A review of things you need to know before you sign off on Wednesday; no retail rate changes, business confidence up, TDs very popular, dairy prices rise, house lending up, swaps unchanged, NZD firm, & 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
Unity Money revised its personal loan rates today.

TERM DEPOSIT/SAVINGS RATE CHANGES
None here either.

PAIN WE HAD TO ENDURE
Business confidence improved slightly in January and to quite good levels levels. In fact, to its highest in nearly ten years. The ANZ latest Business Outlook survey shows cost and price expectations are still holding up. 'Overall, businesses expect the worst is past. Although the medicine has been bitter, it’s working', says ANZ.

MORE CONFIDENT
Retailers are feeling more confident as they head into 2024, according to the latest Retail Radar quarterly survey of Retail NZ members.

A WEAK YEAR
Farm and lifestyle block sales were down in the dumps in 2023 with farm sales were down -32% last year, lifestyle block sales down a lesser (still large) -20% over the year.

SIGNS OF STIRRING DEMAND
Log prices are still largely stable in January, although there are some early signs that demand in both China and India is rising.

UNINTENDED CONSEQUENCE (?)
One large accountants industry group, Chartered Accountants Australia and New Zealand (CA ANZ) , is pointing out that after the shift to a 39% tax rate for trusts, almost 90% of trusts will be taxes at a rate that wouldn't apply if this rule wasn't in place and they were taxed like an individual or company.

BANK LENDING FOCUS DOESN'T SHIFT AWAY FROM HOUSES
The December RBNZ data shows home loans rose to $356 bln, a rise of +$1.3 bln in December alone, the fastest single month rise in 19 months, since May 2022. But lending growth to productive enterprises (business and rural) was minimal, as usual (sadly). There are lots of reasons for that, not the least being the regulatory capital backup rules require much less for housing than businesses.

TDs STILL INCREASINGLY POPULAR
Households seem to have stopped running down their transaction accounts at banks because December was the first month since May 2022 they didn't decline. But they did add another +$1.7 bln to their bank term deposit balances in December, taking them to a new record high of just under $127 bln and almost certainly incentivised by circa 6% interest rates. In 2023 overall households added $13.4 bln to their term deposit balances, +16% more than in 2022. As at the end of 2023 52.5% of household bank balances were in term deposits. This is far from a record. In 2019 pre-pandemic it was 57%. If we got back to that level another $11 bln would flow into TDs. Overall TD balances at December 31, 2023 were 52% higher than in December 2021, two years ago.

ON THE MOVE UP
There were some limited interim dairy auctions last night in the GDT Pulse program. WMP prices rose +1.1% from a week ago to be +10.7% higher than at the start of December. SMP prices rose a minor +0.3% to be +5.4% higher over the same longer period.

GOING NOWHERE
For the record, we should note that local carbon prices are flat-lining, now at $71.50/tonne. They first hit that level in August 2023 and have hardly budged since. And we can note that EU carbon prices are falling now, down to €65.75/tonne. These peaked on March 2023 at €105/tonne, so a major backslide there. The price mechanism for polluters to 'pay' (salve their conscience) for polluting isn't working - probably because the cost of oil and gas is falling sharply, and coal too. In inflation-adjusted terms, fossil fuels are very cheap now. Energy intensity changes and efficiency gains are driving price signals, not the cost of carbon offsets. The corporate world has chosen to decarbonise, reducing demand for both fossil fuels and carbon offsets. Ironically, a warmer planet also has reduced the demand for heating energy.

ON THE MOVE LOWER
As regular readers will know, we monitor grocery prices every week in an independent review. (Infometrics monitors the prices Foodstuffs pays suppliers, StatsNZ monitors overall prices.) Our process monitors a stable basket of 'healthy foods' for one. And that now shows that last week's prices are -1.8% lower that in the same week a year go. This time last year, that monitoring showed a +19.6% rise over the prior year. Since the recent trough in January 2021, this monitoring reveals a +35% rise, so the recent dip is minor in comparison. But at least we are starting to see the heat go out of the rises even if prices aren't reverting to pre-pandemic levels.

FAST PROGRESS
Australia's inflation rate came in lower than expected at the end of 2023. The quarterly CPI was 4.1% from a year ago (a two year low) and well below the 5.4% in Q3-2023. Markets expected 4.3%. And their Monthly Inflation Indicator for December alone came in at 3.4%, a big drop from 4.3% in November and well below the expected 3.7% analysts were expecting. Both are substantial shift lower and paint a picture of fast-easing price pressures.

A BIG PAY CUT
Elon Musk, the world's richest person, answers to no-one. He has even tied regulatory agencies of the US Government in legal knots. But he got a comeuppance today in a Delaware court, one that threw out his self-written pay deal at Tesla (after a shareholder challenge). Here is the judgement. It's worth a read, especially the first few pages. (It is also interesting to see two of the seven members of his patsy board are Aussies.) Musk is no longer the world's richest person.

CHINA BECALMED
China's official PMIs for January were out today. The factory PMI was unchanged at 49.2 maintaining the December contraction. It was their fourth consecutive month of decline and the ninth in the past ten months. Their services PMI expanded slightly more than in December at 50.9 and up from 50.4. Their services sector has never slipped into contraction in these official survey. So overall these surveys record a slight expansion in January.

CHINA REGIONAL BANK RISKS BRING SUDDEN MERGERS
Earlier today, China moved to merge more than 2,100 rural banks with about NZ$11 tln in loans (assets) in a move to contain grow8ing financial risks. These banks have been hit by by bad loans, shrinking margin, and slowing growth.

JAPAN SOFTENS MARKETS UP FOR RATE RISE
Meeting notes from the last Bank of Japan review shows that more members are coming to the view that they need to shift their unusually low rate up soon. This will be a very big deal when it happens.

UNCONSCIONABLE CONDUCT
In Australia, the Federal Court has declared that Westpac engaged in unconscionable conduct in October 2016 when executing a AU$12 bln interest rate swap transaction, the largest of its kind in Australian financial market history. It did pre-hedging ahead of an interest rate swap transaction with some large customers. Westpac will pay a fine of AU$1.8 mln as a penalty and reimburse ASIC $8 mln for its investigation costs and litigation costs. No one will go to jail though, and the costs of the behaviour are a rounding error compared to Westpac's profits. Lessons are probably not learned here.

SWAP RATES 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 up +1 bp at 5.67%. The Australian 10 year bond yield is down another -7 bps at 4.09%. The China 10 year bond rate is down a further -4 bps at 2.49% and a 20 year low with a sharp daily fall. And the NZ Government 10 year bond rate is down -6 bps at 4.75%, while the earlier RBNZ fixing was at 4.66% and unchanged from yesterday. The UST 10 year yield is now at 4.02% and down -6 bps from this time yesterday. The UST 2yr is at 4.32% and so that key inversion is out to -30 bps now.

EQUITY WINNERS & LOSERS
The NZX50 is down -0.6% in late trade today. The ASX200 is up another +0.3% in early afternoon trade, no doubt helped by the sharply lower CPI and the expectation the RBA cust might come in 2024. Tokyo has opened down -0.8% in early trade. But Hong Kong has opened down -0.3% at its open and that has been matched in Shanghai in their opening trade today. Singapore is up +0.3% at its open. The S&P500 closed on Wall Street in Tuesday trade essentially unchanged.

OIL FIRM
Oil prices are up +50 USc from yesterday at just over US$77.50/bbl in the US while the international Brent price is now just under US$82.50/bbl.

GOLD FIRMS FURTHER
In early Asian trade, gold is now at US$2036 and up another +US$5 from this time yesterday.

NZD FIRMER
The Kiwi dollar is now just on 61.3 USc and little-changed from yesterday at this time. Against the Aussie we are nearly +½c firmer at 92.7 AUc as the Aussie sank after their CPI data release. Against the euro we are still at 56.5 euro cents. That means the TWI-5 is now at just over 70.4 today and up a bit more than +10 bps.

BITCOIN HESITATES
The bitcoin price eased -1.2% today, down to US$42,965 and breaking the recent run of rises. There's been modest volatility over the past 24 hours of just over +/- 1.3%.

This soil moisture chart is animated here.

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