pass etc.
The fact that people can become absolutely irate from driving 90 - 95 in a 100kmh limited road, in the comfort of a drivers seat with air con and a radio, really demonstrates the state of our mental health in this country.
I always love when people gun it to overtake then you catch up with them at the nearest intersection.
There’s a certain smile you get when that happens, distinctly satisfying :D
It's not the speed - it's the inconsideration that makes people irate - just put your indicator on and pull over if you can't maintain the speed limit.
It's a limit though, not mandatory.
I can have my radar cruise control set to 105, which results in a 101 - 102 real speed, and have dicks riding up my arse until the passing lanes. It happens _ALL_ _THE_ _TIME_. I am not the problem.
Driving is not some never ending game of leap frog. Imagine if everyone pulled over because they had someone behind them.
Its due to the way the Health and Safety legislation is worded something along these lines "take all practicable steps" Guarantees if a person gets killed or seriously injured the employer is automatically at fault. That's also a reason why schools have basically shut shop on swimming lessons. They'll need a very high ratio of teachers and teachers aids to children learning to swim.
It could be fixed by changing "take all practicable steps to "all reasonable steps" The deaths and serious injuries will increase with that and watch the howls from it.
There's sort of a middle ground, the employer needs to be seen to be promoting safety, and providing the requisite equipment, but workers ultimately sign off on the safety of their own conduct.
Schools often shut pools more due to funding than safety. The government want schools to use public facilities instead of financing something onsite most schools only use 2 months of the year.
You've got to love the Bank of Japan. Quick change of their settings - smooth adjustment to a new set of market rates, stronger yen, traders in a spin, the usual heejuts saying 'this is it, hyperflation and total collapse is finally coming to Japan'...
Meanwhile in Japan they're preparing for a major strategic economic investment programme - and presumably a stronger yen is part of the plan.
Auckland real estate boss: The severity of the downturn 'has taken us by surprise'
The head of Auckland’s biggest real estate agency says he wasn't surprised by the change in the market after last year's surge, but the extent of the downturn was a shock.
"This wasn’t out of the blue, though the severity of it has taken us by surprise," says Barfoot & Thompson managing director Peter Thompson.
He believes the market is heading into territory it hasn't experienced in more than 30 years.
“We’re not quite at 1987, [just after] the share market crash, but we’re heading down that level. But you’ve got to remember, real estate always bounces back, we’ll get through this short period and things will change. What we have learned from 1987 is that you don’t sell and make a huge loss, but hold on."
New Zealand's economy in 2022 is different to the one in 1987, when inflation was running at 18.9% and the floating mortgage rates were above 20%.
Thompson did not characterise this month’s drop in sales numbers as a collapse.
In November his company reported 700 sales, slightly up from October’s figure but well down on the 1182 it recorded in November 2021.
"It’s hard because everyone is comparing to last year, which had the sharp increase. It’s come down, at the same rate as it went up.
“Prices should be compared to 2017, 2018, 2019. We’re down, but not as a big drop as versus 2021.”
Thompson was frank about the cost to real estate agents and offices expected next year.
“Layoffs will not be far off, the crucial period is the next two to three months for sales people.
“The top sales people get a higher commission percentage, so there’s less money for head office. We will see a few companies walking the tightrope in a couple of months.
“It’s very hard for [agents] as they’re commission only, so they’ve got to take the good with the bad. The experienced top people are still making the sales, they’re out doing the work and the customer service and communicating.”
He says the upper end of the market, where the company does about 35 to 38% of Auckland’s deals worth over $5m, and first home buyer segments have suffered less than the middle $1m to $2m market.
Thompson says not all vendors have understood the drop in prices. The company’s November median price of $1.065m is 2.5% down on last month and 14.1% off November a year ago.
Peter Thompson, managing director of Barfoot & Thompson, said layoffs could happen after the next two to three months. Photo / supplied
“Vendors have to price right to meet the market. There is still the odd vendor waiting for that big opportunity buyer to come along.
“But we’ve got some 5000 listings this year compared to 2000, so there’s more choice for buyers. If they’re not priced right, the vendor will lose the one opportunity to sell."
Thompson expects buyers switching to 7% mortgage interest rates after a comfortable five or six years paying 2% will have to adjust their expectations. "You’ve got to remember that [7%] is what it was in the normal days. In the last five years we’ve been on the lucky side. We guide buyers to a slightly more affordable suburb – Meadowbank, not Remuera; Mount Albert, not Mount Eden.”
Thompson isn't expecting an uptick in mortgagee sales, saying banks would not want to damage the market by selling for too low prices.
Thompson isn't expecting an uptick in mortgagee sales, saying banks would not want to damage the market by selling for too low prices.
I wonder what rating agency's will think if banks where to just sit on portfolios of non- performing loans?
I wonder what happens when prices keep halving every ten years and they didn't sell up the mortgagee. All simply because they bought into a flawed narrative. How does it look on the portfolio 50% down, maybe 80% down, rather than just 30% where they could have sold?
Look see over there Junior, there's a street vendor selling fear... I wonder if that street vendor has managed to con anyone into buying a small bag of fear yet. He sure is shouting and carrying on trying to get attention.
It's not a street vendor it's the CEO of Barfoots !!! or maybe HW2 you are closer to the industry then he is?
Thompson was frank about the cost to real estate agents and offices expected next year.
“Layoffs will not be far off, the crucial period is the next two to three months for sales people.
I will let you in on a secret, in the story, the st vendor is not P Thompson
Sorry I should have explained it better so that you did not get confused
Why did you think of Tony the Combs latest survey of Mortgage Advisors ?
Since you brought it up,,, what's your thoughts,,, Remember to Accentuate the negative and eliminate the positive
If Tony said that everything is coming up roses, you'd bemoan the thorns and falling petals... wouldn't you
Was there a positive?
TonyAlexander-Report-December2022.pdf (mortgages.co.nz)
COMPARED WITH A MONTH AGO, ARE YOU SEEING MORE OR FEWER FIRST HOME BUYERS LOOKING FOR MORTGAGE ADVICE?
The net proportion of respondents in our monthly survey saying that they are seeing more first home buyers coming forward for advice has fallen back into negative territory for the first time since July. A net 17% now are seeing fewer young buyers as opposed to a net 13% last month seeing more and a strong net 48% in both September and October. Comments on lending to first home buyers submitted by advisers include the following. • Test rates have increased to 8.60%. • LVR restrictions is still the killer. If clients do not meet First Home Loan criteria its very difficult to get funding. There are willing participants but the limitations on low deposit funding as well as aggressive affordability tests are hamstringing many potential borrowers • Slight loosening underway. Flatmate income increased x 2 lenders. • If they don't have 20% deposit or a family supporting property don't bother applying. • No change, but I notice everyone seems happier and therefore more willing to take the time to try and work out ways of reducing the obstacles to the approval and getting declines overturned.
COMPARED WITH A MONTH AGO, ARE YOU SEEING MORE OR FEWER INVESTORS LOOKING FOR MORTGAGE ADVICE? The net proportion of mortgage advisers saying that they are seeing fewer investors has gone back to levels in place since early-2021. The months of September and October now stick out as aberrations. The reduced negativism then came about before mortgage interest rates were raised 0.5% for two months in a row.
What could be more positive than prices falling?!
Was there a positive?
Well done eliminating them... Other than:
* Slight loosening underway
* for the first time since July.
* everyone seems happier and therefore more willing to take the time to try
I challenge you to find others and I will match it
How scary was it to take a house to auction with $1 reserve? | Stuff.co.nz
cv 840k sold for 480k last sale 2014 was 510k
to be fair it had a bit of rot, which sounds much like the general market.
So could be a total reclad, new joinery new internal linings.
Hence, it's worth less than land value.
Scarfie - It amazes me how people want the good times of capitalism where you make the profit, but no one wants the bad times, where the overextended have to sell and you have a loss situation.
Some of the money that the bank put into that failed mortgage may be from your Grandma's term deposit, should she get told she cannot have the money back until the property is sold?
If you read the mortgage docs the banks have about hundreds of years of legal precedant to get their money back (and a 20% deposit helps as well). People who have made money off property did not share the profits with the bank, not sure why people who lose money could expect the bank to share the loss.
The banks wil do what they can to protect famillies, investors are running a business, just like the banks. This is where the carnage wil occur.
Risk. That is the dilemma I've wrestled with in terms of deposits in a bank. I'd say most people treat it as risk free, where with a little research it clearly isn't. Where does the fault lie? With the bank for not discouraging the illusion? Or the greed of the deposit owner claiming interest, or unearned income, and now thinking about the source?
What you have to do is take a step back and look at the requirements for a criminal fraud. That is something being misrepresented in a manner so as to gain a pecuniary advantage.
Go through your bank documents, mortgage or deposit, and look at the fine print. In particular regard to the mortgage, do the documents specify where that money comes from and who owns it?
But I agree with you. Who is taking risk, and who believes they are playing it safe?
Richard Duncan has been saying for years that we have creditism, not capitalism. Doesn't change the principles though.
"What you have to do is take a step back and look at the requirements for a criminal fraud."
🤔
🤣
Has Scarfie been overindulging in the Christmas spirits / pot
Not to mention OBR.
But with borders open and international tourism and education slowly building back
Tourism, being a labour-intensive sector, contributed per worker was $70,350 to GDP at its peak in 2019. That was nearly -40% below GDP per worker in the wider economy (~$115k). For comparison, the primary sector contributed $138k per worker to our GDP in the same year.
So, it'll take 2x more workers to achieve the same economic output from tourism as from agriculture.
They should just make everyone plastic surgeons, we'd all be rich as.
Oh wait, how many hrs does the average agricultural worker pump out in a year, compared to the average worker in tourism?
You can structure a country to encourage low productivity industries (in NZ tourism and horticulture) but we end up poorer and unable to afford things like first class health care.
You make it sound like we could just become another Singapore or Ireland with the wave of a pen.
We have the industries we have because of NZ's natural limitations. If it were economically feasible to have higher earning industry here, it'd be here - one great thing is it's super easy to start any business in NZ.
"stroke of a pen": Singapore & Ireland are both low corporate tax and low income tax regimes which is what attracts the large number of profit shifting, transfer pricing, tax avoiding multinationals who underpin their economies (along with Switzerland, Liechtenstein etc). Around/under half NZ rates, nothing thats "naturally limited" there.
That's right, and they attracted companies from their much larger adjacent populations. So we probably can't even pull that trick off.
We can be a tax haven for who, Kiribati?
The sharsies fee changes seem extreme. What do others think? I know there was a lot of pushback on the last round.
I get that they are still cheaper than some other options but they do not offer named holding of the stock, which should be reducing their costs.
Probably the end of me trading on there and it worries me that they are not sustainable.
Most platforms like that are running a "acquire users and worry about profitability later" model. Sounds like now is later.
I’m not feeling good about the situation. I was taking a long term view of using the platform and my investment. They’ve raised the transaction costs by about 4x. I can just sit and hold but how will that be sustainable for them if everyone stops buying? They’ve shot themselves in the foot.
especially when you can earn > 5% in a term deposit now.
Their addressable mkt is small (NZ business) so difficult to increase trading volume. Sharesies gave me access to Emerging Markets ETFs but not sure I'm comfortable with the fees. They'll be losing business.
they have always been too expensive for me compared to likes of ASB Securities. What are the changes? Nothing in the news about them.
From what I can tell the transaction fee is now 1.9% but there is a cap of $25 for NZ/AU shares, lower cap for US shares.
You can mitigate it with a monthly subscription that gives you a certain amount of free transactions.
ASB Securities doesn't have the same access to market as Sharesies I think.
They reckon they are still cheaper than ASB but they don’t give you ownership like ASB used to (don’t know if they still do).
The closest you get to ownership is if you have some control through a share registry. And remember, ownership of an ETF or fund is not really ownership of anything in terms of owning shares in a company.
You can transfer your sharesies-held shares out into your own name for $5 per holding (increasing to $15 per holding when the new prices take effect).
I tried registering my shares in my own name and Sharesies said no - they don't allow direct registration. I moved to Hatch as their fee is US$55 per transfer/registration (whether 10 shares or 10,000).
You can transfer your sharesies-held shares out into your own name for $5 per holding (increasing to $15 per holding when the new prices take effect).
You can. But you still need access to an exchange where your shares can be sold. For international shares, that is potentially an issue.
Here are the details.
Even at the new higher prices, they are generally much cheaper than ASB. Now, ASB will be cheaper at around the $1k mark, but much more expensive for very small or >10k trades. If you want them in your own name the calculation is a little more complex at the cheap end.
Ahh, last time i looked sharies had a monthly membership fee. Looks like that's now optional. For my low trading volume (buy and hold) the ongoing account fee made them more expensive - now there's not really any difference. Still prefer asb though, being on the share registry and e.g. getting the 3% discount on dividend reinvestments from F&P.
Why wouldn't you just use Interactive Brokers?
bit more hastle to open an account and the UI is so complicated. Multicurrency is a dog too, you have to do manual fx transaction prior to purchases. Degiro just tranparently fx any trades back into your base currency.
"but they do not offer named holding of the stock" Does this mean its held in a pool and is only a paper figure that shows you what you own? Hopefully all that's in a Trust ac setup otherwise there might be another BF siphoning off funds or loaning against what you ostensibly own.
Someone care to comment?
Meanwhile, Taiwanese export orders slumped badly in November, diving -23% from the same month a year ago as the nation feels the effect of the cold shoulder from China.
Russia joins in:
Chinese MOD: "The joint exercise [with Russia on December 21-27 near Taiwan] aims to demonstrate the determination and capability of the two sides to jointly respond to maritime security threats and maintain international and regional peace and stability." https://tass.com/world/1552911 Link
My recollection is that there was a considerable international tourism downturn at the time of the GFC. I expect something similar to be evident as from about next April. The skiers will still come in winter from Oz, but the catch-up of overseas Kiwis returning for a visit will be over. The nine months from April 2023 will be quiet.
KeithW
Peddling the doom Keith, most ungentlemanly like. :-P
The streets of Queenstown will be paved! (hasn't it taken a long time...) But not with gold in 2023.
Shouldn't it be Kingstown?
You've just highlighted the seasonal period of tourism.
Considerable is the correct term. I was made redundant from a 4 star hotel in Christchurch when our daily occupancy went from ~95% to ~15% in a very short timeframe.
The American, European & Japanese FIT's and Tour groups just stopped. all future bookings cancelled.
The Chinese Tour groups slowed considerably.
Workmates who stayed on said it was coming right towards the end of 2010 but then the earthquakes stopped that.
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