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
Bank of China raised some fixed rates today.
TERM DEPOSIT/SAVINGS RATE CHANGES
Rabobank raised rates today, taking their 6 month rate to 5.90%, their nine month rate to 6.00% and their 12 and 15 month rates to 6.15%. NBS raised its call account +50 bps to 2.75%.
HIGH RENTS DIP IN MAY FROM APRIL, BUT HOLD STRON Y/Y GAINS
Nationally, there was a slight dip in rents in May from April (-0.9%), but compared to last year, Auckland CBD apartment rents are up strongly (+23%) following the return of international students. The national median rent now $570 a week, up +$30 (+5.6%) from May a year ago.
JOB ADS SOFTER
The BNZ/Seek job ad monitoring shows that after running at a fairly high but stable level in 2023, this activity is starting to decline and the June levels are the third monthly fall in a row. Ads for jobs in Hospitality & Tourism fell the most. It was also significantly lower in Retail & Consumer Products, and Manufacturing, Transport & Logistics in June. But Construction, in contrast, has been trending slightly higher over recent months – news that might surprise many.
HOME DETENTION
Forestlands sole director, Rowan Kearns, has been sentenced for making false statements and financial reporting offences after regulatory action by the FMA. "The false statement charge relates to Mr Kearns’ failure to ensure that the financial statements of three Forestlands companies recorded a $1 million loan to the Nelson Building Society."
RECORD HIGH
The High Court found in April that Wei Zhong and Lei Ding had breached the market manipulation and disclosure provisions while officers of Oceania Natural: Mr Zhong had six market manipulation contraventions and three disclosure contraventions; Ms Ding had six market manipulation contraventions and five disclosure contraventions. Now the Judge ordered a penalty of $1.33m for Mr Zhong and $760,000 for Ms Ding. These are the highest penalties ever imposed for contraventions of the market manipulation and disclosure provisions in the Financial Markets Conduct Act.
DOWNGRADED ONE NOTCH
The Hastings District Council had its credit rating lowered by S&P from 'AA' to 'AA-' following the substantial financial hit it took follow from Cyclone Gabrielle. It was on a 'Negative Watch' at the prior rating. S&P said the new lower rating now comes with a Stable outlook. At the same time the rating for Kapiti Coast District Council was revised to 'Negative'.
JAPANESE INFLATION STAYS WELL ABOVE 3%
In Japan, inflation continues to run above their central bank's 2% target. It edged up to 3.3% in June from 3.2% in May but less than market forecasts of 3.5%. Core inflation also ticked higher to 3.3% in June from 3.2% in May. It has been higher than 2% for 15 straight months now.
SWAPS LITTLE-CHANGED
Wholesale swap rates are probably little-changed today. 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 up +1 bp at 5.67% and now +17 bps above the 5.50% OCR. The Australian 10 year bond yield is up another +5 bps from yesterday at 4.02%. The China 10 year bond rate is again little-changed at 2.67%. And the NZ Government 10 year bond rate is up +7 bps from this time yesterday at 4.66%, but still higher than the earlier RBNZ fix which rose +7 bps to 4.60%. The UST 10 year yield has risen +9 bps to just on 3.85% today.
EQUITIES LOWER
The S&P500 ended its Thursday trade on Wall Street down -0.7% with tech stocks hurt by the Netflix and Tesla weak earnings (although that affected the NASDAQ index more). Tokyo has started its Friday trade down -0.6% with an extending retreat. But Hong Kong is up a strong +1.1% at its open today. Shanghai is up +0.4% at its open. Both the ASX200 is down -0.3% in afternoon trade and the NZX50 is little changed late in their session.
GOLD SOFT
In early Asian trade, gold is down -US$11 at US$1972/oz. Earlier it closed in New York at US$1969/oz, and earlier still in London at US$1976/oz.
NZD LOWER
The Kiwi dollar is more than -¾c lower, now at just on 62.2 USc. Against the Aussie we are -¼c lower at 92 AUc. Against the euro we have dipped to 55.9 euro cents. That means the TWI-5 is down at 69.7.
BITCOIN VIRTUALLY UNCHANGED AGAIN
The bitcoin price is down a minor -0.6% from this time yesterday at US$29,865. Volatility has been modest at just under +/- 1.4%.
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66 Comments
I dont see it, what's the connection.
High interest rates obviously relate to high inflation, meaning rising input costs and falling margins. By reducing sell prices musk will direct tesla to the chapter 13 bankruptcy even quicker than Twitter is going down the plughole. I haven't had an update on FBs twitter format, apart from they have sped out of the starting position.
And how many of musks customers are in the squeezed middle, splashing out on discretionary toys
Tesla margins are double that of every other car company. They will force competitors into bankruptcy long before they ever have that problem.
As for Threads, its dying a slow death while Twitter carries on just like normal. Turns out that self absorbed people obsessed with posting heavily filtered, photoshopped and curated photos of themselves online dont actually have all that much to say that's interesting to others. Whodathunkit?
It's slightly tin foil hat territory, but perhaps the most interesting raison d'être I've seen put forward for Threads is that it is really a play by Meta to compete against TikTok (which has been eating Meta's lunch in the short form video game, with Instagram Reels being seen as the inferior platform).
To use Threads you have to have an Instagram account (in fact part of the reason for Threads' initial explosion in sign ups is because Instagram just prompted you to join - meaning an enormous, free go-to-market channel with a seamless experience) Therefore, people who want to join Threads who aren't yet IG users have to sign up for Instagram, meaning more people to expose to Instagram reels to steer away from TikTok.
In other words it was never about competing with Twitter, but about leveraging the anti-Twitter (owing to anti-Musk) sentiment in order to artificially grow Instagram's userbase to compete against TikTok which is a superior platform for algorithmically-delivered, short-form video content.
Threads, to me, feels very artificial and I think it will rapidly become yesterday's news and die off.
New houses are falling in price, just as Musk is reducing the price of new Teslas. Demand for the product at a higher price point falls as finance costs rise so prices must drop. i.e. demand at a price point is determined by the buyers ability to pay, and that is determined by finance conditions.
Bankruptcies are a real possibility for those (manufacturers and developers) who gambled that prices could never fall, even if their input costs continue to rise - especially when the buyers of their products are primarily using finance/debt.
It's ultimately almost all a response to the cheap finance, even the input costs. It didn't suddenly get more expensive to dig materials out of the ground, the difference is a fatter slice being taken by monopolists, middlemen and speculators along the way. Monetary stimulation has a strange way of flowing straight to the nearest rent seeker.
More on the San Francisco apocalypse.
Businesses are closing up shops in droves, while some building owners have stopped payments on malls and hotels as the city's economic recovery appears bleak.
San Francisco's demise is much more than just the remote or hybrid work narrative, and a record 30% of office space is vacant. Remember, without office workers, local shops can't thrive.
"Embarcadero Center is a commercial complex of five office towers, two hotels, a shopping center with more than 125 stores but only two remain open on three levels located in San Francisco, California."
https://www.zerohedge.com/markets/video-deserted-mall-and-streets-downt…
Shades of Johannesburg as a hopeful society unravels. This was the place to put up directors from H/Q when they came out to see how operations were going. Then...(as per San Fran above)
The Johannesburg Sun Hotel is an abandoned twin-tower skyscraper hotel in the Central Business District of Johannesburg, South Africa.... in the early 1980s totally rebuilt at a cost of R100 million, with the addition of the 40-storey main tower...As the neighbourhood decayed, the luxury hotel was converted... the hotel to close completely, in September 1998. The building is currently "mothballed."
Over the ditch, wallets are closing. As I have referred to before, the wealth effect is important and is a indicator of the psychology surrounding the bubble economics strategy.
Retailers are slashing orders for new stock in the lead-up to the festive season to avoid a blowout in inventories as consumers tighten the purse strings.
Forward orders for retailers and wholesalers have been in deeply negative territory for the past two months, according to NAB’s monthly business survey, indicating most retailers expect demand to fall over the next few quarters as cost-of-living pressures escalate.
https://www.afr.com/companies/retail/as-bad-as-we-ve-had-it-retailers-c…
Humans are tangible so they only close up the purse on a grand scale when something directly effects them. Hence one factor in the strong domestic inflation, behavioural change takes time. Suddenly as many predicted on this site, 2nd half of 2023 is going down fast. Spending down, job losses coming here and there, mortgage and credit arrears on the rise, cost of living high and rising along with interest and mortgage rates with a sprinkle of inflation still burning hot.
One thing i’ll be interested to observe is the mental shift when the unemployment is well up and everyone realises they cant command high salaries anymore due to the level of competition unlike the last few years.
Saw a tweet from an Australian property expert saying that the June stats show that Wellington House prices have also crashed over 25% from the peak . Nationally it is nearly 18%. Has been very little in the NZ mainstream media in NZ about the price crashes in NZ. I notice that they tend to only compare the numbers for this year which don't look as bad.
A property crash in New Zealand is fine. Those affected are those that purchased property in the 2021-2022 period, and those that extended their mortgage at the low rates to buy things like cars and boats and are now rolling over onto much bigger rates, and possibly in negative equity due to the large mortgage and lower property value. Those in this situation are only a small minority as only a small percentage of total housing stock is sold each year. For the rest, they have the same house, it will be the same value near enough to what it was prior to covid, and they will have the same mortgage relatively speaking with similar rates. So, it should not affect the banks too much in terms of defaults. Only those that thought low rates would last forever and borrowed when they should not have will be in trouble, and obviously, those that lose their income due to job losses in the next year or two.
Absolutely. There will be carnage. It will be loud and all over the news. But, most will be ok. Many will really struggle but will get through. However the the tipping point in between a boom market and bust market is not a huge volume. In property we are going to have a bust. It’s happening right now. Like a slow moving train wreck. Prices down 20-25%, rampant crime as a result of useless government and complete desperation by those how are already under huge pressure.
You make a good point that it is a small minority of mortgage holders who purchased in 2021/22 but you must also consider how the cost of living crisis combined with interest level rises will affect the average family. As the economy slows down, pay increases are coming to a halt. Less pay to service the mortgage..
Where did the four day week go to? I thought we were all going to work less, get paid more and have a magnificent life doing bugger all. Great idea until the reality of inflation came around. Haven’t seen it in the news for a while now. People seem to be working more now just to make ends meet.
Every week there is an article in mainstream media about property prices falling. You are right though that they hardly use the word "crash". The price falls in each region vary dramatically, with at least one region actually having an increase in house prices. Unfortunately for some, Wellington and Auckland have had the biggest drops (20-25%), but those cities did have the biggest rises (around 40%) in the post-covid scramble to purchase.
The MMM do mention it but they tend to stats that seem to be cherry picked where the numbers don't look quite so bad. eg comparing prices since the beginning of the year, rather than from the peak. Auckland is apparently only around a 14% drop from the peak , so below the national average. I recall one NZ property expert saying in 2020 /21 that he considered a crash to be 20% or more, and if that occurred then we could be in serious trouble. The victims in this are probably first home buyers who purchased over the last few years. I remember some experts saying that there was never a bad time to buy home for FHBs and that the best time to buy was yesterday etc. All that created FOMO with the ultra low rates as they saw prices continuing to increase.
The Financial Innovation and Technology for the 21st Century Act was introduced in the U.S. y'day. The bill establishes a regulatory framework for digital assets.
You will notice that this falls under the agriculture officials' responsibility. The reason for that is that they control the Commodity Futures Trading Commission (CFTC).
https://agriculture.house.gov/uploadedfiles/fit_for_the_21st_century_ac…
A tragic situation, but from the Dickason trial we get as part of the evidence.
“I’m wondering what the hell we have done.We looked at two rental properties, and they gave me the creeps. Disgusting. People here are unkempt. I really want to come back (don’t say anything to anyone) this is not going to work for me. House we are staying in is 100m2. Don’t apply for NZ. They are so full of crap.”
Brother in law based in Italy but runs a massive cruising cat.... says he will never buy here, when he can get so much more in Spain, Greece, France etc, can't argue with him he keeps sending me great listings, we have so much pain to come as the world adjusts to higher rates.... Thinking of going to the UK for a year skiing over winter in Europe then Narrowboat cruising over summer 2024 . ..... hard to make money in NZ in these current situations.
Forget the house prices, go for the weather. We genuinely have one of the worst climates on the planet, relentless rain and wind all year around. Rarely above 26c anywhere, miserable winters. The irony of NZ pointing the finger at the European heatwave, I would take that in a heartbeat. Cappucinos $2.50 in Italy, food so much better and fresh (and cheaper).
I am always pro-NZ but have to admit, unless you are putting kids through school, I'd be in Europe.
We are seriously thinking of leaving once our daughter finishes high school, and perhaps the first year of uni. So another 3-4 years.
Apart from friends and family (admittedly important things), what’s the point being here?
High and rising crime, increasing inequality, horrible cost of living, very far from most of the world. Some pretty places but most countries have some pretty places.
I am in a position where I could cruise the inland waterways or med in summer seasons and just be back here for Kiwi summer..... Just sorting final things so everything lines up. I have a cruising boat here I took to islands a while back, will pull out of water soon and start refit, cruising is a good lifestyle, i am keen to tick off a round NZ
Might be not much stopping house prices having a slow decline over the next 10 years? Like the prices are fixed at mortgage so it doesn't matter to the banks much.
I thought prices would be stabilised by aussie capital coming over but with yields so low that might be less attractive and if iron ore calms down then they might keep their money at home.
Rabobank raised rates today, taking their 6 month rate to 5.90%, their nine month rate to 6.00% and their 12 and 15 month rates to 6.15%. NBS raised its call account +50 bps to 2.75%.
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