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
Just after we published, Westpac advised they are raising fixed home loan rates tomorrow. The rises are similar to the BNZ ones yesterday, with their 18 month rate risi +14 bps to 7.09% and their two year rate up +10 bps to 6.99%. They are alos raising their 4 and 5 year fixed rates. None of these changes are market-leading.
TERM DEPOSIT/SAVINGS RATE CHANGES
None here either.
MOOD IMPROVES
Business confidence is moving in the right direction (despite the peak-bodies being in campaign mode for their preferred party(s)). Confidence was positive in September after being negative since early 2021. Confidence in a firm's own prospects has been positive for a while and it improved too in September. Inflation expectations fell slightly to finally be below 5%. There’s still a long way to go, but things continue to move slowly in the right direction, ANZ noted. BUT pricing intentions are going the 'wrong way', rising and showing that inflation impulses are far from beaten. More here.
MORE BUSINESSES
Stats NZ data shows there are 585,309 businesses operating at the end of August, the highest count ever.
A COUNTRY FOR OLD(ER) MEN?
Stats NZ also released the August update to its "filled jobs" series, and that is starting to show signs that young workers are leaving the country. Infometrics notes that high migration is continuing to provide for a larger labour supply, with filled jobs growth in the over-30 age group rising at its fastest rate since the data series began in 2020. But there are also sharp declines in employment among the 15-19 and 20-24-year-old age groups that has caused annual growth in the under-30 category to turn negative for the first time in over two years.
FEWER LOGS, BUT SOFTER PRICES
In our pine forests, local demand for logs holding but supply tightening as harvesters pull back. Despite that prices are softer. China demand for logs almost at normal level but confidence in residential construction not high. Overall log prices stable but with softer expectations
NZGB DEMAND STARTS TO FLAG
Today's Government bond tenders drew 101 bids for the $500 mln on offer attracting $900 mln in bids. While that is still good overage, it is the lowest $ bid level over the past 29 events and the first time since February 2023 that less than $1 bln has been bid across all three maturities. The average winning yield for the April 2023 bond was 5.23% pa, up from 5.01% at the equivalent bond offered six weeks ago. For the May 2034 bond, the winning yield was 5.31% and up from 4.77% eight weeks ago. The May 2051 bond paid a 5.46% pa yield, up from 5.34% just one week ago.
FEWER CONSTRUCTION CRANES IN OPERATION
The RLB semi-annual crane count data as at September shows fewer construction cranes across the country, down to 144 from 157 six months ago and 148 a year ago. In Auckland, the counts fell to 90 from 104 a year ago. The fall is largely because large residential projects are winding down. Counts by city are charted here. But about 150 cranes in operation is timid for a country of 5.2 mln. That is about the population of Sydney and they have 465 in operation. Melbourne has 178. and Brisbane has 168.
MORE REINSURANCE
Insurer Tower says it has "successfully renewed its reinsurance programme for the 2024 financial year." But it has had to scale it back, so now it has "decreased its catastrophe upper limit to $750 mln from $934 mln." That is -20% lower for the new year. It says this is because EQC has raised its share of catastrophic losses from $150,000 to $300,000 per claim. However, given the increased frequency of major climate or quake claims, it says it has "purchased cover for two catastrophe losses up to $750 mln. Cover is inclusive of an automatic reinstatement. Tower has also purchased cover for a third catastrophe event up to $75 mln."
SIGN OF IMMINENT DEATH
In Hong Kong, Evergrande's is in a trading halt, near the end of its life-support.
GOLDEN WEEK III
China's National Day Golden Week runs from October 1 to October 7 this year. This is the last 'golden week' of 2023, the first one (Chunyun/New Year) is in early February, The labour day one is in early May. This final one is also known as Mid Autumn Festival. More than 21 million people are expected to travel by planes during these holidays, many more by rail, and retail sales activity should get a bounce.
SWAPS LITTLE CHANGED AGAIN
Wholesale swap rates are probably little-changed again today. But the real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is also up +2 bps at 5.73% and now +23 bps above the OCR. The Australian 10 year bond yield is up +10 bps from yesterday to 4.47% reversing all of yesterday's retreat. The China 10 year bond rate is unchanged at 2.73%. The NZ Government 10 year bond rate is up +9 bps to 5.34%, but still well above the earlier RBNZ fixing of 5.26% which was up +6 bps today. The UST 10 year yield is risen +9 bps today to 4.61%. The UST 2yr has risen back +9 bps, now at 5.14%.
EQUITIES DOWN EXCEPT IN CHINA
The NZX50 is down -0.5% near the close today. The ASX200 is up +0.3% in early afternoon trade. However, Hong Kong has opened down -0.5% to start its Thursday trade but Shanghai has opened up +0.3%. Tokyo is down -0.8% to start its Thursday trade. The S&P500 ended its Wednesday trade unchanged in the end with a late rally.
GOLD DOWN SHARPLY
In early Asian trade, gold is now at US$1873/oz and down -US$28 from this time yesterday. Earlier, it closed at US$1875/oz in New York. Earlier still it closed in London at US$1877/oz. Higher yields are hurting the yellow metal further today.
NZD LITTLE-CHANGED
The Kiwi dollar is slightly softer from this time yesterday, now at 59.3 USc. Against the Aussie we are up to 93.2 AUc. Against the euro we are little-changed at 56.4 euro cents. That means the TWI-5 is now at 69.4 and little-changed.
BITCOIN SLIGHTLY FIRMER
The bitcoin price is marginally firmer today, now at US$26,432 and up by a minor +0.8% from this time yesterday. Volatility over the past 24 hours has been modest at just under +/- 1.4%.
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54 Comments
Interesting news from The Warehouse today that Sanitarium will no longer be supplying them with Weetbix, following persuasion from the supermarket duopoly who did not like The Warehouse selling Weetbix for $6 when they sell them for $8 to $9. Surely this is a slam dunk for the new Grocery Commissioner for anti-competitive behaviour? We have heard of these thr#at# to suppliers many times now from the duopoly.
If he wants to be taken seriously, he needs to give out a big fine, to send out a big warnings that he means business. Otherwise he is going to lose the publics confidence. They have had enough prior warnings. If there seriously was a supply shortage on weetbix, then supply should be restricted evenly to all retailers. This should also be an election issue in debates.
What an incredibly dumb thing for the supermarkets to do right now! They are basically forcing the government's hands by doing that.
Self regulation with the constant threat of draconian regulation normally works quite well in other industries. But it looks like the supermarkets have taken the piss and there is no choice other than draconian regulation.
Edit: Just read the article, and it is just conjecture that the duopoly were involved: https://www.stuff.co.nz/business/133024778/sanitarium-drops-weetbix-fro…
I wonder if the duopoly feel its OK to take the piss now with National about to win the election. National did nothing at all in their 9 years to sort out the duopoly and couldn't care less the last time The Warehouse were blocked from selling groceries. I wonder if the duopoly are contributors to the National party?
Ex National MP Katherine Rich was CEO of the Grocery Council since 2009
I don't know about her views on that however I do know that as of a few months ago men are now being mass medicated with folic acid in most bread (excepting organic flour variants) in case their babies are affected by birth defects. Apparently women can't be trusted to check pregnancy medication requirements with their doctor & take the folic acid tablets when pregnant but will happily eat quite a reasonable daily quantity of bread
Folic acid to be added to some bread-making flours from tomorrow | RNZ News
Folic acid fortification of bread | NZ Government (mpi.govt.nz)
News from colleagues about the famed Imperial Hotel in Tokyo is selling part of its land to Mitsui Fudosan for a rebuild project. The land they acquired more than 100 years ago for JPY700k has now turned into JPY62 billion.
12% CAGR over 100 yrs.
https://www.globalconstructionreview.com/tokyos-imperial-hotel-make-way…
Jamie Dimon lets it all out:
“First of all, interest rates went to zero. Going from zero to 2% was almost no increase. Going from zero to 5% caught some people off guard, but no one would have taken 5% out of the realm of possibility. I’m not sure if the world is prepared for 7%. I ask people in business, ‘are you prepared for something like 7%?’”
This scenario, he said, would create stress in financial markets.
“We urge our clients to be prepared for that kind of stress. Warren Buffett says you find out who’s swimming naked when the tide goes out. That will be the tide going out. These 200 basis points will be more painful than the [jump from] 3% to 5%.”
https://fortune.com/2023/09/26/jamie-dimon-jpmorgan-ceo-the-fed-interes…
Fascinating stuff. China is going ape on gold while the West manipulates its price down. We're living in unprecedented times.
The market for bullion in China has surged this month, at times commanding a record premium over international prices of more than $100 an ounce, compared with an average over the past decade of less than $6. On Wednesday, an ounce of gold in Shanghai cost $2,007, about 6% higher than the price in London or New York,
“With the yuan falling, the property market slumping and capital controls keeping money from leaving the country, investors are buying gold,”
The so-called Shanghai premium started rising in June, a response in part to import curbs imposed by the People’s Bank of China, which may have been trying to shore up the value of the yuan by shrinking the need for dollars to buy gold. But now, the currency’s plunge is having the opposite effect, as investors chase dollar-denominated assets to preserve value.
https://finance.yahoo.com/news/chinese-gold-bugs-lift-price-010537829.h…
Costco is selling gold bars. Selling like hot cakes apparently.
- Costco is selling 1 ounce gold PAMP Suisse Lady Fortuna Veriscan bars.
- Costco Chief Financial Officer Richard Galanti said the bars are in hot demand and don’t last long when in stock.
- Gold has risen more than 15% over the past year and more than 55% over the past five years.
https://www.cnbc.com/2023/09/27/costco-is-selling-gold-bars-and-they-ar…
But there are also sharp declines in employment among the 15-19 and 20-24-year-old age groups that has caused annual growth in the under-30 category to turn negative for the first time in over two years.
What a surprise, not. When we've imported 26,500 young people on a working holiday visa, and another 52,000 on student visas with work rights.
But there are also sharp declines in employment among the 15-19 and 20-24-year-old age groups that has caused annual growth in the under-30 category to turn negative for the first time in over two years.
This isn't due to outward migration, it is because unqualified youngsters were last resort hires for many businesses when the labour market was hot, and now that we have a steady flow of migrants again willing to work precarious contracts for minimum wage, they can dump the young kiwis back on the dole queue. Ain't life grand.
The latest data from SEEK shows that the number of applicants per job has soared in New Zealand and has even surpassed the pandemic peak
https://www.macrobusiness.com.au/2023/09/record-immigration-runs-roughshod-over-jobs-market/
Dollar's a wrecking ball again, hitting everything and seemingly everyone (not just China and Japan). But why does the dollar do what it does? Everyone says it's the Fed, but nope. The real engine is eurodollar. https://buff.ly/3RDZM35 Link
Today's Government bond tenders drew 101 bids for the $500 mln on offer attracting $900 mln in bids. For the May 2034 bond, the winning yield was 5.31% and up from 4.77% eight weeks ago.
And yet the interpolated mid IR swap rate, for today's 4.25% 15/05/34 government tender yielding 5.3064%, was - minus 18.77 bps at 5.1187%.
Quite simply, it takes some financial institution’s balance sheet capacity to take on an interest rate swap (the farther the maturity, the more capacity it requires). If balance sheet capacity (the real money in the system, therefore liquidity) is systemically impaired, as in a crisis, or a crisis that doesn’t really end, then to get dealers to give up their precious balance sheet capacity and engage on the other side of a swap someone would have to pay a hefty premium to make it worth it (risk-adjusted) for the dealer to do so. J Snider
Notice that once the Fed expanded its liabilities beyond 16% of GDP, interest rates were reliably driven to zero. They would still be zero today, if not for the fact that the Fed is explicitly paying 5.4% interest to banks and money market funds on everything but the physical dollar bills in your pocket. Rather than targeting the Fed funds rate as Congress intended, through changes in the Fed’s balance sheet, the Fed has shown no concern for restraint, or for keeping its liabilities “commensurate with” GDP. Instead, it’s creating money to pay banks, and has invented an offsetting “asset” (technically, a negative liability) on its balance sheet Link
Its quite simple really. The nature of the NZX (majority of gains comes from companies paying high dividends) makes it a bond proxy, and as Higher for Longer takes hold, the bond market is being smashed. Just wait until Higher Forever kicks in! But whatever you read regarding the bond market you can pretty much apply to the direction of the NZ50. The index is now back at September 2019 levels, undoing all of the Covid gains. Housing market should be following, but you know, lag. lol
This sums up the crap that passes for ‘journalism’ at OneRoof. All rosey, no mention of the big lease issues with that block:
https://www.oneroof.co.nz/news/auckland-apartment-sells-for-less-than-3…
Oil is getting perilously close to US$100/bbl. We will get the first round effects of price increases in the CPI release on 17/10 although it may take 3 to 6 months for the second order (pass through) inflation to get prices in.
Frustratingly a lot of commentary has been around an imaginary "soft landing" but when that data is released I expect that we are actually further away from any "landing" now. We are not an oil producer so any great extent so won't benefit from higher prices.
By the way little New Zealand made the news, all-be-it not for the reasons one may have hoped:
https://www.bloomberg.com/news/articles/2023-09-26/criminals-exploiting…
Alternatively link:
Punching above our weight :)
And this is only the start - years of unravelling to play out - 40 years of cheap money piled up benefiting some people/families and penalising others. NZ deserves whatever it gets for following the monetary herd.
Thanks for the alt link - convenient.
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