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 RATE CHANGES
Heartland Bank raised its floating rate by +26 bps taking it to 7.75% (and well below the main bank levels of 8.64%).
TERM DEPOSIT/SAVINGS RATE CHANGES
The Cooperative Bank raised its Step Saver, Online, and Business Online savings account rates by +25 bps. The new potential Step Saver rate is 4.75%.
PATCHY, SURE, BUT MUCH LESS DOWNBEAT
ANZ's latest Business Outlook survey shows improved business confidence and expected activity levels, while inflation indicators have eased, even if only slowly. The lifts were not trivial. This has prompted the ANZ economists to note: 'The RBNZ perceives widespread sogginess across the economy...We aren't so sure'.
ELEVEN YEAR LOW
The collective mortgage books are now growing very slowly. They rose only +$577 in April from March, an extension of the low level in all months of 2023. In April 2022 they rose +$1.4 bln. In April 2021 they rose +$3.0 bln, and in April 2019 they rose +$1.2 bln. Apart from the pandemic April, April 2023 is the lowest since 2012. More here.
HOUSEHOLDS RUSH TERM DEPOSITS AGAIN
Households have been shifting funds out of transaction accounts and savings accounts and the April shift has kept up the pace. Household transaction balances fell -$900 mln from March, and savings accounts fell -$330 mln. But term deposits rose by +$2.1 bln in the same month, taking the full year rise in term deposit balances to +$26 bln. In the year to April $2022 the rise was only +$2.8 bln. In the year to April $2021 it was a sharp fall of -$18 bln. And in the year to April 2020 it was a -$1 bln retreat.
KIWISAVER RESULTS WEAK
KiwiSaver assets have now probably hit $100 bln. As at March they were just above $97 bln, having risen at about +$1.8 bln per month in the March quarter. At that rate, the May balances could have exceeded $100 bln. But don't forget, these increases are not all investment gains. Much of the rise is due to member and employer contributions. IRD data for the March quarter shows members were credited with +$2.4 bln in the period. The RBNZ data shows fund values rising +$5.4 bln, so investment returns (after tax) must have been about +$3 bln. That implies positive investment earnings returned in Q1-2023. But for the past twelve months, contributions were +$9.6 bln but the value of all KiwiSaver has only risen from $92.3 bln a year ago to $97.2 bln and a rise of only +$4.8 bln. So half the 2022/23 contributions were lost over the past year. Only Q1-2023 performance limited the loss.
GENEVA FINANCE PROFIT FALLS
Geneva Finance says its March-year pre-tax profit fell -42% to $4.8 mln. Reduced lending, higher funding costs, claims costs stemming from the Auckland floods and increased investment in group governance were blamed for the profit drop by Geneva, which offers personal loans, vehicle loans and insurance.
ME TOO
Synlait has revealed it is reducing its current season milk price, and its nex season indication will be even lower. But these changes mirrow Fonterra exactly, as it has done since the 2020/21 since it has done since the 2020/21 season.
LATE SEASON CATCHUP
Milk flows in April, as the season is well into winding down mode, were strong according to Fonterra, more than +8% higher in the month than the same month a year ago. That narrows the total season milk flows to be only -0.2% behind the prior season.
AUSSIES START WITH MORE BUT FACE CUTS TOO
In Australia, Lactalis (previously Parmalat) has cut their milk price paid to farmers in Queensland and NSW, taking it down by -5.7% from AU0.87/l to AU$0.82/l. Dairy companies there are required to review their annual milk supply agreement price by June 1, and competitors Norco and Bega have yet to announce their stance. Farmers are disappointed because weather-induced lower production should have led to higher prices, not lower, they say. For the past year Fonterra Australia offered AU$9.57/kgMS (which is a different basis to the c/l basis of Lactalis), and they too have yet to declare their price. But AU$9.57/kgMS is NZ$10.30/kgMS which in turn is far above Fonterra's NZ indication of $8.20/kgMS to Kiwi farmers for the current season and $8.00/kgMS indication for the next season.
INFLATION TICKS HIGHER ACROSS THE DITCH
Australia's monthly inflation rate rose to 6.8% in the twelve months to April, which is a rise from the monthly indication of 6.3% in the March month.
NOT POSITIVE
China's official factory PMI contracted more in May than April and more than expected, reinforcing the lackluster - even failing - recovery there. Ectect the yuan to come under pressure. But tomorrow's services PMI is unlikely to be as negative.
SWAP RATES SOFT
Wholesale swap rates are likely lower today with modest falls. However, the real action in swap rates comes near the close. Our chart will record the final positions. The 90 day bank bill rate is down -2 bps at 5.69%. The Australian 10 year bond yield is now at 3.63% and down -3 bps from this time yesterday. The China 10 year bond rate is unchanged at 2.74%. And the NZ Government 10 year bond rate is at 4.33% and down -4 bps, and that is still higher than the earlier RBNZ fix which fell by another -6 bps to 4.27%. The UST 10 year yield is now at 3.68% and another -8 bps lower from this time yesterday.
EQUITIES ALL LOWER
Wall Street closed with the S&P500 unchanged today. Tokyo has opened down a sharp -1.1% after a long run up. Hong Kong has opened very weak, down -2.3% so far and compounding their recent losses. Since Monday, May 8, they are down more than -10%. Shanghai has opened down -0.8% and falling. The ASX200 is down -1.3% in afternoon trade today, while the NZX50 is down only -0.2% in late trade.
GOLD FIRM
In early Asian trade, gold is at US$1956/oz and up +US$10 from this time yesterday. Earlier in New York it closed at US$1959/oz and London closed at US$1952/oz.
NZD DROPS
The USD got a boost this afternoon when a House vote cleared a hurdle to their debt-limit deal. The Kiwi dollar fell more than -¼c from this time yesterday, now at just 60.1 USc. Against the Aussie we are holding at 92.5 AUc. And against the euro we are down at 56.2 euro cents. That means the TWI-5 is down at 69.1 with a -30 bps drop.
BITCOIN SETTLES IN
The bitcoin price is marginally softer today, now at US$27,682 and down a mere -0.3% from this time yesterday. Volatility over the past 24 hours has been low however at just over +/- 0.8%.
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53 Comments
136 days to go.
Edit: National digging a deeper hole every day...
https://www.newshub.co.nz/home/politics/2023/05/election-2023-national-…
Labour's total campaign has been to spend money we don't have, except on the overpromised, and grossly under delivered Dunedin Hospital, of course.
National's seems to be to cut spending in a mean, politically suicidal manner.
Luckily for them, their election opponents are of such a low calibre that they still seem the best alternative, especially if there is a chance of racially based parties having a say in Parliament. There are 2 of course. The Maori Party, and the really tough Maori Caucus in the Labour party.
Their policies are also about undoing a lot of Labours policies, without coming out with any real new ones. Their plan to raise Kiwisaver withdrawal eligibility to 67 along with Super eligibility, will affect most people under 50, and is just a recycled policy from Bill Englishs days, right down to the dates. So they are giving people 7 less years to plan for those 2 extra years.
It’s ridiculous. National need to justify why they are for taxes on people needing prescriptions but against taxes on high earners and property investors.
I mean I know the answer, same as under John Key national are for rich mates. Except Key had a lot more scruples.
Yet they plan on allowing rich retired people with a gold card to still get free prescriptions. They are full of double standards. Removing the prescripton fee for everyone saves money and demand on the health system, as well as red tape. It also saves small phamacies.
I enjoy watching boxing, where you talk about a fighter's "Ring IQ" - that innate ability to hit and not get hit, to avoid putting yourself in a position where you wind up flat on the canvas, and to know when to go on the attack and when to defend. Obviously a high Ring IQ is better than a low one.
If we port that concept over to politics, Luxon has a negative Ring IQ it's that bad. He's the guy who throws an uppercut and knocks himself spark out. He is so bad at politics I'm starting to wonder if he is a Manchurian Candidate.
If chart/technical trends are anything to go by, it looks like we are falling back into the 0.50's against the USD.
RBNZ just backing themselves further into a corner here. They could be forced to raise again at the next OCR review to stop the NZD falling too far.
Rock meets hard place stuff (but a lot of it from their own doing).
The collective mortgage books are now growing very slowly
Let me see if I get this right, our banking overlords were handed a great opportunity during Covid by RBNZ to drown us all in debt and they grabbed it with both hands.
Now that everyone who could borrow to buy an expensive property has done so, our central bank is lowering LVR limits for investors while we import people by the planeloads everyday in the hope that they will take on huge mortgages.
Great strategy to run what's left of our productive economy further into the ground!
The prices may approach "humane level" when the OCR hits double digits however in that event FHB affordability will of course remain unhelpful.
Surely it's clear by now that the decade of monetary largesse lowering interest rates post GFC culminating in the Covid near zero cost of credit is a key reason for the flight to real assets, pumping up the price. The reverse case will also hold.
Australian food producers are prohibited from exporting more than 30% of their goods. That is why meat, cheese, dairy, veges, fruits etc are often a lot cheaper there.
Unlike here in NZ where 95% is exported, and the little that remains here is absolute crap, charged at premium prices.
NZ lamb leg in Melbourne recently was $5.99/kg. Here it's close $24/kg. Absolute rort.
Comcom are a toothless tiger. They won’t do sh1 t.
We have a duopoly with a cornered captive market. The actions needed are very straightforward just require some guts from Comcom and govt, but of course this is NZ and we lack the cojones. Farmers and supermarkets taking the piss need to be set straight.
Farmers to sell locally at Nz price below world market price if they want govt support in next natural disaster. If not, no support and impose clean up taxes for their environmental damage.
Force divesture of supermarket chains so that one company can only operate one chain - thus pak n save competes with new world and countdown and big fresh.
Declare supplier exclusivity contracts illegal.
Remove GST from food (boils my piss when people say this is too hard - loads of other countries have done).
declare land covenants illegal and impose punitive tax on empty land zoned for big box retail.
Offer a 5 year tax break to Aldi to setup.
force supermarkets to display their margins on each product.
frank knows
Percentage of US stocks outperforming the S&P 500 index now smaller than during dotcom bubble.
https://pbs.twimg.com/media/FxaB17HWYAEN3_G?format=jpg&name=900x900
So the sharemarket being held together by a few high performing stocks while everything else stagnates.
Similar story in Nasdaq 100 vs small caps (Nasdaq 100/Russell 2000).
https://pbs.twimg.com/media/Fxa2FPlXoAEt_x1?format=jpg&name=large
I think it is possible the RBNZ made an error not raising 0.50 or 0.75 at the last review. Markets were expecting a higher lift in OCR (wholesale rates and now currency FX) and now we may import more inflation. Meaning CPI and rates could keep going higher this year.
A deflationary bust (starting in the US or China) could reverse this of course.
I agree, it just doesn’t feel right. Like we primates have been living beyond our means in some decadent spending orgy that should’ve been corrected during the GFC… but wasn’t.
I’d love to know how we can get ourselves out of this coming correction, without printing more money, but cannot fathom anything that might help… aside from perhaps some energy/technology breakthrough that transforms society as we know it!
Care to explain the 50% we could easily do without?
Hahaha yeah, you should try lotto powerball Housemouuse, $50 online tickets won 10 million mid may
I've been looking for where to put it and a mat said the wurst beaten up shares. So bought a range of property companies and retirement companies. And the warehouse.
Been a Flying High ride since, IMNSHO. Texas tea. And don't have to deal with any dumb nuts, check it out mate
Am still "investing" in Lotto tickets 🍻🍻🍻🍻🍻🍻🍻🤫
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