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). It's a skinny edition today.
MORTGAGE/LOAN RATE CHANGES
Westpac cut many of its fixed home loan rates today. Details here. Other banks will no doubt follow. Discretionary discounts are active at all banks at present. You just need to ask. For example ANZ's carded 1 year rate of 7.39% can be had for 6.89% for existing customers. But their carded 2 year 6.89% rate can be had for only 6.85% however. No doubt the large 1 year discretion discount will pull back when/if ANZ changes rates next week. But we will all just have to wait and see how this plays out. Separately, Kookmin Bank has cut its 2 to 5 year fixed rates today.
TERM DEPOSIT/SAVINGS RATE CHANGES
Westpac also trimmed a number of term deposit rates as well, generally by more than the mortgage rate cuts. However a few days ago they did raise their 6 and 8 month rates.
FEWER CONSENTED RENOS
The number of homes having major alteration work done is steadily declining. The volume of building consents issued for major dwelling alterations is down -15% over the last two years and from the recent peak in February 2022. The current declines are the most since 2011.
SHOCK FROM ORR?
Economists at our largest bank now say the Reserve Bank could shock in their next two reviews by lifting the Official Cash Rate +50 basis points to 6%. Meanwhile many other economists are backing off their 2024 rate cut predictions, or at least pushing them much further out, as the data that drives the RBNZ's decision-making turns to not support rate cuts.
MORE LOCAL SPACE INFRASTRUCTURE
The new runway at the Tāwhaki National Aerospace Centre near Christchurch opened today. US-based Wisk Aero recently conducted its world-first airspace integration test flights for an uncrewed aircraft from Kaitorete, and Dawn Aerospace and Kea Aerospace will now conduct horizontal space launches and stratospheric flights from the site.
AUSSIE HOUSEHOLDS SPEND LESS
Household spending rose +2.3% in December from a year ago in Australia. This was the smallest growth in household spending since February 2021. But that is before inflation was accounted for. Discretionary spending actually fell -0.6% (also before accounting for inflation). This data highlights how their cost-of-living crisis is affecting them.
AN IMPORTANT CHANGE COMING
We should note that next Wednesday is election day in Indonesia. They will get a new president. Indonesia (the world's fourth largest country by population) rarely features in Kiwi minds. (It should do.) But it does figure large in Australia, and if it matters to Australia, it will end up mattering to us.
SWAP RATES RISE FURTHER
Wholesale swap rates will probably be higher yet again today, perhaps boosted by ANZ's big call. However, the key reaction will come at the close. Our chart below records the final positions. The 90 day bank bill rate is down -1 bp to 5.69%. The Australian 10 year bond yield is up +1 bp at 4.13%. The China 10 year bond rate is little-changed at 2.44%. And the NZ Government 10 year bond rate is up another +4 bps at 4.89% and a one month high, while the earlier RBNZ fixing was at 4.79% and down -2 bps from yesterday. The UST 10 year yield is now at 4.15% and up +5 bps from yesterday. The UST 2yr is at 4.44% and so that key inversion is now just under -30 bps.
EQUITY WINNERS & LOSERS
The S&P500 closed its Thursday session little-changed at 4998 index level. At no time did it touch or breach 5000 however. But the NZX50 is down -0.5% late in its Friday session and heading for a weekly -0.8% retreat. But the ASX is up +0.1% in early afternoon trade, and if it holds that will end their week down -0.6%. Tokyo is up +0.3% at their open heading for a +1.6% rise. Hong Kong has opened its Friday session down -1.7% but is heading for +1.6% weekly rise. Shanghai is on holiday for their Lunar New Year break. Singapore has opened down -0.6%.
OIL PRICES UP
Oil prices are up +US$2 from this time yesterday at just over US$76/bbl in the US while the international Brent price is now just under US$81.50/bbl.
GOLD EASES SLIGHTLY
In early Asian trade, gold is now at US$2034 and down -US$3 from this time yesterday.
NZD FIRM AGAIN
The Kiwi dollar is now just on 61.2 USc and marginally higher than this time yesterday. But it has been volatile in between. Against the Aussie we are up sharply, up +¾c however to at 94.3 AUc. We haven't been this high since May 2023. Against the euro we are holding at 56.8 euro cents. That means the TWI-5 is now at just under 70.5 today and up +10 bps from yesterday.
BITCOIN FALLS BACK
The bitcoin price has fallen back today, now at US$45,361 and down -2.5% from this time yesterday. There's been modest volatility again over the past 24 hours of just on +/- 1.3%.
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54 Comments
I cannot wait to see how TA will spin this as a positive, some of the spruikers on here will just parrot how well the econo0my must be doing for another 2 hikes to be needed. I have heard a few Silverdale engineering businesses say that things have fallen off a cliff since pre xmas....
If the leading bank expects OCR increases this year, and some other banks don't expect the OCR to drop this year, and the messaging from the RB doesn't want banks dropping lending rates, why are banks dropping their interest rates? Isn't the move from the banks to drop rates more likely to lead to more OCR increases and increase inflation? The whole point of the OCR is to bring down inflation, which should mean that people have less money to spend. Banks reducing interest rates means that people have more money to spend.
Yes, but you said it was choking the demand out of the economy, that's not the intent. It's actually rewarding people with money, paying them interest just for holding money. And discouraging people from having no money, or being in debt. This encourages people to hold money, thus they value it more, thus inflation goes down.
3) Improves the currency to make imported goods cheaper
Not necessarily. Using System 1 thinking, you are correct.
1. Remember the GFC when AUD and NZD got smashed against JPY despite a favorable interest rate differential.
2. Economies with high-cost structures like Nu Zillun cannot bank on cheaper imports but the fact that prices need to be higher for commercial viability.
As I said, not necessarily. It's a fair assumption to make. But it's not some kind of watertight cause-effect phenomenon.
For the same reasoning, you would argue JPY should never be strong relative to high-yield currencies. But if capital started flowing back to Japan, you could imagine JPY would strengthen dramatically as a leading creditor nation.
If the Japanese increased their cash rate, wouldn’t that increase cash flows back to Japan and increase their currency?
It’s all relative. You could increase your cash rate and have currency go backwards, but that backwards is likely to do with your economy not doing so good, and you would have gone more backwards without the increase.
Buy yes none of those things are guaranteed to happen.
Western media now insinuating China is to blame for putting the Anglosphere property market at risk of being flushed down the toilet. So we blame China because of our silly valuations on banks' balance sheets?
The Global Tremors From China’s Real Estate Crisis Are Only Just Starting
- Overseas developments from Mayfair to Toronto hit the market
- Discount prices could force a reassessment of industry losses
Chinese investors and their creditors are putting up “For Sale” signs on real estate holdings across the globe as the need to raise cash amid a deepening property crisis at home trumps the risks of offloading into a falling market. The prices they get will help finally put hard numbers on just how much trouble the wider industry is in.
https://www.bloomberg.com/news/articles/2024-02-09/china-s-real-estate-…
Harris is unelectable. That is demonstrated in part by Biden being pulled out of the ditch in 2020 when the Dems finally realised none of the others were electable. Yet regardless of that dawning, they selected Harris as Vice President, and now four years later, she is even more unelectable.
Musings on gold via Bloomie Intelligence:
Gold may be on a sounder footing than before the GFC. At the start of 2008, the per ounce price of the metal was around a 30% discount to the S&P 500 and US nominal debt was about 40% below GDP.
Though both gold and the S&P 500 have been flirting with record highs, gold is around a 60% discount to the stock market and US debt exceeds GDP by more than 20%.
Relative to the benchmark measure of risk-asset beta, this represents the lowest gold price since 2005.
It took US government deficit spending of about $2.65 trillion in 2023 for nominal GDP growth around $1.53 trillion. This may mean strengthening tailwinds for gold. The sharp rise in deficit spending, on the back of the GFC helped the metal breach $1,000-an-ounce resistance at the start of 2009. We see parallels around $2,000 now.
So basically gold has done badly so now it must do well? Or maybe it’s just been replaced by criminals with Bitcoin.
It's Bloomberg Intelligence using their own analytical parameters. But you have a point, has ratty become the go-to asset for wealth preservation? Too early to tell IMO but the idea does resonate to some extent. Given than central banks are increasing gold purchases, it could be that the gold price has been suppressed by the likes of vested interests such as JPM through derivative instruments.
A little off topic but it is in the news today. What is the non story about Mark Mitchell and Coster being polite to each other all about? It is quite normal in the private sector to disagree over business but still wish people a happy Christmas and congratulate people on a new job. No wonder labour had bullying issues if they think you have to be unpleasant to everyone who disagrees with you.
From todays Kiwiblog, summing it up well
"Hugh Jarse
Re Coster and Mitchell’s texts conversations. It seems beyond the experience of the angst ridden teenage girls in the media that two older white males who have to work together while perhaps not particularly liking each other can be polite and professional in their communication. They seem to judge everyone by their own limited experience and inter personal tools. Pathetic"
Sydney's more popular and well-known eateries are doing it tough.
"....data from the Australian Securities and Investments Commission shows that insolvency claims in the accommodation and food services sector surging by 92 per cent in the December quarter compared to the same period in 2022."
https://www.smh.com.au/goodfood/sydney-eating-out/popular-crown-street-…
Random question, do you guys think a notable contribution to current inflation is simply due to rising nihilism as a result of cost of living and property being out of reach for a large percentage of the population? I imagine a growing percentage of people are spending money they would have otherwise put aside for their first home or who would already own a home and be paying off a mortgage with that money instead.
Takes a decent amount of discipline to not spend money leftover from renting especially if owning a house seems out of reach in the short to medium term.
As a young person this is absolutely true, I know people who literally gave up in 2021 and spent their deposits on other things. Other friends aren't even trying to save, presumably just waiting for a housing crash or inheritance, whichever comes first. Actually working and saving your way to success seems almost impossible to gen z.
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