Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
Bank of China launched the new market low home loan rate today of just 2.55%. More here.
TERM DEPOSIT RATE CHANGES
No more cuts announced today.
EXTENDED WAGE SUBSIDY CRITERIA WIDENED
Businesses now need to have suffered a smaller revenue decline to be eligible for the extended wage subsidy, but this fall needs to have occurred in a more specific time period. Businesses have more time to apply for an interest free IRD loan.
ANZ SOLD USELESS PRODUCT
ANZ NZ is 'very sorry' as the FMA takes it to court for allegedly charging some customers for credit card repayment insurance policies that offered those customers no cover. The FMA didn't know about the issue until ANZ dobbed themselves in. ANZ didn't declare the breach in the 2018 2019 Conduct & Culture review.
TAKING ON THE BIG BOYS
The Australian Tax Office is taking PwC to court over it's work constructing shields for large MNCs for their obligations to pay income tax in the country. The ATO also claims PwC is using legal professional privilege to withhold facts or evidence or to make false and misleading statements that could conceal fraud or lead to tax evasion. The ATO has found only 40% of big businesses were paying the correct amount of tax, compared to 90% of individuals.
EASIEST DEBT SERVICING EVER
Household debt servicing loads fell to their lowest levels ever at the end of March 2020, down to 7.1% of disposable household incomes, according to the RBNZ's C21 data.
BIGGEST HOUSEHOLD NET WEALTH FALL EVER
The RBNZ household balance sheet tracking shows that household net wealth fell -$10.5 bln in Q1-2020 from Q4-2019, the largest single quarterly retreat on record. (The largest quarterly GFC fall was -$7 bln.) Financial assets fell -$7.9 bln while financial liabilities rose +$2.6 bln. You should note that financial assets do not include housing or housing rental investments. They do include bank deposits, equity and investment fund shares, and superannuation (including KiwiSaver). But household liabilities do include housing loans - in fact those make up the biggest portion of them. Household financial net wealth slipped from just over $1 tln to just on $993 bln as at the end on March. Given bank balance activity and share market pricing, it is unlikely the net financial wealth has fallen further in Q2-2020 so far.
BAD ADVICE?
The Financial Markets Authority has issued a formal warning to a financial adviser who sent an email to clients that they urgently move their investments to ‘low risk’ funds in the wake of COVID-19. The Head of Supervision at the FMA said the advice was inappropriate and had the potential for significant harm. The fault is said to be that ‘class’ financial advice has limitations and may not be appropriate for all clients.
LOCAL UPDATE
There were zero new Covid-19 cases again today in New Zealand, so now only the same one person is left with it in the whole country. We are now at fourteen days with zero new cases.
AUSTRALIA UPDATE
In Australia, there have been 7247 cases (+7 since this time yesterday), 102 deaths (unchanged) and a recovery rate of just under 92% (unchanged). 25 people are in hospital there (unchanged) with 5 in ICU (unchanged). There are now 505 active cases in Australia (+7).
GLOBAL UPDATE
The latest compilation of Covid-19 data is here. The global tally is now 6,601,300 which is rising at much faster pace than recently. American cases rose by +21,000 since this time yesterday to 1,872,600. US deaths now exceed 108,000. Global deaths now exceed 390,000. It is starting to get very ugly indeed in many emerging economies like Brazil, Russia, (the UK), Iran, India, Mexico and Chile.
EQUITY MARKET UPDATES
The S&P500 slipped -0.3% earlier today. If it stays like that in tomorrow's Friday session it will have a weekly gain of +2.3%. Frankfurt ended last night's session down nearly -0.5% and is heading for a +7.3% gain for the week. London ended last night down -0.6%, heading for a weekly +4.6% gain. In Shanghai today, they have opened flat, as had Hong Kong. Tokyo is down -0.3% so far today in early trade. Locally, the ASX200 is down -0.3% and heading for a +9.0% weekly gain. The NZX50 Capital Index is down -0.7% so far today, heading for a +2.4% weekly gain.
SWAP RATES UPDATE
Swap rates may have changed little today, with any firmness at the long end. 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 another +6 bps to 1.07%. The China Govt 10yr is up +8 bps to 2.89%. And the NZ Govt 10yr yield is up to 0.95% and is pushing higher in offshore trade. The UST 10yr is up another +7 bps since this time yesterday to 0.81%
NZ DOLLAR FIRM
The Kiwi dollar has continued to rise, up +½c today, to now just on 64.7. Against the Aussie we are also firm but less, now at 93.1 AUc. Against the euro we are holding at 57.1 euro cents. That means the TWI-5 is up at 69.4.
BITCOIN FIRMS
The price of Bitcoin is marginally firmer from this this time yesterday at US$9,781, a small (for bitcoin) +1.1% rise. 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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34 Comments
A number of banks have rerated upwards their forecasts for both NZD and AUD, which still sit well below current levels. The RBNZ at its recent May MPS had "forecast" TWI for June quarter under baseline scenario at 68.5 falling thru the year, currently TWI at 72.1. ANZ have held firm and see NZD/USD at 55 by year end. The machines want 70 AUD and 65 NZD by weeks end.
The S&P 500 has returned 37.7% over the last 50 trading days, making it the benchmark index's largest 50-day rally in history, according to LPL Financial.
https://www.cnbc.com/amp/2020/06/03/this-is-the-greatest-50-day-rally-i…
However....
Another 1.9 million Americans filed initial unemployment claims the week ending May 30, according to the U.S. Department of Labor. Since the start of the coronavirus shutdowns, a staggering 42.6 million jobless claims have been filed—greater than the combined population of America's 22 smallest states.
https://fortune.com/2020/06/04/us-unemployment-rate-numbers-claims-this…
I personally think that is BS. Some of the worst economic data coming out in decades and its not ok to advise clients to play it safe for a while?
What happens if we see another leg down now across markets, through to the end of the year? Do the FMA then retract their position? World has gone mad.
Reminds me of the big short where investors wanted out of Michael Burry's fund, before he made them $700 million by not following the herd and the BS narrative/views coming out of all the vested interests.
The financial markets would now appear to be something very different than the economy and the Fed (and in my view the RBNZ) have made it so. The question is how long can share markets continue to not reflect the real economy and just reflect the funny money that the Fed is creating with a computer?
It raises the question - why would anyone ever want to create earnings, when value is based upon how much money the central bank is creating with a computer? The earnings of the S&P500 is tracking down and the price is heading up. Any notions of value investing are being destroyed in this market - yet if as an advisor you tell your clients to reduce risk, you get a telling off from the FMA. This is actually f$#ked.
BOE speech, which may have been posted regarding March and the rush to cash
https://www.bankofengland.co.uk/-/media/boe/files/speech/2020/seven-mom…
Treasury market smells a rat
https://wolfstreet.com/2020/06/04/treasury-market-smells-a-rat-steepest…
Chinas wealthy socialist landowners
https://dimsums.blogspot.com/2020/06/chinas-socialist-economy-with-land…
Bloomie reckons Bitcoin could appreciate by 180% in 2020 and thinks that the previous bubble high of USD20k is on the cards.
https://markets.businessinsider.com/currencies/news/bitcoin-price-forec…
The FMA case on bad advice would appear to be a bit tough! Some of the worst economic news in 100 years (or more from the UK!) and its not ok to say 'play it safe for a while'? Honestly...WTF. Just me or has the world gone mad. The narrative is clearly 'whatever happens, the markets can not drop, will not drop, ever'.
I'm sure there are younger clients in the advisors portfolio who could have carried the volatility, but even then, seeing the unemployment data, bad debt data coming out of the US, surely it wasn't bad advice?
I'm rapidly losing faith in our current economic and financial system. It looks corrupt to the core and risks revolt. It risks dividing society and in the path/attempts/actions of saving itself, it is in reality destroying itself.
finally some people able to leave for India, and come home from india, just hope we dont import some covid cases, and if we do we catch them at the border
http://www.indiannewslink.co.nz/first-air-india-repatriation-flight-lan…
tragic to hear Grant Robertson just bleat on about getting us back to where we were before the crisis lets rush back to something that was not working before -- piling on household debt - rampart consumerism - and massive inequality - now we are borrowing 200 billion in the next thee years - alongside a structural deficit that will take a decade to correct - and still no actual fundamental change
the only response - an extension of a scheme designed to hide the real damage that has been done -- and stretch the problem out until after the election - blatant power grab with no plan or vision - and no actual alternative yet --
I hope at least a big chunk of Kiwis will not heed this cry to go out to the malls and buy yet more cheap imported chinese tat to add to all the other cheap chinese tat in their wardrobe they only wore twice
I worked in Australia 2011-2015 for a MN and they did the same thing except other way round. Said I could pay tax in NZ for first 6 months despite meeting the criteria for tax residency in Oz. They offered me the opportunity to get advice at the time... From PWC who told me it was all above board. By the end of 4 years when I decided to come home I smelled a rat, called ATO & IRD and asked for their opinion. They said illegal. I then spent 9 months of increasing intensity trying to get my former company to sort the mess out. Effectively all these MN are encouraging their employees to become personally liable for the tax risk that they themselves benefit from. Eventually I did get them to do the right thing and pay to rectify (late fees etc) and pay the tax in the correct country, but it was a David and Goliath fight. I also lodged a formal complaint with the ATO about the practice. That was 2015. They said they knew about it and had a problem with it then, so they must have been prepping this for a while.
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