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
No changes today.
TERM DEPOSIT/SAVINGS RATE CHANGES
The Co-operative bank raised its 6 month rate by +5 bps to 5.65% and its nine month rate to the same level.
MORE FILLED JOBS, WITH PAY UP WITH INFLATION
The number of filled jobs rose by +5,400 in May from April and now total 2.37 mln. They are up +82,000 in a year (an extra New Plymouth or a Napier). This Stats NZ data shows the expansion of filled jobs is slowing however but are still strong in the service sector. The pace of wage increases remains elevated, but growth in earnings per filled job has come down off a peak of +8.1% pa in February 2022 to +6.2% pa in May 2023 - still basically keeping up with inflation. Westpac pointed out "that the demand for labour is as much a factor as the supply when it comes to inflation pressures."
WE ONLY WANT TO TRADE, THANKYOU
In Beijing, Chinese President Xi Jinping met with Chris Hipkins and called New Zealand 'a friend' but Hipkins was slow to return the compliment, preferring to focus on trade. China touted its process of 'opening up' 改革开放 but we should note that China has been saying that since the late 1970s when Deng Xiaoping was leader. Arguably, China has not delivered on its promises or claims very fast, even if New Zealand has been an early adopter. Xi also met with three other country leaders yesterday, all notably smaller ones - Barbados, Mongolia, and Vietnam. Large countries are wary of tying themselves to China's embrace. New Zealand didn't sign up to the common language the others did on One-China, GDI, GSI, and GCI. (GDI is the Belt & Road initiative, GSI is their Global Security Initiative, and the GCI is their Global Civilisation Initiative.)
FIRST HOME BUYERS ARE GETTING IN AT LOWER PRICES
The average amount first home buyers are paying for a home dropped about -$48,000 over the year to May. First home buyers are now paying about $669,000 on average for a home and taking on a $556,000 mortgage.
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BACK ON TRACK
The regulation FMA is satisfied the splitting out of the NZX's regulatory functions is working well. The annual NZX Market Operator Obligations Review reports NZX met all its market operator obligations during the review period from 1 January 2022 to 31 December 2022.
GAYA HERRINGTON
We have released a long-form interview with Gaya Herrington today. She talks about why the goal should be meeting human needs within planetary boundaries rather than economic growth. The Global Financial Crisis led to her leaving central banking, going back to university to study sustainability, and she has revisited The Limits to Growth.
TACKLING FRAUD ATTACKS
Online fraud is a growing problem. ANZ said that "only 0.06% of transactions are fraudulent" but it is a big problem for them and their customers because they process 67 mln transactions per month. That means they are dealing with 40,000+ fraud attempts every month. They claim their fraud detection system regularly detects and stops payment fraud. But clearly that isn't enough. They have released an enhanced Fraud Check tool to send an SMS message for any transaction they think looks suspicious, requiring confirmation from its customer that it is ok to proceed. (They never send email requests that have links, for these confirmations. By very wary of email 'confirmations'.) Also, see this.
A DRYING OUT IS COMING
NIWA is again warning that El Niño is coming. During El Niño, New Zealand tends to experience more southerly winds during winter. While that hasn’t been the case so far, a sharp cold snap along with strong winds will soon arrive on our shores and last into early next week. During late winter, spring, and summer, southwesterly-to-westerly winds may become more prominent. This increases the chance for drier-than-normal conditions in eastern areas of the country and tends to cause more rain in the west. Such winds can also contribute to increased wildfire risk because of drying grounds in key agricultural regions, along with occasional hot air masses coming in from Australia. While El Niño has been associated with historically significant droughts in New Zealand, such as in 1972-73, 1982-83, 1997-98, and 2009-10, but it doesn’t always bring one, they said.
AUSSIE INFLATION EASES
In March, CPI inflation was running at 7.0% pa. But today they released their May inflation indicator which has it easing to 5.6% pa. That's a 13 month low. The RBA next reviews its cash rate target on Tuesday next week, so the chance of a hold then might have gone up. But then again 5.6% is still way above their target and the RBA doesn't always do what the markets think the signals are. Besides, some are noticing a rise in inflation expectations.
WEAKER DEMAND, MARGIN PRESSURES = PROFIT SLUMP
In China, more indications of their economic funk. Profits earned by their industrial firms dropped by -19% from a year earlier in the first five months of 2023, on weak demand, and margin pressures. The decline followed a -21% plunge in the prior period and a 4% fall in 2022, with profits shrinking in both state-owned firms and the private sector.
SWAPS TURN UP
Wholesale swap rates are ending today a bit firmer. 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 unchanged again at 5.69% and still +19 bps above the 5.50% OCR. The Australian 10 year bond yield is down -8 bps from this morning at 3.88%. The China 10 year bond rate is little-changed at 2.71%. But the NZ Government 10 year bond rate is at 4.61% and up +8 bps from yesterday, and that is still higher than the earlier RBNZ fix which was up +7 bps to 4.54%. The UST 10 year yield is now at 3.77% and up +4 bps from this time yesterday.
EQUITIES RISING (EXCEPT IN CHINA)
Wall Street was up +1.2% on the S&P500 probably because recession fears seem to be fading. Tokyo has opened its Wednesday session up +0.9% and turning back up towards the record highs it posted earlier in the month. Hong Kong is little-changed at its open, but Shanghai has opened down -0.5%. The ASX200 has caught whatever New York and Tokyo has and is also up +1.1% in afternoon trade. The NZX50 is tagging along but more modestly, up +0.5% near the end of trade today.
GOLD RETREATS
In early Asian trade, gold is at US$1915/oz and down -US$14 from yesterday. Earlier it closed in New York at US$1914/oz and earlier still it closed in London also at US$1919/oz.
NZD LOWER
The Kiwi dollar is down -½c from this time yesterday and now at 61.2 USc but that is more about the USD than the NZD. Against the Aussie we are marginally firmer at 92.2 AUc. Against the euro we are lower at 55.9 euro cents. That means the TWI-5 is down to 69.8.
BITCOIN SLIGHTLY FIRMER AGAIN
The bitcoin price has risen slightly further today and is now at US$30,512 which is up +0.4% from yesterday. Volatility has stayed modest at +/- 1.3%.
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