A review of things you need to know before you sign off on Monday; services PMI expanding, some big corporate stumbles, Fonterra consolidates, Rio Tinto on back foot, swaps gold, 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). It's a skinny edition today.

MORTGAGE/LOAN RATE CHANGES
No changes today.

TERM DEPOSIT/SAVINGS RATE CHANGES
None here either.

SERVICES TO THE RESCUE
Probably surprising some, the BNZ-BusinessNZ services PMI expanded solidly in January on the back of a pick-up in new orders. This is in quite a contrast to the factory PMI which is contracting.

NO SWEAT
Latest quarterly Reserve Bank figures show ahead of the likely introduction of debt-to-income restrictions in the middle of the year, most new borrowers are currently well below the proposed lending limits to be imposed on banks.

HUNT FOR VALUE AMID TIGHTER BUDGETS
NZ Post conducts online retail research. Their Q4-2023 report found the single most important driver of spending levels was the sharp increase in transactions. There were just over 16 mln transactions in the quarter, an impressive +2.4 mln more (+17%) than in the same period the prior year. Although shoppers were buying more often, the average value of the quarter’s transactions was -$12 less (-11% lower) than a year ago, down to about $100. This was the third consecutive quarter where we saw online transactions grow and the online average basket size fall, compared to the same quarter in 2022.

TURBULENCE AHEAD
Our national airline has announced profit guidance that suggests the second half of the current financial year is proving to be a very bumpy one. Profits will be scarce, they warn.

DOWNGRADE COMING I
Fletcher Building says it has been notified that credit rating agency Moody’s has placed the Company’s credit rating of Baa2 and medium-term note program rating of Baa2 on review for downgrade from an outlook of stable. The current level is only two notches above junk grade.

DOWNGRADE COMING II
Ryman Healthcare also flagged lower earnings today on lower demand and lower margins. Potential residents seem to be negotiating much better deals.

A2 MILK RECOVERING STRONGLY
It isn't all negative on the NZX50. A2 Milk has reported that both its China and US strategies are paying off. Sales are up less than 4%, but profit rose +15%. Investors are bidding its price up on the improved outlook. (These gains are unlikely to be reflected in similar gains at Synlait Milk, its one-time close partner - but no more.)

INTEGRATING
Fonterra said it is combining Fonterra Brands New Zealand and Fonterra Australia, effective May 1, 2024. Local brands Anchor, Mainland and Kāpiti, will continue to utilise New Zealand milk. The Australian milk pool will continue to provide the milk solids for their Australian brands and ingredients..

POPULATION POLICY COMING?
Immigration Minister Erica Stanford said she will tighten visa rules and create a long term population plan. More here and here.

SHOE ON OTHER FOOT
Both Meridian Energy (the main one) and Contact Energy (the secondary one) are renegotiating electricity supply agreements with NZAS, the Tiwai Point aluminium smelter. (Aluminium is basically solid electricity.) Given its green credentials, the NZAS facility is likely to stay. The two electricity suppliers are expecting a new agreement to be long-term, "at a fair price materially above the current pricing", and "including demand response". Rio Tinto (the 80% owner) no longer has the upper hand. Perhaps the Government should get back its previous subsidies?

BOUNCEBACK, SORT OF
Japanese machinery orders bounced back in December after a terrible November. They came in better that expected (+2.7% vs +2.5%) but nowhere near enough to make up for that November -4.9% fall.

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 unchanged at 5.71%. The Australian 10 year bond yield is down -2 bps at 4.20%. The China 10 year bond rate is unchanged at 2.45% and holding after the holiday. And the NZ Government 10 year bond rate is up +2 bps to 4.94%, while the earlier RBNZ fixing was at 4.86% and up +5 bps from Friday. The UST 10 year yield is now at 4.29% and up +1 bp from this morning. The UST 2yr is now down to 4.64% and so that key inversion is little-changed at -35 bps.

EQUITY WINNERS & LOSERS
The NZX50 has opened the week down -0.2% in late trade. The ASX200 is up almost +0.3% in afternoon trade. Tokyo has opened its Monday trade little-changed. Hong Kong is down a full -1.0%. Shanghai however has opened after their week-long break up +0.3%. (Over the same timeframe, Hong Kong is up a net +1.3%.) Singapore has opened unchanged. The US is on a long holiday weekend and Wall Street will be closed until Wednesday NZT. The S&P500 futures suggests it will re-open then with a +0.5% gain. But there is still some time to go before then.

FBU MADE IT A BAD WEEK
Fletcher Building -7% dive took the breath out of the NZX50 last week. It wasn't the only big decliner, but there were also some notable gainers too. More here.

OIL STABLE
Oil prices are down -50 USc at US$78/bbl in the US while the international Brent price is holding at just under US$82.50/bbl.

GOLD MOVES UP
In early Asian trade, gold is now at US$2020/oz and up +US$7 from this morning.

NZD FIRM
The Kiwi dollar has risen slightly from where we were this morning, now at 61.4 USc and up +20 bps. Against the Aussie we have firmed to 93.8 AUc, a -30 bps slip. Against the euro we are also firmisah at 56.9 euro cents. That means the TWI-5 is now at just under 71 today after a +20 bps gain.

BITCOIN ESSENTIALLY STILL ON HOLD
The bitcoin price has moved up a little today, now at US$52,199 and up +0.8% from this morning's open. There's been high modest over the past 24 hours of just on +/- 1.1%.

This soil moisture chart is animated here.

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