Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
Update: The Cooperative Bank reduced two key home loan rates today.
TERM DEPOSIT RATE CHANGES
SBS Bank cut its TD rates across the board. Update: Kiwibank has also cut and quite hard, taking -30 to -35 bps off most rate offers. The Cooperative Bank also trimmed some rates.
SLUMP & PARTIAL REBOUND I
As expected, Barfoot's Auckland house sales were low in May, just 396 units and down from just 552 in April. But the company, as always, is optimistic about sales volumes in June and going into Level 1.
SLUMP & PARTIAL REBOUND II
The number of new car sales rebounded in May from April, but it was still down -29% from the same month a year ago. Used imports rebounded better to be down "only" -22% year-on-year. Commercial vehicle sales were hit the hardest, down -37% on that basis. Car sales really missed orders from the car rental fleets which have dried right up. More than 70% of passenger car sales were SUVs in May, and that is back to the record high share first reached in January and February this year. (Australia's car sales fell -35% in May on the same basis.)
MTF's VIEW
Car finance specialist MTF is saying that the lockdown saw sales levels rapidly decline, with April’s volume down -90% on March 2020. They’ve experienced a gradual recovery through Level 3 and into Level 2, with May ending at around 75% of last year’s levels. They now don't anticipate a return to pre COVID-19 business levels for some time and are busy reviewing their business to align with a very different future.
NO NET CHANGE, BUT BIG INTERNAL SHIFTS
Rising prices for WMP (+2.1%)at the latest dairy auction "saved" the event because it also brought sharp falls for butter (-4.4%) and cheese (-5.3%). But after accounting for a rising NZD, the overall result in local currency was a fall of -3.9% and a tough way to head into the new season (which starts on July 1).
LESS INFLUENTIAL THAT THE COMMENTERS THINK
We all "know" that we run a large merchandise trade surplus with China (+$4.5 bln), but data out today shows that also run a large trade surplus with China in services (+$2.4 bln). Together we sold China $6.9 bln more than we purchased from them in the year to March. That is not the case with Australia where we ran a +$1.6 bln goods surplus but have a -$0.5 bln services deficit. With the US, its the reverse, a goods deficit and a services (tourism) surplus, and that nets to a smallish +$0.4 bln surplus overall. With Japan it is remarkably similar to our US trade relationship. The one area that sucks us dry is Europe where we run large goods deficits (-$5.9 bln) and only small (tourism-based) surpluses (+$0.4 bln). The net from everyone else in the year to March netted to a balance, involving $21 bln of each of goods and services exports and imports. In the end, our exposure to the two-way China trade is less than 20% of all our trade (actually 19.4%) - the China trade is just under $33 bln per year of our total two way trade of a bit more than $169 bln. With the US it's $19 bln.
GROWING
Investing platform InvestNow says it has broken through the $0.5 bln level for funds under management for its 26,000+ customers.
VANISHING CUSTOMERS
Air New Zealand reported today that its April passenger numbers fell -99% in April. The few flights they did run had a load factor of just 25% compared with 88% a year ago. They say "Prior to the outbreak of Covid-19, Air New Zealand was in a strong position with a resilient balance sheet and short-term liquidity of more than $1 billion. The airline has no financial covenants on new or existing debt facilities and no significant debt maturities until 2022. The airline has taken and will continue to take swift and decisive action to preserve and enhance liquidity and minimise cash burn."
SLIPPING DEMAND
Demand for electricity is slipping on a 7-day-on-7-day basis, and on a 14 day basis. The restart flush is weak as revealed by this electricity data.
NO LIQUIDITY ISSUES FOR BANKS
Banks overall core funding ratios in April were strong, a very strong 88.8% and a record high. The RBNZ minimum standard is 75%. It is being boosted by "non-market domestic" deposits - that is household and business bank deposits.
LOCAL UPDATE
There were zero new Covid-19 cases again today in New Zealand, so now only one person is left with it in the whole country. We are now at twelve days with zero new cases.
AUSTRALIA UPDATE
In Australia, there have been 7228 cases (+7 since this time yesterday), 102 deaths (unchanged) and a recovery rate of just under 92% (unchanged). 26 people are in hospital there (+5) with 4 in ICU (unchanged). There are now 501 active cases in Australia (-4).
GLOBAL UPDATE
The latest compilation of Covid-19 data is here. The global tally is now 6,377,600 which is rising at a faster pace than recently. American cases rose by +20,000 since this time yesterday. Big rises in Iran, Mexico, Russia and Saudi Arabia are worrying. Some countries may avoid a 'second spike' solely because they never got over the first hit. US deaths now exceed 106,000. Global deaths now exceed 380,000.
EQUITY MARKET UPDATES
The S&P500 ended up +0.8% in their session earlier today. But that was tame compared to most European markets which saw gains for up to +3.8% (in Frankfurt, but only +0.9% in London). Shanghai has opened today up just +0.4% but both Hong Kong and Tokyo are each up +1.2% in early trade. The ASX200 is up +1.0% in mid-day trade; the NZX50 Capital Index is up +0.8% in late trade.
THE RECESSION THEY HAD TO HAVE
The Aussies reported Q1-2020 GDP today and it was down -0.3% in the quarter. Their Government says Q2-2020 will be much worse, so "we are in recession today". It is Australia's first recession in almost 30 years.
SWAP RATES UPDATE
Update: There is little change at the short end, but 10 year rates rose +5 bps to 0.80%. Swap rates may have moved little today. We don't have wholesale swap rates movement details yet but we will update this later in the day if they show a significant movement. The 90-day bank bill rate is still unchanged at 0.26%. The Aussie Govt 10yr is up +7 bps at 0.97%. The China Govt 10yr is up +9 bps at 2.83%. The NZ Govt 10yr yield is up only another +3 bps to 0.86% but has now erased all its May weakness. The UST 10yr is up +5 bps to 0.70%
NZ DOLLAR UP SHARPLY
The Kiwi dollar has continued rising today against the greenback, up to just on 64.1 and that is nearly a +1½c gain since this time yesterday. Against the Aussie we are also holding at 92.5 AUc. Against the euro we are firmer at 57.2 euro cents and a +¾c gain. That means the TWI-5 is up at 69.
BITCOIN REVERSES
The price of Bitcoin is sharply lower after breaching US$10,000. It is down -5.6% from this this time yesterday to US$9,498. The bitcoin price is charted in the currency set below.
This soil moisture chart is animated here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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60 Comments
Could you remind me how many people have lost jobs, had pay cuts, or are now receiving government wages?
But yes all is well.
It was ~1,200,000, and with Level 1 will come a nervous reacquaintance with formal employment, and "is my job still there...."
https://www.stuff.co.nz/business/120670336/12-million-nz-workers-though…
Could be worse we could be in America with its ever climbing coronavirus death rate and a megalomaniac on the loose. BBC Trump disperses protesters so he can walk to church. "The US president announces he is deploying the military to quell unrest in Washington DC".
https://www.bbc.com/news/av/world-us-canada-52886893/trump-disperses-pr…
I'm a wee bit tired of being told by our offshore siblings about how lazy we are. And how we should bless the US, Russian, Chinese and any other feckin millionaire or economic migrant that shows up upon these shores. Try investing in and supporting the people of this country for a change.
For my part, I've never stopped believing that NZ gives more than it receives on the world stage, and that as individuals most of us have been gifted (by our parents and by the much maligned welfare state) the power of self determination. But all this seems to have changed over the past 20 years or so. NZ Inc. just doesn't do enough to foster self-belief and strength among those who aren't succeeding in the libertarian milieu.
That is our greatest failing...smugness and mental laziness we reserve for well-heeled expats.
He has a lot of faults, but being a megalomaniac is not one of them. Best look up it's meaning. The carefully worded troop deployment actually referred to helicopters buzzing protestors, but was deliberately written to make us misunderstand what actually happened. I suspect Washington, D.C., not being a state, has no National Guard, so after the police, there is only the army there.
Ok - so you meant 'All is well for ME in the land of the long white cloud'.
Gotcha...I wouldn't confuse the ME with the air nz cabin crew or pilots (I know a few) or any other workers who have just lost their jobs and don't know what they're going to do to pay their mortgages now.
pas en cas de chômage
Although we have many problems we have much to be thankful for in this country. That is founded on generations of kiwis who worked hard in productive endeavours, and also fought for our freedom.
It's not thanks to a generation of property speculators, many of them foreign, who have done more damage than good.
As I have said ad nauseam, Covid-19 caused very little damage in NZ. Our government's reaction to it, combined with all the other governments' of the world's reactions are what caused all the issues. Check facts from Sweden. Average alleged Covid death, 88. Average man death age, 81; women 85. No school closures. Keep an eye on Pakistan. Imran Khan bowled a bouncer at all the Bill Gates faithful and said Pakistan just can't do Covid stuff, and will just have to live with it. So interesting
Brazil's President has treated COVID19 like a flu and not implemented any social distancing measures or lockdown.
Will be interesting to watch how that pans out.
https://www.worldometers.info/coronavirus/?utm_campaign=homeAdvegas1?#c…
https://www.stuff.co.nz/national/health/coronavirus/300027183/coronavir…
"At 43 deaths per 100,000, Sweden's death rate is among the highest globally and far exceeds that of neighbouring Denmark and Norway, which imposed much tougher lockdowns at the outset of the pandemic.
Now, Tegnell has for the first time admitted publicly that the strategy is resulting in too many deaths.
"Clearly, there is potential for improvement in what we have done in Sweden," he said.
Yvil
I rarely comment on your posts because I think I fundamentally disagree with you on most things
But on this...I agree. we have truly been blessed by a combination of common sense and acceptance by the majority that a Government (like them or not) has chosen a sensible path, kept us in the loop, and made us feel OK about it.
All the bullshit about too much/too little and why didn't we do what Sweden did is immaterial.
We don't know how lucky we are
Banks overall core funding ratios in April were strong, a very strong 88.8% and a record high. The RBNZ minimum standard is 75%. It is being boosted by "non-market domestic" deposits - that is household and business bank deposits..
The Reserve Bank reduced banks’ core funding ratio requirement from
75% to 50%, effective from 2 April 2020.
Part though of reduced power demand may indeed be structural I haven't been to the office for months and have elected to WFH permanently. Commercial real estate is a big power user (have to run HVAC continuously because the windows typically don't open, by design....) and lease managers may be minimizing costs....Multi-parallel-unit manufacturing lines can shut down a line without impacting optimisation (poster child: Tiwai potlines). Temperatures can be reduced, lights turned off, whole floors locked off by adjusting elevators and mag-lock doors.....
Power usage drops so my price per KWH leaps up this week. What a crony capitalistic scam. Let's hear the Power Companies' PR spinners try to bullshit us with their tediously fake complex reasons for the rise. The real one is that if you lose half your customers, you have to make twice as much profit off the remaining half to keep your profit where it was.
Support for Trump is evaporating rapidly. BBC George Floyd protests: Trudeau's epic pause when asked about Trump's response. https://www.bbc.com/news/av/world-us-canada-52900486/george-floyd-prote…
China trade is less than 20% of all our trade (actually 19.4%) - the China trade is just under $33 bln per year of our total two way trade of a bit more than $169 bln. With the US it's $19 bln.
Tooze engages Pettis and Klein new book Trade Wars ARE Class Wars. Key takeaway: US does not control its current account, or saving rate; all driven by China and Germany imbalances.
https://youtube.com/watch?v=cMtdq1
' But after accounting for a rising NZD, the overall result in local currency was a fall of -3.9% and a tough way to head into the new season (which starts on July 1)."
Reserve Bank MPS , 13 May
"The economic impacts of lower import and export prices will be partially
offset by the lower New Zealand dollar exchange rate. As is typical during
times of global uncertainty, the New Zealand dollar exchange rate has
depreciated. The TWI has fallen from 73.8 in early January 2020 to 68.7
at the time of writing (figure 5.4). A lower New Zealand dollar exchange
rate makes our exports more price competitive on international markets
than they would be otherwise. It provides a partial offset to the declines in
exporters’ incomes, but also offsets some of the reduction in import prices"
May Financial Stability report
"The exchange rate has depreciated and partially insulated New Zealand
commodity exporters from the deterioration in international conditions"
'Flexible exchange rates have helped to cushion the effects of
COVID-19 for New Zealand commodity exporters."
Mr Orr, the TWI is now 71.7, less helpful to exporters, and property prices are already declining. Why are you waiting, or is the NZD having a blow off top.
Waiting for what? - QE is supposed to reduce interest rates. Maybe the thick end of $18 billion of RBNZ securities purchases are just not enough to overwhelm government debt issuance of $11.42 billion over the same period (April, May)?
Orr said the QE programme had been “highly effective” in lowering wholesale interest rates. It was also “complementary to the Government’s fiscal policy”. In other words, the programme means there’s a buyer of the wad of bonds the Government is throwing into the market as it takes on a huge amount of debt to pay for the COVID-19 response.
“One of our concerns way back was we wouldn’t have enough assets to purchase,” Orr said. Link
The 10 yr NZ government note is trading around 0.91% up from 0.498% on the 13/05/20 - nearly double with big DV01s.
Slipping demand: my fuel bill for May: $79.41 for 100.2 litres (Caltex truckstop diesel). It used to average out at 50-70% above that per month. Price is instructive: that works out to 79.25c/l...used to be around $1.20. Demand reduced: zero commutes, zero caravan trips (the latter will soon be rectified, the former won't...). Structural....
Market exudes confidence... delay buying at your peril.
Waikato property market shows no signs of Covid-19 hangover | Stuff.co.nz
https://i.stuff.co.nz/life-style/homed/residential/121695537/waikato-pr…
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