A review of things you need to know before you sign off on Wednesday; no retail rate changes, ASB posts record profit, inflation expectations don't ease, swaps stable, NZD softish, & more

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
Update: HSBC has raised the rate on its only fixed home loan offer by +10 bps to 7.19%.

TERM DEPOSIT/SAVINGS RATE CHANGES
None here today.

TWO OF LAST THREE ARE LOWER
Stats NZ figures show that total retail spending using electronic cards & phones fell by -0.9% in July, reversing some of the gains made in June when there was a rush of fuel spending to beat the excise tax duty rise. A fall in national overall retail spending when population growth is high does suggest that belt tightening is quite severe at the individual household level.

MAKING MORE IN A RISING RATE ENVIRONMENT
In their full year to June, ASB posted a record profit of $1.559 bin as their net interest margin rose from a year ago to 2.44% (about average for the big four Aussie owned banks). And they said they are 'proactively contacting' thousands of refixing home loan borrowers. (This just part of the big banks usual spin when record profits are announced; they always allude to 'tough times ahead' in some way. But the records keep coming anyway.)

LONG LUNCH 'STRIKE'
Meanwhile, Westpac was hit with "a nationwide 2-hour strike" today from 12:00 noon to 2 pm, and there was a full-day stoppage at selected branches. The union says they have been in pay negotiations with the bank for five months and are seeking meaningful wage increases above the cost of living. Westpac is reported to have offered a +7% rise for the next 18 months, which is what is being rejected. About 800 union members are involved of Westpac's 5000 staff and bank operations have not been affected.

COMMERCIAL CONSENTS KEEP PIPELINE FULL
Less new warehouse space is being consented but more retail projects are in the pipe for the commercial construction sector. The value of building work consented for new retail projects hit a record high in the second quarter.

PUMPED HYDRO & PORTFOLIO APPROACH FEASIBLE OPTIONS TO SOLVE DRY YEAR PROBLEM, MBIE SAYS
The NZ Battery Project, being run by the Ministry of Business, Innovation & Employment to investigate the ability of pumped hydro and alternative technologies to address NZ's dry year electricity problem, says Cabinet has decided its next steps. Two options will be progressed to the next stage of the project. They are a multi-billion dollar pumped hydro scheme at Lake Onslow, and a portfolio approach drawing on multiple technologies such as biomass and geothermal technologies. The two options will now be run through a detailed business case framework, with a preferred option likely to be confirmed in mid-2024.

DATE SET
Update: Now the High Court has given the green light, Fonterra said it will make its special capital distribution to shareholders of record on August 16, and pay them on August 18, 2023.

HEAVY PROFIT HAIRCUT IN ONE PART, BIG GAIN IN ANOTHER
Significant weather events, a more than 50% increase in natural disaster claims costs, reinsurance increases and claims inflation has led to a general insurance profit of NZ$65 mln for Suncorp NZ, down -56% on the previous financial year. Suncorp NZ operates here with the insurance brands Vero, Asteron Life, AA Insurance and AA Life, as well as AA Money. Because other parts of their New Zealand business did well, overall they posted an after tax profit of $115 mln for the year to 30 June, just a -30% reduction. One key part was a sharp improvement in its Asteron Life business, which posted a tax-paid profit of $50 mln, up +$35 mln in a year.

A POSITIVE QUARTER
Morningstar has published its KiwiSaver Survey for the June 2023 quarter. All multisector KiwiSaver funds produced positive returns over the June quarter. The average multisector category returns ranged from 1.2% for the conservative category (including default options) to 5.4% for the aggressive category. Top performers over the quarter against their peer group included Kiwi Wealth Default Conservative fund 2.1% (multisector conservative), Generate Moderate fund 2.7% (multisector moderate), QuayStreet Socially Responsible Investment fund 4.8% (multisector balanced), QuayStreet Growth fund 6.4% (multisector growth), and Generate Focused Growth fund 7.7% (multisector aggressive). But the most appropriate to evaluate performance of a KiwiSaver scheme is by studying its long-term returns. Over 10 years, the aggressive category average has given investors an annualised return of 8.7%, followed by growth (8.3%), balanced (6.6%), moderate (4.6%), and conservative (4.2%).

HIGHER FOR LONGER?
The influential RBNZ survey of business expectations shows a slight rise in the expected level of inflation in two years time - which was a surprise because it was expected to dip. Perhaps that has been behind a late rise in the NZD and a late rise in short NZGB yields?

DEFLATION FOR CONSUMER PRICES
Deflation has arrived in China again for its consumer prices. They fell -0.3% in July from a year ago (the first time in two years) but rose a minor +0.2% from June, but given year-ago levels it is unlikely to repeat on a monthly basis in future months. Food prices are deflating, so is clothing. Beef prices are down -1.4% in a month, lamb prices are down -1.3%. Milk is holding however, unchanged from a year ago. Recently petrol prices have blipped up, but they are lower than a year ago.

DEFLATION IN THE FACTORY SECTOR
China's producer prices fell -4.4% in July from a year ago, worse than market forecasts of a -4.1% decline, after a -5.4% drop in the prior month, which was the steepest decrease since December 2015. It was the tenth consecutive month of producer deflation amid weakening demand and wavering commodity prices. Yesterday's weak export data won't be helping.

FOOD NOT ADDING TO INFLATION
World food prices rose in July, but only because vegetable oils turned up. Dairy and meat prices were little changed in the month on a global basis, cereal and sugar prices fell noticeably. Given the global weather (and war) pressures, perhaps this is all a bit surprising.

SWAPS UNCHANGED
Wholesale swap rates are probably little-changed. 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 yet again at 5.64% and now +14 bps above the 5.50% OCR. The Australian 10 year bond yield is down -7 bps from yesterday at 4.01%. The China 10 year bond rate is little-changed at 2.66%. And the NZ Government 10 year bond rate is down -4 bps from this time yesterday at 4.81%, and still very much higher than the earlier RBNZ fix which was down -2 bps bps at 4.74%. The UST 10 year yield is at 4.02% and down -4 bps from yesterday. Yesterday's volatility isn't around today.

EQUITIES LOWER ON RISK-OFF MOOD
The S&P500 ended its Tuesday session on Wall Street down -0.4%. Tokyo has opened its Wednesday session down -0.3%. Hong Kong is down -0.2% and Shanghai is down -0.3%. The ASX200 is unchanged in afternoon trade (on the Matilda effect?), but the NZX50 is also down -0.3% in late trade.

GOLD LOWER AGAIN
In early Asian trade, gold is at US$1929/oz and down -US$5 from yesterday. It closed earlier in New York at US$1925, and earlier still in London at US$1926/oz.

NZD SOFTISH
The Kiwi dollar is only marginally softer from this time yesterday is just on 60.6 USc although it had been lower earlier in the afternoon today. Against the Aussie we are also marginally lower at 92.5 AUc. Against the euro we also holding at 55.3 euro cents. That means the TWI-5 is at 69.3 and down -20 bps.

BITCOIN RISES
The bitcoin price has risen from yesterday, now at US$29,738 and up a bit less than +2.0%. Over the past 24 hours, it got as high as US$30,192. Volatility has been modest at just over +/- 1.8%.

This soil moisture chart is animated here.

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