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
No changes to report today.
TERM DEPOSIT/SAVINGS RATE CHANGES
No changes here either.
IT'S GOING TO GET TOUGH
The services sector has followed the factory sector into contraction. BNZ says that "is bad news for both near term growth and employment in New Zealand. The composite index that we derive by combining the two performance indicators is consistent with the economy reaching a maximum annual contraction of around 2.0%. We are not nearly that pessimistic but can envisage a trough approaching -1.0% by mid-2024."
NOT THAT CONFIDENT
Employment confidence hardly changed in December from September in the Westpac-McDermott-Miller survey. It is still at the bottom of the range of the post-GFC to pre-Covid period, and miles lower than its pre-GFC range. Workers think job options are now more limited and it is harder to get one; they worry that the jobless rate is about to rise. But they have been positive about the 2023 rise in earnings.
RBNZ WANTS TO CHANGE HOME LOAN GUARDRAILS
The RBNZ wants to loosen loan-to-value ratio restrictions and introduce debt-to-income restrictions on banks' mortgage lending.
RATINGS ACTION
Credit rating agency Fitch has been reviewing some non-bank financial institutions. It held NBS (Nelson Building Society) at BB+ but trimmed its outlook from 'Positive' to 'Stable. However, it cut Unity Money's rating from BB to B and changed their outlook to 'Negative'. Unity got somewhat trapped in a foray into personal loans, and is now working to revert from this mistake. A list of all non-bank credit ratings is here. What the rating codes mean is here.
FEAR OF THE FUTURE
Farmers have shelved their spending plans. One indication is that there were only 155 tractors registered in December and that is the lowest December in more than a quarter of a century. Over those 25 years the average December was 211 sales, so December 2023 is -26% lower than that. Apart from April 2020 and that month's lockdown, December 2023 sales are the lowest of any month since April 2017 (and a tax-induced change).
MOVING FORWARD WITH A FINCO
Former senior ANZ executive Fred Ohlsson is the new Chief Executive of fast growing finance company Avanti Finance.
THE MONEY & DRIVE IS THERE FOR MORE RENEWABLES
Businesses are committing the funds. A report commissioned by the Electricity Authority shows the amount of new renewable electricity generation that has been committed has almost doubled in 18 months. The Generation Investment Survey released today shows that there is now, based on annual output once built, 5,000 Gigawatt hours (GWh) of new generation committed. This is up from 2,600 GWh from the previous survey in July 2022. The majority of the new committed investments are geothermal, solar or wind projects.
LESS NEGATIVE
Australia's NAB business confidence index climbed (?) to -1 in December from a downwardly revised -8 in the prior month. It was the third straight month of negative readings but the softest figure in the sequence, supported by a pick-up in the mining and retail sectors.
A FORECLOSURE PROBLEM
In China, newly released data for 2023 shows that foreclosures in the residential market jumped at lot from 2022, up more than +35%. There were 796,000 foreclosure auctions monitored nationwide in 2023 and 389,000 were for residential units. Non-auction foreclosures will be on top of that. (For perspective, there were 357,000 residential properties "entering the foreclosure process" in the US in 2023. About 270,000 were actually foreclosed. This was little-changed from 2022. If the US foreclosure-to-dwelling rate applied in New Zealand we would have had 5,150 in 2023, and clearly we had far, far less than that.)
PASSING MUSTER
The EU has determined that New Zealand has an "adequate" level of protection for personal data transferred from the European Union. Essentially ‘adequacy’ says that our legislation isn’t the same as Europe’s, but its outcomes are similar and can be trusted. The EU has turned into the global privacy cop - for small countries at least. But someone needs to stand up to the bad global actors.
SWAPS HOLD
Wholesale swap rates will probably be little-changed again today. However, the key reaction will come at the close. Our chart below records the final positions. The 90 day bank bill rate is unchanged again at 5.65%. The Australian 10 year bond yield is down -8 bps at 4.22%. The China 10 year bond rate is little-changed at 2.51%. And the NZ Government 10 year bond rate is down -6 bps at 4.73%, while the earlier RBNZ fixing was at 4.70% and down -5 bps from yesterday. The UST 10 year yield is now at 4.10% and down a mere -1 bp from yesterday. The UST 2yr is at 4.39% and unchanged, so that inversion is now out slightly to -29 bps.
EQUITY WINNERS & LOSERS
The NZX50 is up +0.5% in late trade following global market enthusiasm. The ASX200 is up +0.4% in afternoon trade. Tokyo is up +0.7% in morning trade to yet another new recent high. Hong Kong has recovered +0.5%. Shanghai however is down -0.8% at its open. Singapore has opened unchanged. In New York, the S&P500 ended its Monday session up +0.2%.
OIL RISES
Oil prices are up +US$1.50 from this morning at just on US$74.50/bbl in the US while the international Brent price is now just over US$79.50/bbl.
GOLD LOWER
In early Asian trade, gold is now at US$2020/oz and down -US$10 from this time yesterday. It closed earlier in London at US$2029/oz.
NZD FALLS
The Kiwi dollar is now under 60.8 USc and down -½c from this time yesterday. Against the Aussie we are down -40 bps at 92.4 AUc. Against the euro we are -30 bps lower at 55.9 euro cents. That means the TWI-5 is now at just 69.6 and down -40 bps.
BITCOIN DROPS
The bitcoin price has moved down today to US$39,718 and down -4.1% from where we were this time yesterday. There's been moderate volatility over the past 24 hours of just over +/- 2.5%.
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67 Comments
IT'S GOING TO GET TOUGH
The services sector has followed the factory sector into contraction. BNZ says that "is bad news for both near term growth and employment in New Zealand.
Yet, so many on this site (wishfully?) believe that high interest rates will only hurt those with debt… Oh, how wrong they are!
And it will be really tough in the regions as farmers put the cheque book away in the bottom drawer - those I know, including family, have definitely put capital expenditure on hold.
Many are forecasting significant losses this year despite the weather being generally kind
The RBNZ wants to loosen loan-to-value ratio restrictions and introduce debt-to-income restrictions on banks' mortgage lending.
As I have noted many times before:
Banks have migrated away from lending to productive business enterprises because the risk weights can be as high as 150%. Thus around 60% of NZ bank lending is dedicated to residential property mortgages owed by one third of already wealthy households
Chinese officials are considering a market rescue package in the order of $280B. Markets are responding. Plenty of cheers around the water cooler when I mentioned it.
Chinese authorities are considering a package of measures to stabilize the slumping stock market, according to people familiar with the matter, after earlier attempts to restore investor confidence fell short and prompted Premier Li Qiang to call for “forceful” steps.
https://www.bloomberg.com/news/articles/2024-01-23/china-mulls-stock-ma…
Zespri CEO Dan Mathieson calls it a day. Moving to greener pastures (no pun intended) and the lucrative cherry business (out of North America).
Chinese gold varieties now making their mark in China and across South-East Asia. Wonder if that had anything to do with Dan's decisions.
https://www.just-food.com/news/zespri-ceo-dan-mathieson-to-leave-kiwifr…
Businesses are committing the funds. A report commissioned by the Electricity Authority shows the amount of new renewable electricity generation that has been committed has almost doubled in 18 months.
OIL AND GAS ARE NOT "FOSSIL FUELS" THEY ARE A RENEWABLE ENERGY SOURCE CREATED BY A GEOTHERMAL REACTION BETWEEN THE SOLID MANTLE & LIQUID CORE: 'Abiogenic Deep Origin of Hydrocarbons and Oil and Gas Deposits Formation' Link
Pretty desperate argument. I guess we will have to come up with some new definition to cover it . Short term stored carbon vs long term stored carbon , or something like that .
The key point is the addition of carbon to the atmosphere, not where the carbon originated from. .
It doesn't matter - they're not renewable for millions of years.
Although you missed a crucial point - "renewable electricity committed" - meaning MW installed capacity. Capacity factors are atrocious on solar and wind, meaning that all that generation capacity must be taken with a grain of salt. While I'm writing this, solar is generating 12MW from 24MW installed (50%) and wind 867MW from 1259MW installed (68.8%). However, tomorrow wind might generate <20MW as I've seen many times and solar might generate 0MW.
At some point EA must realise that 100% renewable is an incredibly wasteful endeavour, especially when you consider that the ~15% of remaining non-renewable generation is a drop in the bucket when compared to CO2e from process heat and transport. Do we want to be left with blackouts and unreliable power as a result of intermittent, or do we want to plan ahead by building resilient hydro, gas, and geothermal plants?
You might want to go back and read what you are commenting on. The figures above are GWh of annual generation not GW of installed capacity, rendering your entire speil null and void.
Anybody with half a clue would have spotted the units, or queried the magnitude. 5000GW would be roughly our entire installed hydro nameplate capacity.
My bad - I read the comment and figured that generation committed would be in MW as that's usually the unit which gets more clicks on headlines. Quite stupid to be fair, I should've been more careful.
The point still stands that wind in the middle of the night or even worse - solar at midday - is not as useful for the market as stable, consistent generation which can switch on and off at the whim of a grid operator. Thankfully I was wrong and reading the report showed that just over half was geothermal. Actively pursued projects paint a grim picture with 90% of annual generation being solar and wind, but maybe they were all relying on the now-cancelled Lake Onslow scheme and will adapt to market conditions.
Aussie government starts snooping around the major supermarket chains and all of the sudden red meat prices drop 20% and hundreds of grocery lines are on deep cut promotional activity. Let's hope its not groups down the supply chain paying for all this. This type of price action should have been taken well before the Government called for a review. Not the best look for major chains.
https://www.afr.com/companies/retail/woolworths-slashes-meat-prices-as-…
A great time to do it now that Countdown is being rebranded. Tell Progressive to save money by only rebranding half their stores, then split it into to two. Then also split foodstuffs into two (New World and Pak and Save). And split the wholesale parts off. All of a sudden a much more competitive market.
There have been comments over the last few days about businesses failing, jobs lost and the reasons beyond the control of the business owner. My view is that if businesses are barely scraping by when the times are good then they are highly likely to fail at some point when there is a downturn. Those who were managing reasonably well are could also fail in a bad downtown. This leads to job failure and is the nature of the business beast.
I have never owned or run a business and have no wish to but I have a feeling for business. I understand one of the top reasons for failure are debtors.
There is a statement that business can't control certain external events but that is the risk you take when you enter business. Unfortunately employees are collateral damage.
Civil servants loosing their jobs could also be attributed to over hiring which generally appears to be the case under the former govt so it can be expected that a number will loose their jobs.
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