A review of things you need to know before you sign off on Wednesday; infrastructure funding catch-up, housing confidence 'complicated', business confidence 'grim', swap rates rise again, NZD eases, & 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
None here today, so far.

TERM DEPOSIT/SAVINGS RATE CHANGES
The Co-operative Bank raised its 6.10% nine month rate to 6.15%, effective Friday.

THE COST OF CATCHING UP
Higher power bills are coming to pay for electricity grid investment. The Commerce Commission tentatively approved Transpower and local lines company revenue increases to cater for growth and ageing asset replacements. The position is out for consultation.

RIDING A WHITE SWELL
Fonterra says it is targeting $8/kgMS 'midpoint' farmgate milk price for the upcoming season. It is picking a slightly higher milk price for the coming season, while increasing its earnings forecast for the current financial year. It also advised it is getting a 'high volume of interest' in the potential sale of its consumer brands. Today's update came as the overnightGDT Pulse milk powder auction brought mixed results for the 1652 tonnes of product offered by Fonterra. SMP slipped -1.1% from last week's full auction event but WMP rose +0.4%.

RATE CUTS EXPECTED, BUT STILL NOT BUYING
ASB's latest Housing Confidence Survey paints a 'complicated picture'. This updated survey shows more people are expecting interest rates to fall but they remain uncertain about prices and whether it's a good time to buy.

MARKET SITUATION PIQUES INVESTOR INTEREST
Latest Reserve Bank mortgage figures show while housing investors are not exactly piling back into the market, they are at least starting to sit up and pay attention. They now take the biggest slice of monthly new mortgages written in three years.

OLDER, MORE DIVERSE, MORE NORTHERLY
Stats NZ has started releasing the 2023 Census data. Today's release is about overall population changes. Since the 2018 Census our population has grown by almost 300,000 people, three out of four New Zealanders live in the North Island, Selwyn and Queenstown are still the fastest growing territorial authorities, almost 1 million New Zealanders were of Māori descent at the time of the 2023 Census, the population continues to age, and the population continues to diversify.

HOUSE-BUILDING RISES FASTER THAN POPULATION
The same Census data shows that in the period between the two censuses, the building of dwelling rose at a much faster rate than population growth, a somewhat unexpected result. If that trend keeps up, it will be hard for house prices to rise.

SOFTNESS EASES INFLATION PRESSURE
ANZ economists say their latest Business Outlook Survey 'makes for grim reading' but is encouraging for the Reserve Bank in its inflation battle. Business confidence may be down but so are inflation expectations.

MORE DRY POWDER, BUT STILL ONLY A SMALL PILE
You may recall that the RBNZ's foreign currency intervention capacity (F5) rose to a record-high $20.7 bln in March. In April it rose again but more modestly, now to $21 bln. But they could not take on the market to defend the NZD with that (just over US$12 bln) as that is the size of a war-chest for only one smallish international investment bank, and there are dozens of large ones out there. But perhaps it might be useful in a confidential 'nudge' strategy. Not market moving, rather 'encouraging a useful trend'.

BACK-SLIDING
In April 2023, Australia's monthly inflation indicator was rising at a 6.7% rate. One year later it is down to just 3.6%. But unfortunately the headlines feature its rise from March when it was at 3.5% and the three prior months at 3.4%. Insurance and foods costs are the main culprits. An up-trend is being sensed and that probably means the RBA may have to double-down on its inflation-fighting pressure. This just adds to the international sense that getting inflation back to the mid-point of the various target rates is hard, and keeping it there even harder. Don't expect central banks to throw in the towel on their core mandate.

AUSSIE CONSTRUCTION ACTIVITY SAGS QUICKLY
Meanwhile, construction completed in Australia is sagging, and in some sectors quite fast. In the March quarter total construction work done fell -2.9% to AU$64 bln to be just +1.2% higher than a year ago. In the quarter building work done fell -3.7% and engineering work done fell -2.1%.

IAG DEFENDING CLASS ACTION LAWSUIT BASED ON ASIC CLAIM
In Australia, well-known "ambulance-chasing" listed law firm Slater & Gordon is suing IAG in a class action based on ASIC accusations two subsidiaries of the insurer duded some clients of discounts they were entitled to. IAG said in August 2023, the subsidiaries IAL and IMA are defending the ASIC proceedings. IAL and IMA maintain they have delivered on loyalty promises made to customers and do not agree that they have misled customers about the extent of the discounts they would receive.

YUAN WEAKENS
In China, the yuan is trading at a six-month low against the dollar at 7.25, highlighting the divergent monetary policies of the world's two biggest economies. Authorities in Beijing are trying to speed things up from a weak base. In the US they are trying to slow things down from a very long expansion that just won't give in.

TARGET LOCKED IN
And staying in China, the IMF revised their GDP growth outlook to 5% for 2024 and 4.5% for 2025, both 0.4 of a percentage point higher than its April projections. The upgrades reflect strong first-quarter results and recent policy measures. In the first quarter, GDP grew 5.3%, keeping China on track to meet its growth target of "around 5%" this year.

SWAP RATES RISE
Given the day's theme is that inflation isn't beaten yet, it will be no surprise to see rates generally rising, internationally. Wholesale swap rates are likely to be higher at the long end again (+10 bps ?) but maybe less of a rise at the short end. Our chart below will record the final positions. The 90 day bank bill rate is still unchanged at 5.63%, a level it has hovered around for more than 70+ days. The Australian 10 year bond yield is up +15 bps to 4.46%. The China 10 year bond rate is now at 2.30% and down -2 bps. The NZ Government 10 year bond rate is up +7 bps at 4.96% from yesterday and the earlier RBNZ fix was at 4.88% and up +9 bps from yesterday. The UST 10yr yield is up +10 bps from yesterday at 4.56%. Their 2yr is now at 4.96%, so the curve has shifted to -40 bps inverted.

EQUITY STRUGGLE FOR DIRECTION
The NZX50 is little-changed in late Wednesday trade, giving up some early session gains. The ASX200 is down -1.1% in afternoon trade and knocked by that inflation data. Tokyo has opened down a minor -0.1%. But Hong Kong is down a full -1.5%, while Shanghai is up +0.3%. Singapore is unchanged at its open. Wall Street ended its Tuesday trade essentially unchanged on the S&P500, blocked from any gain by inflation concerns.

OIL FIRMS AGAIN
The oil price is +US$1.50 higher from this time yesterday, now just on US$80/bbl in the US, while now also at just on US$84/bbl for the international Brent price.

GOLD BASICALLY HOLDS
In early Asian trade, gold has risen by another +US$2 from this time yesterday, now at US$2358/oz.

NZD EASES
The Kiwi dollar has eased back almost -+¼c to 61.4 USc today. Against the Aussie we are similarly soft at 92.4 AUc. Against the euro we are have eased slightly at 56.6 euro cents. This all means the TWI-5 is now back at 70.6 where we were at the start of the week..

BITCOIN SLIPS
The bitcoin price has slipped today, now to US$68,445 which is down -1.2% from this time yesterday. Volatility of the past 24 hours has been modest, also at +/- 1.2%.

This soil moisture chart is animated here.

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