Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
SBS Bank trimmed some key rates to a market-leading 3.78%.
TERM DEPOSIT RATE CHANGES
Both Westpac and Kiwibank cut a range of TD rates today. Details here. Revised rates from Christian Savings are mostly lower.
WHERE RATES ARE HEADING
Kiwibank economists are now predicting a 'terminal' Official Cash Rate by next year of 0.75%, but also put some possibility on the rate going to 0.5%. And there is more here.
DECELERATING
New car sales were flat in July, down -1.4% from the same month in 2018 and continuing a trend of falling year-on-year outcomes that now stretches to nine of the past eleven months. SUV sales were also soft, and represented just over 65% of all car sales and the lowest share for any month in 2019. Commercial vehicle sales were much weaker, down -7.3% year-on-year. The vehicle market has been retreating overall since its high point in August 2018.
UNDER PRESSURE
The ANZ World Commodity Price Index fell -1.4% month-on-month in July. The recent fall in forestry prices weighed on the index, with dairy price movements also negative. The index has weakened by -0.5% in the past year.
NOT GLITTERING
Retail investors bought only 210 tonnes of gold in the June quarter, the lowest level in four years and the second lowest quarter in almost ten years. Gold sales for jewelry were pretty flat too, as Chinese demand sags. This data is all from the World Gold Council. ETF demand is also very average. Meanwhile, supply is relatively strong with mine and scrap channels still pushing product through at a solid clip. The only place where demand is good is from pariah governments, with their central banks buying 224 tonnes in the June quarter and close to the September 2018 high (it's been about half that level in-between times).
BLOODBATH BREWING?
Equity markets have opened this week sharply lower. The NZX50 is down -0.7% so far today. The ASX is down -1.1%. Shanghai has opened -0.5% lower, while across the thin border Hong Kong is down a massive -2.4% and Tokyo is also down -2.4%. Hold on to your hats for Wall Street and European markets tonight.
XI GIVES TRUMP THE FINGERS
At its official fix today the Chinese yuan went above the psychological barrier of 7 to the US dollar. Now wait for the Americans to whine. But they really have little basis to do so having wrecked both their trade relationship and the influence they once might have had, by using cheap bully tactics.
SWAP RATES SINK
Wholesale swap rates are down another -3 bps so far today and across the curve. The 90-day bank bill rate has slipped another -3 bps to 1.43%. Australian swap rates are also a little softer today ahead of a no-change rate review expected tomorrow. The Aussie Govt 10yr is down -5 bps to 1.04%. (This is a rate that started the year at 2.3%). The China Govt 10yr is down -3 bps at 3.11%, while the NZ Govt 10 yr down -4 bps today 1.35%. The UST 10yr yield is down further, now at just 1.77% and -7 bps since the open this morning.
NZ DOLLAR RETREATS
The Kiwi dollar fell almost -½c today, then recovered and is now just on 65.2 USc. Against the Aussie we holding at 96.2 AU cents. Against the euro we are softer at 58.6 euro cents. That means the TWI-5 is now down under 70.5.
BITCOIN JUMPS
Bitcoin is strongly higher today at US$11,632 and up +10%, or more than +US$1,200 since this time on Friday. The bitcoin price is charted in the currency set below.
This chart is animated here.
Daily exchange rates
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34 Comments
AIG PMI reported today shows a deep slide in consumer-oriented services.
This puts the economy under threat of a full-blown crisis as the tertiary sector follows construction into a downward spiral.
Authorities have already enacted two successive interest rate cuts and loosened credit restrictions. Also, a "business-friendly" party won the federal elections by landslide and quickly announced income tax cuts across the board and billions in further infrastructure spending; while the country continues to bring in more working-age "skilled" migrants than ever.
Are there any arrows left in the quiver at all?
Yes. And they have a so called 'business friendly' Liberal government in power...
Over here ,the likes of Roger Kerr, The Man, TTP, Yvil et al put all the blame on our centre-left government. Disingenuous would be a polite work to describe this.
Whatever type of government, it's simply the chickens coming home to roost in Australasia, off the back of decades of unsustainable 'Bubblenomics'
Agreed. Right or left, both sides of the spectrum have for long relied on quick-fixes over long-term investments for decades to boost headline economic numbers.
How long can we keep up this growth charade off population growth, bulk commodity trade and asset inflation while ignoring problems with our ageing infrastructure, low business capex spending, low export complexity, dead labour productivity and skill mismatch?
Well said.
The US never had any influence over China in regards to trade. The CCP has treated the US as "useful idiots" for years now. The greatest scam in trade history was the US, under Bill Clinton, lobbying the world to accept China into the WTO. The CCP has cheated and lied to the world from its inception and has been mercantilist in trade policy since its so-called opening. The CCP steals intellectual property and has embarked on a neo-colonial enterprise with the BRI. We were promised that the CCP would reform if we let them in - this was lie. We have been in a cold war with China it is only now that we have figured it out.
I am curious as to what members (contributors) make of Bitcoin. An investment, a gamble ? Anyone seen any trends that could be the basis of a leverage/ spread betting ?
My son asked me that question yesterday. I told him it has no intrinsic value but if there is confidence in it then it will maintain its role as a store of value.
I haven't seen any spread betting. Guessing the hedging cost would be prohibitively expensive ?
One of my friends Henry Arslanian has just released a book on the topic of cryptos (which I haven't read yet). I'm guessing it would be worth a read as he's a smart guy and he breathes the subject.
https://books.google.co.nz/books/about/The_Future_of_Finance.html?id=M4…
Lonewolfnz is probably the only commentator that has regularly stuck his head up. ( Although reading last week j.c owns bitcoin )
Most platforms provide trading in cryptos, from bitcoin to ether to indices .Entry sizes can be small , spreads are not excessive given the volatility., with guaranteed stops available . How you trade it, and what news makes it move is another matter.
I'd categorise it as gambling. Not that it's impossible to make money from - there are often ways to get an edge when gambling and turn the odds in your favour, but I have no edge in that market and am not involved. I have enough other things going on and am happy to let others play with this one.
Even if you believe that crypto is the future, it's extremely hard to believe that most of today's currencies will be an intrinsic part of the future economy, so you'd better be good at picking winners if you want to buy and hold because most will go to zero.
See Nouriel Roubini or Peter Schiff podcasts. It’s a con and will ultimately collapse, but in the meantime some will make a fortune.
Andreas Antonopoulos articulates it brilliantly in his latest speech https://youtu.be/Pkgo05Hdnfg
I initially tried to buy bitcoin early 2017, I believe it was $700, but couldn't buy through coinbase so put it in the too hard basket. Saw it go to $19000K. I bought eventually in mid-Dec 2018 in 3400 to 4500 range. I'm a trader so saw it bottom, ethereum hit low 80s and bitcoin cash low 70s, after large dump in Asian trade. Trucked around these lows for 2 weeks. My rationale when buying was it has bottomed at 5 times the level I was trying to buy at 22mths previously. This says to me it is not going away.
The more I learnt about cryptocurrency the more it appealed, most of the coins are not currencies, but basically the equivalent of a share in a project that involves the use of blockchain based technology. See ethereum and smart contracts, basic attention token and paying viewer for watching adds etc. My philosophy is blockchain is a new technology, that may revolutionalise the internet amongst other sectors, and I want a stake in the sector as I see value in the various projects. Hope this helps. Jump on youtube and do some research and see if it makes sense to you.
Hi David, thanks for all your great articles.
Given the significant movement in swap rates, would it be possible to include charts for the swap rates for various terms on the 4 O'clock summaries? (I think you have these already).
Thanks
AK at your service
NZ treasury out with latest monthly
https://treasury.govt.nz/publications/mei/monthly-economic-indicators-j…
If you read the article you might come away with the sense that gold was underappreciated over the last little while.
A little bit on gold, the barbarous relic, pet rock, shiny doorstop that brought people from 'pariah' nations all the way down here to NZ to dig out of the ground or fish out of rivers (back when international travel was more carbon neutral).
Also from the World Gold Council:
YoY bullion demand is up 8% (for first 6 months)
Poland(EU) China and Russia are the nations leading the gold buying.
To put it into perspective in the first six month of 2019, Central Banks the world over have bought more gold than in any time since 1971, when there was a gold standard. Wut?Really?Yes!Why?Hm.
Good as gold though aye?
Back to your scheduled programming.
Haha, yeah don’t look to close now. It might show that gold works as a hedge against our depreciating currencies and also that the bodies that should be least interested in owning it (central banks) are increasing their holdings.
On central banks (and the imf), its a bit ironic that they sell us one idea while they go the opposite direction, it’s almost as if they are playing us....
This popped earlier today
https://www.bloomberg.com/news/articles/2019-08-05/china-asked-state-bu…
Your link pulls a 404 error. This one may have replaced it.
https://www.bloomberg.com/news/articles/2019-08-05/china-hits-back-at-t…
Thanks . I had trouble locating it originally
You really have a B in your bonnet about gold haven't you David? Yet you give the biggest con of the decade, Bitcoin, the credibility of a chart. What goes here?
Gold is the ultimate hedge in this environment where cash gets relentlessly undermined by lower and lower interest rates. It's up again today ...and I'd say has a way to go yet.
Gold does not represent another's liability - hence it's value and the reason some dislike it as a store of wealth.
No doubt the Germans felt the competition and came up this prohibitive diktat:
Germany to lower “anonymous gold buying” from €10,000 to €2,000. Link
Can I tell you a story about human behaviour? I'll assume you answered yes :)
I live in a town where a man makes pies for a living. Everyday bro, pumping out pies. He does a good trade man. But the day after he wins a national award for piemaking, the line is out the door, everything is gone. People were climbing over themselves to get a pie. Why? The pie was the same as yesterday. But the difference was, someone told the people that this was "good" it had triple A rating, the value of this pie could never go down. And people just charged over that cliff like lemmings.
Gold at the moment is like that man's pies the day before he got that award.
Gold has been around much longer than pies and will probably be around long after they are gone. Your analogy is a good story about human behaviour but doesn’t fully reflect the situation at all. It only encompasses the herd mentality part of the equation and ignores everything else.
Gold holds its value like nothing else. That is the story.
You're undervaluing that man's pies :)
Haha maybe I could be tempted for a good steak and cheese.
What a load of bollocks. Anyone can make a pie (or crypto). Gold is on its own. The ultimate precious metal and store of wealth. Sit on the sidelines by all means....
Siding with China, which has manipulated and fixed its currency for 18 years, against USA. Robbing IP rights for more time than that also. Sorry but someone had to say it’s time this stopped. Free trade ideology I am afraid has always been more rhetoric and faith than reality.
Well put.
"Free trade" was imposed on the global production community to enable banks to finance end to end delivery of goods from one sovereign border to another and in the process deny a home nation the right to exercise domestic import substitution. Furthermore, insurance companies were tasked with insuring the goods and vehicles moving them around the globe. Corporations got rich while the rest basically starved or got indebted or both.
Interesting that there has been a lack of retail investor interest in gold, yet it has been a great contrarian play in the last 6 months, rising 15%. I think it’ll probably be the best performer during the next few years too, and retail investors will pile in later.
I'd doubt that many people know how to invest in it.
Guess so, there is a bit of a learning curve.
Chaston loves to bag gold. Yet today gold priced in NZ$ (which is what anyone living in NZ would buy and sell it in) took out it's all time high (from back in 2011), now trading at $2,230+. Priced in A$ the high in gold was taken out some weeks ago. It would really help if this site gave the POG in NZ$ as well as US$ - but then that would show how the metal is acting as a superb hedge against a tumbling NZ$, and we wouldn't want the barbaric relic to have a role now would we.....
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