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A review of things you need to know before you go home on Monday; no retail rate changes, PSI strong, migrant flows slowing, inflation gauge up, recession risks rise, swaps slip, NZD holds, & more

A review of things you need to know before you go home on Monday; no retail rate changes, PSI strong, migrant flows slowing, inflation gauge up, recession risks rise, swaps slip, NZD holds, & more

Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes to report today.

TERM DEPOSIT RATE CHANGES
None here either.

STRONG SERVICE SECTOR
The BusinessNZ services PSI has come in quite strong for January. BNZ said that "for now, January’s glowing PSI report fits with the rather upbeat view of the economy expressed by the Reserve Bank last week. In the least, it helps offset a still soft looking PMI. Regardless, the near term outlook heavily depends on how much – and for how long – disruption occurs as a result of local weather conditions and COVID-19".

MIGRANT FLOWS SLOWING
The population rose by +43,625 in the past year from migration. This is a slower rise than at any time since October 2014. Part of the reason for the slowdown in growth is that we are attracting far fewer migrants from China. In fact, since the peak in July 2016, the migrant expansion has slowed by -30%. Another important reason is that increasing numbers of NZ citizens are leaving. The net of departures over arrivals has exceeded -9000 per year for the first time since 2014 after being close to balance in 2016.

THE USUAL PEAK
Visitor arrivals data for December was about the same as for the same month a year ago. But this data is well before the coronavirus impacts so there will be trepidation now, no matter what this data revealed. At least it clawed back some year-on-year softness we were saw in November, and December is the top month of the year. It is probably all downhill for a while for tourism from here.

UP, BUT THE FUTURE IS DOWN
The same can probably be said for inflation. While the January ANZ gauge (which measures non-tradable inflation) recorded a +2.9% rise year-on-year, the recent shift upward is all due to new taxes on cigarettes. Without that, ANZ says, the rise would have been very modest with downward pressure from falling road freight prices. They too see an upcoming dip from the effects of the coronavirus.

RECESSION RISKS RISING
BNZ is reminding us that despite the trade impacts from the coronavirus, we are also facing economic slowdown risks from the North Island drought (and South Island flooding. They are warning that they may add up to two quarters of declining GDP growth - that is a recession. They are not calling that yet, but they do say the risks are elevating.

COSTLY TO INSURE
Aussie insurance giant QBE has warned that climate change poses a material threat to its business (see page 32) and the entire Australian economy after booking a -AU$300 mln hit to revenue due to unusual weather events. It is looking to exclude or reprice climate risks. QBE operates in New Zealand focused on business insurance. (Like many other financial services companies, QBE is completely opaque about its New Zealand operational performance.)

CORONAVIRUS UPDATE
Today's updates for Covid-19 sees the tally of official infection up over 71,000 and 1773 deaths. A week ago these levels were at 40,500 and 910 respectively.

AT THE OPEN ...
The NZX50 has started the week +0.3% higher than where it finished last week. The ASX200 has opened -0.2% lower. Tokyo has opened sharply lower, down -0.7% (on worse than expected Q4 GDP data), while Hong Kong has opened +0.6% higher and Shanghai has opened +1% higher.

FINDING A WAY
We are not hearing of protests in Hong Kong. Partly that is because PRC influence in the media. But it is continuing even without unwise street demonstrations and crowd events. One way it is happening is economically. Retail businesses are crowd-categorised into 'yellow' - supporting democracy - 'blue - supporting Beijing - and 'red' - owned by mainland PRC companies. In a city where democracy forces won two thirds of the seats at recent elections, life is even tougher for 'blue' and 'red' businesses.

A NEW SERIOUS NON-BANK CORPORATE LENDER
Aussie non-bank corporate lender Metrics is opening up in New Zealand and has been joined by three ex-ASB managers. Metrics uses managed funds they organise and operate to fund their range of business landing. The core trusts are ASX-listed and their income trust targets a 4% return while their 'Opportunities Trust' targets a 7% return. Both are only available to 'wholesale investors'.

LOCAL SWAP RATES DOWN
Wholesale swap rates are marginally lower today, down -1 bp across the curve. The 90-day bank bill rate is down -2 bps to 1.19% and its lowest of the year. Australian swap rates are up about +2 bps across their curve. The Aussie Govt 10yr is down -1 bp to 1.07%. The China Govt 10yr is now up +1 bp at 2.89%. The NZ Govt 10 yr yield is unchanged at 1.37%. The UST 10yr yield is also unchanged from this morning at 1.59%.

NZ DOLLAR HOLDS
The Kiwi dollar is unchanged against the greenback at 64.4 USc. Against the Aussie we are also little-changed at 95.8 AUc. Against the euro we up still at 59.4 euro cents. That means the TWI-5 is holding at 70.2.

BITCOIN STOPS FALLING
Bitcoin is a little firmer since this time this morning, up +1.7% to US$9,901. The bitcoin price is charted in the currency set below.

This chart is animated here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Our exchange rate chart is here.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

16 Comments

Holden is gone, everything, dealers gone too.

https://youtu.be/3Zqg2B-mlwk

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A real shame - the land down under, going under. Definitely GM to blame, going broke everywhere.

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Some look forward, the Big Three didn't stop looking backwards. Mind you, neither has the USA. I've said on this site for a long time, that fossil-fuelled SUV'S bought new now, are 100% guaranteed to end up as stranded assets before they run their useful lives out. Caveat emptor.

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I hope you're right in the sense that EVs will be affordable and have practical options to replace all current vehicles. The extraction of resources to build these EVs still remains an ecological dilemma, however.

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Staff at HSBC’s investment bank are braced for “the worst”, as the group prepares to slash bonuses and cut jobs in a radical overhaul of its major business lines.

Financial News reported last week that the UK lender was mulling the creation of a wholesale division with closer ties between its investment and commercial banking teams, as well as a new “bad bank” to house unwanted assets.

The timing couldn't be more prescient as HSBC is being asked to lend a hand for small business and investors in HK.

https://www.fnlondon.com/articles/hsbc-investment-bank-staff-expect-the…

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Increasing numbers of New Zealanders leaving? An economy flooded with low-paid, low-value, often low-principled jobs, in which policy is geared to expansion of commodity, non-value add, industries (agri, hort, tourism, NZ-standard construction, forestry), and wealth via property price inflation, in which GDP per capita stagnates, infrastructure is overburdened, and political leadership is compromised - corrupted - by anti-democratic overseas interests, has little to hold the alert, educated, young, ambitious. It is of course attractive to those in worse living conditions. And so we witness the large-scale transformation of our population, culture, values.. Into what? Heaven knows... but it's not going to be what we know as New Zealand.

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My personal observations that over the last 10 years or so parts of NZ have lost their sense of community and at times charity toward one another. I think we’ve seen the dark side of capitalism where competition for scare resource has seen many turn nasty (greed and bullying) and many give up hope (suicide stats).

My personal view is that NZ is not the same place it was 15 years ago and wouldn’t appear to be trending in the right direction.

Low interest rate policy’s to ensure asset prices rise (with the cover of inflation rate targeting haha) is a one way trip to a shitty creek with no paddle.

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Agreed. You are looking for social cohesion and that requires being surrounded by people you know. NZ cities are filling with migrants both from strange lands and similar lands and probably mainly other parts of NZ - while we keep moving social cohesion is difficult. We need things in common to cohere to - those things can be as different as sporting teams or religion or values so long as we feel they are ours. Of course that is a minimum for social cohesion because you can have and we do have small towns in decline where it is dog eat dog despite the inhabitants knowing one another.

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Can anyone please explain , why the NZX is up today? If you read stuff about the logging industry losing money, the tourism industry going broke asking for handouts, and farmers struggling with the drought. Is the real economy not measured by the strength of the stock market?. Tourism was struggling before the virus, we know that.

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Don't believe everything you hear and read...

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Maybe Kiwisaver funds that have to be used to purchase stocks in high growth/risk stocks may be one area and also people most likely retired chasing a better return than the bank say 4% dividend but risking a large haircut of 40% (just a guess looking at the current share values) if the prices decide to correct back to say approx 2018 prices ???.

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Smartshares DIV has a gross dividend yield of 5.44% with fund charges of 0.54%. It's price went down 0.5% today.

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My view is yield on many shares is better than savings - and at least with share ownership you diversify away from banks and OBR...surely bank deposits can’t reflect the risk free rate with this much debt around?

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SFO court filing re the National Party donations fraud - now frauds (i.e., x2);

https://www.newsroom.co.nz/2020/02/17/1040468/sfo-case-is-over-two-100k…

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Well it looks like a certain individual with previous affiliations to National is being thrown under the bus, even though "the boss" apparently ordered him to do something shifty.

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Initially mooted as a "tin foil hat" - it seems scientists inside China are now talking on the record about the possibility of the virus being a product of state research activity;

https://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=12309…

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