A review of things you need to know before you go home on Monday: some rate changes, retail sales growth lackluster, credit card balances fall, swaps sink, NZD low, & more

A review of things you need to know before you go home on Monday: some rate changes, retail sales growth lackluster, credit card balances fall, swaps sink, NZD low, & more
ID 22702269 © Daniaphoto | Dreamstime.com

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

MORTGAGE RATE CHANGES
In case you missed it late on Friday, SBS Bank has reduced its four year fixed rate by -30 bps to 4.19% and its five year fixed rate by -20 bps to 4.29%.

TERM DEPOSIT RATE CHANGES
SBS Bank also raised its one year TD rate, up +25 bps to 2.85%. This is the highest bank one year rate on offer and better than any main bank.

RETAIL SALES GROWTH LACKLUSTER
In the October to December quarter, retail sales of electronic equipment boosted retail sales in a disproportionate way. They recorded the largest volume boost (+15% year-on-year) although they were matched by pharmacies for the largest value boost (+3.8%). Overall, December quarter sales were +3.4% higher than the same quarter in 2018. That was a much slower growth rate than the +4.5% rate in the Q2-18 quarter however. And for a second quarter in a row, petrol sales were a drag in the overall outcome. That we see the Q4 result as 'not a bad outcome' shows that we have lowered our standards on what constitutes a satisfactory outcome for the most important retail period of the year.

ATROPHY
Credit card balances fell in January - even if only marginally - for the third month in the past four. The only other time we have had a string of declines was in mid 2009. This time it is not recession, but the challenge from the Buy-Now, Pay-Later sector who are eating its lunch. But there is minor growth in the value of transactions going though the credit card system, up +2.9% pa in January. It is just the balances that incur interest that are being affected the most. These are now down for nine consecutive months, the longest decline on record., and the level of balances that accrue interest is at a record 'low' (although still at 58.7% of all balances, so there are plenty of inroad BNPL can still make here).

EQUITY MARKETS FALLING HARD
The new week is starting with a good dose of renewed fear. The NZX50 Capital Index started of modestly lower but has fallen away quickly since and is now down -1.3%. Meanwhile the ASX200 started with a big loss and it has gotten worse from there, now down -2.2%. Tokyo is closed for a national holday, while in very early trade, Hong Kong is down -1.4% and Shanghai is down -0.6% even with 'home team' support. (In fact, 'home team' buying must be leaving them with huge potential losses that will probably remain unbooked on Beijing instructions.) All eyes will soon turn to Wall Street for its Monday opening.

CORONAVIRUS UPDATE
The latest compilation of Covid-19 data is here. There are now 2208 cases outside Chine. A week ago that number was 756 so it has trebled in one week.

LOCAL SWAP RATES SHARPLY LOWER
There is a sharp retrenchment in wholesale swap rates underway as well. The two year is down -4 bps, the five year is down a similar -3 bps, and the ten year is down -6 bps. The 90-day bank bill rate is unchanged at 1.14%. In Australia, their swap rates are currently holding, little-changed. The Aussie Govt 10yr is down -6 bps to 0.91%. The China Govt 10yr is down -5 bps at 2.88%. The NZ Govt 10 yr yield is down -5 bps at 1.22%. And the UST 10yr yield is down -4 bps at 1.47% although that is unchanged from the opening this morning.

NZ DOLLAR STILL WEAK
The Kiwi dollar has held its lower rate against the greenback at 63.2 USc. Against the Aussie we are also holding at 95.7 AUc. Against the euro we are lower at 58.3 euro cents. That means the TWI-5 is now a tad lower at 69.3.

BITCOIN HOLDS
Bitcoin is virtually unchanged since its opening this morning at US$9,932. 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 help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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.

60 Comments

Comment Filter

Highlight new comments in the last hr(s).

Look out - maybe the penny’s finally dropped when it comes to trading the world’s biggest financial markets.

“Dow set to drop more than 400 points at the open as coronavirus cases outside China surge”

https://www.cnbc.com/2020/02/24/us-futures-coronavirus-outbreak.html

That would be a 1.4% drop, not exactly catastrophic

Of itself certainly not catastrophic – however it would still be the 2nd largest drop this year if that is what actually plays out during tomorrow’s trading.

More importantly it may indicate a meaningful shift in sentiment which up until now has been somewhat in denial.

It'll go down 1.5% even with the Fed pumping bucks in.

Whoops – pre-market now at a 600 point drop – and the 10 year at 1.38%.

Looks more and more like the penny has indeed dropped.

Sentiment can turn on a dime – or penny.

That sucking sound will be American’s perceived wealth beginning to go down the proverbial.

"I’ve noticed a massive difference in how much people who deal in risk care versus those who don’t on #Covid_19
My VC & Wall St trader friends are prepping like mad.
My friends who work for bureaucracies just sort of shrug, waiting for someone else to tell them what to do."

https://twitter.com/nntaleb/status/1231759004436697088

Covid-19 will probably not kill people in the hundreds of thousands worldwide but the attempts to mitigate its spread is about to severely hurt the world's economies.

10
up

It kills nominally 2% of people who get it and hospitalizes 20%.

Its transmissible at around double that of flu which infects in excess of 200,000 New Zealanders every year (some estimates as high as 1M).

If it hit Flu levels alone (despite the much higher R0 and no vaccination) it would kill 4000 people and hospitalize 40,000 people every year.

The consequences of containing it will be far less that those if it grows unchecked.

I didn't imply that we should not do our best to stop it spread.

Interestingly 4'000 deaths pa in NZ is less than the 5'000 people who die pa due to cigarette smoke inhalation according to Ministry of Health NZ

..you really don't get it do you?

Why don't you explain it to me rastus if you think you're so much smarter?

15
up

This website really has gone downhill in recent months, and it has nothing to do with the content.

SO. MUCH. EGO.

"Covid-19 will probably not kill people in the hundreds of thousands worldwide" You base that on?

It's my opinion and I base it on the fact that none of the recent "pandemics" (SARS) have killed people in the tens of thousands, also because of faith in modern medicine

Yvil, out of curiosity, you were recently in Hong Kong/ mainland China , have you taken any additional precautions if you have since returned ?

12
up

Yes I wear a mask when I read posts from certain commenters ; )

As commented before we got lucky with SARS it simply died out (No vaccine)...hopefully crono19 is the same but not looking good so far.

If you mute the annoying music, I think this video shows a pretty good comparison between Corona virus infection rate compared to other similar pandemics.
https://www.youtube.com/watch?v=6dDD2tHWWnU&t=235s

Seems to be spreading at a similar rate to swine flu, but with a mortality x5 higher. So if we similar similar spread, you could be looking at half a million deaths.

To put it into further context they show the impact of the spanish flu. Lets all be glad it doesn't look like a repeat of that one.

Yep, I predict we have either a working vaccine, or a treatment regime with a high success rate by mid may.

a vaccine will take far longer than that

Kospi down 3.26%.

That's a big drop

All but one retail store (except for a massage parlour) immediately around Scott Morrision PM's office in Cronulla are closed for business and for rent. And this is in "rich" Cronulla. Where's the wealth effect happening? Online shopping?

https://www.spectator.com.au/2019/11/exclusive-to-see-the-true-state-of-...

ScoMo might be keeping that one shop afloat, perhaps.

Thoughts and prayers please ..just popping next door

ScoMo might be keeping that one shop afloat, perhaps.

I don't think so. But in keeping with the brand image, wouldn't it be a better look if the office were flanked by shiny ANZ and Harcourts branches with a couple of stylish cafes with award-winning beans and stellar reviews?

But there is minor growth in the value of transactions going though the credit card system, up +2.9% pa in January.

On that note, I wish more stores would do what PB Tech does and provide a separate, lower price for EFTPOS instead of Credit Card. Good to have a bit more transparency around how much money is being siphoned out in financial friction.

"The latest compilation of Covid-19 data is here. There are now 2208 cases outside Chine. A week ago that number was 756 so it has trebled in one week."

And that doesnt include Irans real numbers which must be at least 500

Thank you for completing Greg's data with the numbers from Iran

as always, you are welcome

I see the Herald's 'NZ Inc' cheerleader Liam Dann reckons a recession in NZ is 'highly unlikely'....
Interesting view. I would say it's 50/50

Does he have a reason? Perhaps he's suggesting NZ might get off because off a technicality.

As for 50/50, that seems to me to be like saying "I have no idea", which is not a bad thing to say.

He doesn't offer any robust reasons.
More along the lines that NZ's economy is fundamentally robust and the virus will be shortlived. I think he buys into the rock star economy rhetoric.
I think he's a lightweight.

14
up

A few overseas students can’t make it back into the country and our universities threaten to fall over in response…yes, why not - let’s put the whole country at risk on their behalf – I don’t think so - rock star my fat *%%$&!.

Considered the whole rock star headline and "carry-on" trite and naïve nonsense back then, and still do now.

Using the definition below and looking at what’s currently happening in the world I would have thought the term “highly unlikely” a bit optimistic – it’s simply a decline we have to look at – not the end of our GDP as we know it.

I think 50/50 sounds fair – and possibly generous on the upside.

"An economic recession is typically defined as a decline in gross domestic product (GDP) for two or more consecutive quarters. GDP is the market value of all goods and services produced within a country in a given period of time."

There is no other path than recession and maybe depression.

I'll take a punt and say that at least one quarter in recession in NZ before end of the year is guaranteed. I'd say that's already 'locked in' based on existing travel and export order cancellations (even though I see no one has done any serious reporting on calculating/aggregating them). Does sound like TSY are onto it but unlikely to report it until it happens :-).

Locked in is the term I’d use too. It has been for some time, mass immigration and foreign land sales have been the only thing staving it off. So if these taps are turned on full maybe we can buy time - but that would be a terrible trade off.

A real negative 68 bps yield for the NZ Government 10 yr note indicates a monetary contraction going forward.

Well, unless he is living in a bubble or has very poor judgement that displays a pretty massive lack of comprehension. But people by and large struggle mightily to see the consequences of large societal changes and 'black swans'. WuFlu is growing exponentially in multiple countries. Game over - just a matter of a few months before it sweeps the world, unless international travel is all done with stringent quarantine from now on.

NZ Herald also has a line to sell to protect many of it's key advertisers. Their agenda does not necessarily align with the best interests of NZers

Yeah.
And bloody heck OneRoof contributor Ashley Church had a feature in the rag today.
He's got some BS title of 'economic and political affairs contributor'.
Must be mates with the editor

The death toll for yesterday is considerably higher than the three days before that. There is a real possibility of a "brace for impact" event about to hit us. I guess we have been living in a a bit of a fool's paradise for the last few decades. The cataclysmic type of events of the first half of the twentieth century and the constant state of fear during the Cold War kept things real but we had all drifted into a Fukuyamaesque "end of history" type of mindset of late.

It could be time to reflect on things a bit more, appreciate the people you have around you. The end of history was heavy with ennui after all. Mentally prepare for the coming battle. Watch the film "Threads" to get a bit of perspective. It wont be that bad at least.

10
up

Shut the door, a months isolation for Kiwis entering.
A price tag ( $2 million) for a 6 months visa for anyone else, isolation for the first month. Bills need to be paid and our GDP is going to flop hard.

That may just be delaying the inevitable but could be worth trying. Four months is not very long.

As one of the first, if not the first, to raise serious concerns about this plague (let's call it by its historic name and don't give it a veneer of scientific respectability.....as in "Covid-19") it doesn't surprise me that bank economists have played it down in their weekly reports. I suggest they get up to speed with their education by reading up on historic plagues, in England for instance......it's all online. Up until the last century plagues, famines, as well as wars, were the norm.
With climate change there's no reason why famines might strike at any time...even in NZ. You will discover that during historic famines in England, for instance, the strong took food from the weak by force. No wonder a lot of people wish to keep guns at hand.

The NZ firearms laws are firly lax but we have the least firearms offences in the developed world. I think we still have only one person have a firearm licence and commit murder with a gun. That was Chch and he souldnt have had one.
NZ gun laws function and funtion well.
People do not hold firearms to take food off others in a time of trouble. They would use the firearm to go and get their own food and most likely destrubite it to others who didn't have food.
What you are talking about is the people who do not have firearms licences. If you need to direct that complaint at anyone it would be the NZ Police for not getting them off the street.

Maybe it is too late and/or too upsetting to other bigger countries to isolate NZ from the rest of the world. It certainly would be contraversial. But wouldn't it be easy to just isolate South Island - no flights, no ferries for the next 6 weeks to be reviewed weekly?

We could isolate Palmerston North.
Actually, unnecessary, no one wants to go there.
Safest place in NZ?

So do you think S I is fully self sufficient? The supermarket shelves will be very empty, no clothes or cars for sale, no electronics phones etc, you kill off all hotels Motels, lay off heaps of staff, unemployment at 25% but hey, there won't be Corona virus either

Thanks for taking the suggestion seriously and making serious objections. Food would change - maybe no processed food choco biscuits but plenty of meat, veg & fruit; clothes and cars probably available for months but spare parts and new cars may get tricky. Delivery of critical items by unmanned ferry? Allow whoever wants to leave to go. Isolation for maybe a year or two - epidemics do not run to any specific schedule. The idea is to cater for the worst possible result ie greatly increased mortality rate.

Crayfish, blue cod, venison, salmon, wine, paua, cheese? Also barley, and I just harvested my hops today and Nelson is the stronghold there. Plenty of calories in beer. They'd probably survive down there. Pay the rates with mutton birds or bluff oysters.

Sustainable economy

I'm keen as hell! A couple of years in the bush would be great.

A slip in the mask

China postpones most important annual political assembly because of coronavirus
Chinese political leaders including President Xi Jinping are normally expected to attend the annual parliament session in March, but it has been postponed as a result of the virus outbreak.

It is the first time the meeting has been postponed since the Cultural Revolution.

https://www.theguardian.com/world/live/2020/feb/24/coronavirus-live-upda...

I think Winnie the Pooh is seriously worried

A very loud silence from North Korea – difficult to imagine they are literally immune from all this.

“There are concerns that North Korea, which is subject to international sanctions, lacks the health infrastructure to test and treat those infected and that any outbreak could quickly spread unchecked. Around 3,000 people in North Pyongan province - a north-western region bordering China - are also now under monitoring for reportedly showing suspected symptoms, said state media.”

https://www.bbc.com/news/world-asia-51609360

I'm 99.99999% sure that this conspiracy theory is false, but seems a bit weird that the virus is taking off in the locations of the USA 's arch enemies.
Probably just happens to be a bit of movement between those 'Axis of Evil' nations

Heck 50 dead in Qom.

Imagine there was no such luxury as air travel in today's world. Only overseas travel by ship.
Now imagine there is a world pandemic and at this point NZ is completely unscathed by the pandemic.
And imagine there is an inbound ship anchored out in the Hauraki Gulf with half the passengers ill with the virus.
Then imagine that say Winston Peters and Shane Jones were onboard, or John Key and his deputy prime-minister, and these important personages had the choice of ordering the ship to go ahead and dock at the Auckland wharves and so probably spreading the contagion to the rest of NZ, or the choice of staying at anchor out in the gulf and thus not infecting the rest of NZ but risk contracting the virus themselves.

A similar scenario was what actually happened in 1918 when the Royal Mail ship "Niagara"was anchored out in the Gulf with the Prime Minister and deputy prime minister of the day were on board and with many of the passengers ill with the pandemic virus. They elected to berth the ship at the Auckland wharf thereby introducing The 1918 Flu Epidemic to NZ with the consequential loss of 9000 lives in a much smaller population than we have now. But their lives were saved.

Wonder what the aforementioned politicians of today would decide to do: to berth at the wharf and imperil NZ's population or not to berth and imperil their own lives.

Your access to our unique content is free - always has been. But ad revenues are diving so we need your direct support.

Become a supporter

Thanks, I'm already a supporter.