Here's our summary of key economic events overnight that affect New Zealand, with news that despite the expectations of bears, the US labour market hasn't wobbled yet.
US jobless claims rose +213,000 and a small dip from the previous week. This was about what markets expected and still no indication of any special American labour market stress. There are now less than 1.9 mln people on these programs. This overall little-changed result is actually quite impressive given all the news of growing tech and start-up layoffs recently.
Sales of new single family houses rose +1.1% in February from January to an annualised rate of 640,000, the highest level since August last year. Given the upturn in the existing home market, analysts had expected an even stronger result however. And the industry will be disappointed because they have more than 8 months of unsold inventory at present.
The Chicago Fed's national activity index for February revealed little material change even if the index softened marginally.
The Kansas City Fed factory survey also had little-material change but at least it was positive in March.
Canada's population is now approaching 40 mln in a fast 2022 spurt. They added a record +1 mln new people over in 2022, largely boosted by immigrants and the substantial intake of Ukrainian refugees. The expansion is a stunning +2.7% in one year, their fastest ever post WWII.
In India, the ruling BJP party has engineered a guilty verdict on a senior opposition politician for insulting Prime Minister Modi in an oblique way.
Taiwan's industrial production fell a sharp -8.7% in February from the same month a year ago. But as bad as that sounds, it is far less than the -20% retreat in January. Still it is the fifth month-on-month fall in the past six months, and global tech demand, especially from China, remains very weak.
Taiwanese retail sales slumped in February from January, but were still up +4.2% above year-ago levels. This is quite good in fact given their inflation ran at 2.4% over the same period.
Taiwan's central bank raised their policy rates by +12.5 bps with their key rate now 1.875% with a hike that wasn't expected.
The EU's consumer sentiment survey for March was out overnight and while it remained quite negative, it remained near its best level in over a year.
Overnight three European central banks reviewed their policy rates and two mimicked the US Fed with a +25 bps rise. Norway raised theirs to 3.0% and England raised theirs to 4.25%. Norway has inflation running at 6.3% and in England it is running at 10.4%. The Swiss raised their by +50 bps to 1.5%. They also reminded investors in Tier 1 bonds that they agreed to have them treated as capital in the event of a bank failure and those who invested in Credit Suisse AT1 bonds can have no complaints because that is what they agreed to.
In Australia, the State of NSW votes this Saturday, and the latest poll suggest that the ALP is widening its lead over the Liberal incumbents. (The Murdoch media promotion of the Liberals appears to be toxic in Australia.)
Freight rates for global containerised shipping fell again last week, extending the long decline. They fell another -2% in a week to be almost -80% below year ago levels and are now -35% lower than ten year averages. Bulk freight rates, which have been rising recently, topped out this week and are also falling now too.
And the lithium price retreat is getting even steeper.
The UST 10yr yield starts today at 3.44% and down a large -11 bps from this time yesterday, and back to early February levels. The UST 2-10 rate curve is much lower at -44 bps. Their 1-5 curve inversion is a little more inverted at just under -100 bps. And their 30 day-10yr curve is also more inverted at +58 bps. The Australian ten year bond is down -5 bps at 3.29%. The China Govt ten year bond is little-changed at 2.89%. And the New Zealand Govt ten year is starting today down -3 bps at 4.22%.
Wall Street has opened its Thursday trade with the S&P500 up by +0.6% in late trade. Overnight, European markets were mostly little-changed - except London which fell -0.8%. Yesterday Tokyo fell -0.2% which actually represented a good recovery from early losses. Hong Kong rose a spectacular +2.3%, and Shanghai gained +0.6% in Thursday trade. The ASX200 ended its Thursday session down -0.7% while the NZX50 was up +0.1% and also recovering late from steep earlier losses.
The price of gold will open today at US$1995/oz and up a strong +US$47 from this time yesterday. And that is a new one-year high for the yellow metal.
And oil prices start today a little softer from yesterday at just over US$70/bbl in the US. The international Brent price is still just under US$76/bbl.
The Kiwi dollar is up almost +½c against the USD and now at 62.9 USc. Against the Aussie we are also almost +½c firmer at 93.5 AUc. Against the euro we are also a little firmer at 57.7 euro cents. That puts the TWI-5 up at 70.6 with a +20 bps gain.
The bitcoin price is marginally lower today, now at US$28,544 and down -0.5% from this time yesterday. And volatility over the past 24 hours has been very high however at +/-4.1%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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98 Comments
How are they going to get the children down on the sea floor?
https://www.mining.com/study-shows-seafloor-cobalt-nickel-mining-dramat…
Who knows what she'll say today!
The comments — which appeared to walk back suggestions she made a day earlier to an American Banking Association gathering — revived fears that the government was dithering about how to restore depositors’ confidence in banks
https://www.nytimes.com/2023/03/23/business/dealbook/yellen-powell-bank…
That's why the US market tanked right after a nice move up when Powell announced the "almost end" of rate rises, Yellen spoke out and killed it
https://www.zerohedge.com/markets/bill-ackman-blames-janet-yellen-resta…
https://www.theautomaticearth.com/2023/03/debt-rattle-march-23-3023/
That site has gone down the covid rabbit-hole, but otherwise collates enough interesting stuff to be worth keeping an eye on.
Today's selection is a doozy - the West is being outflanked, but is so full of itself, so woke-diverted media-wise, so steeped in neoliberal-peddled mantra, that it can't see what is happening.
Today's RRP will be 4.80%. Hi for 4w at auction was 4.15%. Median 4.00%. This is post-Bear Stearns stuff. Banks are building huge liquidity cushions, de-risking their books, and hedging (Euro$) the hell out of every position. We can see it happening. Nothing to see here? Link
For the second week in a row, 8w UST bill auction also got a low rate of ZERO. Never mind the incredibly low top or median rates which are now WAY less than RRP. The collateral run is ongoing because the financial system is doing the same thing now it did after Bear Stearns. Link
Real interest rates have collapsed. Financial repression rampant.
To see the "great indication of forward thinking re value" you need at least a medium term view. Not daily gyrations
I did well getting you to fess up only a couple of weeks back, "we're not in a bear market. The market is range trading."
This latest from IT aucklandpropertyrealitycheck GUY is merely a bit of teasing.
Don't get angry and dont worry it guy/auckland property guy I will still be here long after you're gone. You're not so special either, as you can't get max votes from your repetitive posts.
I see that your website spruiking also got caned. Yes caned from the editors
Over to you now
Shrugs. No big deal. I've got more than enough $$ anyway so just doing for fun.
And unlike you, I provide reasoned arguments backed by facts. You are just a one way spruiker - and I've dealt with plenty like yourself back in those days.
Special? IDAGAF but just wanted to correct yet another thing you got wrong.
If the employment mandate is not removed, this will simply create higher long term inflation due to an excessively loose monetary policy driven by contradictory and improper directives, which will ultimately force the RBNZ to push rates even higher, and which will be an even worse outcome for mortgage holders.
There is no such a thing as a free lunch.
There will never be 0 to 2 percent inflation and relatively stable economy like the last 30 years ever again.
When the employment mandate goes, the rbnz will go full throttle. The trouble is, the interest rate tool is not working. Its good for getting house prices down though
Last time inflation needed stomping out what did interest rates get to....oh yeah around 20 something percent. Interest rates (edited) needs to be two percent above inflation rate to have a meaningful impact. RBNZ has just got to stop playing around at the margins and get a move on. Yes it will be very bad for the speculative.
The non speculative (the majority of kiwis) will be happy.
The problem is the mortgage interest rates only initially hits a small percentage who have a high DTI mortgage and are floating. The number with a high mortgage is pretty small too.
And don't get me started about Labour jacking up benefits by the inflation rate. Thats very mike hosking ish of me 🤣
There needs to be a complete rbnz rethink and a new model. Something that actually restrains demand and spending
As much as I love Arbitrum, I'd hazard to say ARB is a borderline shitcoin. It's a governance token for voting on the future direction of the token. The issue is - only 12% of the tokens were issued to early users, the dev team retain something like 40%, some to VCs, good chunk to the DAO. Anyway, easy money!
Taiwan's industrial production fell a sharp -8.7% in February from the same month a year ago. But as bad as that sounds, it is far less than the -20% retreat in January. Still it is the fifth month-on-month fall in the past six months, and global tech demand, especially from China, remains very weak.
Deliberate from the Chinese to try and destabilise Taiwan...?
Wouldn't it be ironic if China used an addictive drug to undermine Western governments? Wonder who taught them that trick?
You will notice nobody has talked about China recently brokering a restoration of relations between Saudi and Iran, a massive accomplishment which undermines the US authority, leadership and foreign policy in the region (which has always been to ramp up people in the area to try and get them to fight each other and sell a lot of weapons in the process). Also in the works could be the settling of Saudi oil accounts in the Yuan, instead of the US dollar.
China is making plays encouraging peace in the region and ensuring it has access to energy which can't be economically sanctioned by an increasingly belligerent adversary. Big moves being made at the moment and its barely being reported in the Western press.
Speculators realizing with capital losses its a fools game. Yields less than money in the banking decline prices and no tax rinse is an investment stupidity. Who knew...
Paid to much....ya think.
https://i.stuff.co.nz/business/131589273/landlords-planning-to-quit-bec…
How do you explain the fact that there are only 716 houses for rent in all of Ireland when they used to have 23,400? Where did their rental houses go? Did aliens come down and abduct them, or did the rental market collapse after small landlords where driven out? Hmm, someone should really investigate those aliens before they descend on NZ!
https://www.themayor.eu/en/a/view/housing-crisis-only-300-properties-av…
Haha. I feel so sorry for the gamblers/greedy-boomers (investors) who have caused lots of younger home buyer to over pay for houses ( and others to leave nz) as they pushed up prices in the mistaken belief prices and rents would only go up and taxes down.
Now all we need is to make sure luxon isnt elected and thus no relief for investors.. and those 35% will sell and prices will be affordable by 2024 (bonus will be if luxon doesnt get to inflict on us his other populist half baked policies and national sort their party out)... 🤣
One quick deep recession and we will be back in business (probably productive business) by 25/26 with an affordable country
Remember that Labours lackeys in Kainga Ora spent the last few years outbidding FHBs in existing houses to ensure that welfare beneficiaries are better housed than people actually working for their living.
Also excluded from meeting the same Healthy Homes deadline as private landlords.
If you think social unrest is bad now, wait for the fallout when you have shopping malls closing at midday on weekends and no one spending anything at all. Widespread job losses, lots of pissed off people, places that can't afford to stay open to serve no customers because no one can afford to spend. Ergo - a lot of very hard-up people with lots of time on their hands.
People are very good at assuming they'll be in a position to make hay while everyone else takes all the pain. If what you're actually suggesting does pan out, you need to think about the consequences for our social fabric. Not saying it won't either, but people need to think through the implications of what they're suggesting here. They may find themselves unprepared if they are right.
The real sell up wont happen until next year, which is when the loss of interest deductibility finally kicks in and landlords will have to pay more tax. Currently the loss of deductibility has been offset by the rise in interest costs, so its made zero difference (deducting 100% of 3% interest is exactly the same as deducting 50% of 6% interest - but deducting 25% of 7% interest is not). So if Labour get back in you can expect the rental crisis to get exponentially worse from April next year.
I've seen this argument twice in 2 days now.
You do realise this means they are now paying a net 3% interest to the bank from that, where previously it was 100% offset and net 0%?
So yes, they might be getting the same deductibility, but their costs have still increased beyond what rent will support.
The rental crisis as about as real as the house shortage crisis. Ways to sort it.
Control immigration properly (so infrastructure keeps and and is properly paid for by immigrants).
Govt should buy new stand aline developments from developers at cost for welfare. (Nats by the way sold off a lot of welfarr housing.. i am no socialist but where did they think poor would live ? Lol).
Make houses cheaper so people choose to buy not rent (that will happen if landlords sell.)
Drop house prices rises so empty houses get sold.. thats happening.
Encorage people inlow skilled jo s to go overseas due to a weakened econony and rising prices.. also happening
... rental shortage was fake news
ACT's immigration policy is starting to make sense. It talks about introducing an annual working range for visas based on NZ's infrastructure capacity to accommodate net arrivals. Beyond this, the employers will have to pay a market-driven levy per overseas hire.
This levy then goes into a capital envelope to be dished out to central and local agencies. It's a win for the general taxpayer if it shifts at least some of the funding pressure on the new users (migrants and their employers).
Except we know now from stretched services like hospitals and schools that there's an ongoing cost in terms of reduced access for services to the existent population, as those services are not funded to keep up with population increases. Governments have shown an unwillingness and incapability to do this, even though they are happy to use it as an attack platform in opposition.
If there's an extra 20% more people at your local ED, all the infrastructure bonds in the world won't help you cover the ongoing operating costs to service an increased population, nor will they make it any easier to access beaches or parks on weekends and so on. That's the bit we need to be pricing.
All the millions sunk into writing immigration policy changes during Covid have produced f**k-with net migration tracking at pre-Covid levels on a monthly basis.
Successive governments have enjoyed bumper tax takes from population growth without putting much back into infrastructure growth. Funding some of that infrastructure growth directly out of future migrants and their employers makes us less reliant than we currently are on incompetent politicians doing the right thing.
I don't see how a $1350 levy is going to pay for much infrastructure.
That sounds awesome. I would love to see the estimated cost per immigrant and how its made up.
I reckon if we realised the true cost per immigrant over their lifetime we would find very few professions we would let in.. and instead we would start investing very heavily in eductating our own people.
What rental crisis. Is this the NZPIA's latest propaganda ?
The interest increase argument is bollocks, you are still paying more interest on your loss making liability.
Im doing my part, my wife and I moved out of a 5 bedroom rental, now rented to a family of 5, and Im heading off shore for six months. Crisis solved.
Such a rubbish stuff article. Conceals that the profit in landlording recently was from huge increases in house prices. Aided by stupid tax deduction for interest expense.
Well the tax thing changed as it should have and house prices are plunging. Both were always going to.
Hoping it would continue is a delusion.
This has long been the obvious outcome. A large percentage of “investors” were primarily in it for the capital gains. The use of interest only loans, and properties with negative yields, could only be sustained if interest rates continued to stay low and prices kept rising
2022 was dominated by people being unable to afford to buy at current prices
2023 may well be the year people with unsustainable levels of debt being unable to afford to hold onto properties.
What a load of nonsense.
So, landlords concerned with mass sales of rental properties leading to a rental crisis? Jesus wept.
ummmmmm so if they are sold someone buys them. And if there is a mass sell off, prices will slump further. This will improve yields, therefore making rentals a more attractive investment….
Or….. it gives FHBs the chance to buy a property. A FHB buys a property then frees up the rental property they are vacating.
Am I missing something here????
Only if its red zoned for some reason. Speculator sells, either a renter buys it, or the Govt buys it, or another investor buys it at a yield that stack up (much lower price). Otherwise to use your quote "what a load of nonsense". This has been spun into something it is not.
The only rent crisis is the stupid rent specuvestor's need to cover the debt on a stupid purchase price as Govt changes level the purchasing field.
You can already see the anger from Investors towards the interest rate deductability.
The funny thing is how slow most investors where to realise its tax impact....
Not sure how many of them understood the tax implications when it was announced.
- Ring fencing of losses in the vehicle.
- Removal of Interest rate deductability
- Bright lines CAPITAL GAINS TAX
- Earlier removal of depreciation.
The fight aginst investors is over, they just don't accept it yet....
Naturally HW2 is going to tell you what a great investment it WAS, and he was right, IT WAS a great investment before all these changes clubbed the baby seal to death.......
NOW ITS STUPIDITY to play the game, thats why he talks about FHBers entering the market all the time, he knows full well no investor is stupid enough to. Banks would laugh at the negitive cash flow projections.
Wow 35% is a lot of investors thinking of selling up, Be Quick HW2 thats going to crater the market,,,, who will buy these FHBers dont normally like the locals in Flat Bush and Manurewa.... and the schools are often not that desirable.... Game theory says those who sell first will get a better price, except buyers also understand game theory and keep lowering the bid. Its easy to see people who want to sell seeing huge losses here. Thos most (65% and falling investors are in the market long term to help their tenants...)
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