What happened Tuesday

A review of things you need to know before you go home on Tuesday; more TD rate reductions, business sentiment low but up, truckometer metric improving, swaps flat, NZD firm, & more

9th Jun 20, 3:59pm by David Chaston

ID 22702269 © Daniaphoto | Dreamstime.com

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

MORTGAGE RATE CHANGES
No changes here today, so far at least.

TERM DEPOSIT RATE CHANGES
Heartland Bank and the Police Credit Union have both trimmed rates today.

UP BUT STILL VERY NEGATIVE
"Reflecting New Zealand’s continued steady progress out of lockdown, the preliminary ANZ Business Outlook data for June saw further increases across all forward-looking activity indicators. Levels remain very low, however. Both business confidence and own activity saw large lifts, of 9 and 10 points respectively. A net 22% of firms expect to reduce investment (up 10); a net 51% expect lower profits (up 5), and a net 18% expect lower capacity utilisation (up 8). A net 37% of firms expect to cut jobs." More here. BNZ thinks this data shows a "stalled recovery".

IMPROVING, BUT STILL A LONG JOURNEY
In May the Light Traffic Index of ANZ's Truckometer series recovered more than half of its April fall, but it was still 37% lower than last May for the month as a whole. The Heavy Traffic bounced more, and is 7.8% lower than May 2019.

STUART MCKINNON CONFIRMED IN ANZ NZ ROLE
ANZ NZ has appointed Stuart McKinnon as managing director of institutional banking. McKinnon has been acting in the role since March following the departure of Paul Goodwin to an ANZ role in the US. McKinnon has worked for ANZ for 23 years, most recently as head of institutional relationships and specialised finance.

MASKED VARIATION
Wholesale trade sales rose +1.9% year-on-year in the March quarter, the same modest rise recorded in the December quarter. But that masked some very large changes in the components. For example, the grocery component was up +5.2% while the automotive component fell -6.1% on the same basis. Wholesale inventories are not rising; in fact they reduced in March compared with teh same level a year ago. This data is among the final elements being released befor the Q1-2020 GDP result is announced next week on Thursday. Massey's AI tool, GDPLive, suggests that that will show an annual change of a touch under +2.0%. Subsequently of course it has fallen hard and the GDPLive forecasts we are heading for a Q2-2020 result at the rate of -2.0% pa, or -15% quarter-on-quarter.

A KEY ACTIVITY METRIC
National electricity use seems to have recovered to normal levels.

NEARLY BACK TO NORMAL IN SOME KEY AREAS
Paymark is reporting that spending in the economy continued to rise during the last week of May. A core set of merchants that are indicative of underlying spending patterns saw electronic payments increase by +2.4% last week. However this still leaves spending amongst the group down by -1% compared with the same week last year. Not surprisingly, spending is still running well below year-ago levels among accommodation, cafes/bars and a wide range of non-retail merchants, such as travel agents, doctors, cinemas and education providers.

LOCAL UPDATE
There were zero new Covid-19 cases again today in New Zealand. Unless (until?) new cases pop up, we will be dropping this daily paragraph update.

AUSTRALIA UPDATE
In Australia, there have been 7267 cases (+2 since yesterday), 102 deaths (unchanged) and a recovery rate of just under 92% (unchanged). 19 people are in hospital there (-6 since yesterday) with 3 in ICU (-2). There are now 459 active cases in Australia.

GLOBAL UPDATE
The latest compilation of Covid-19 data is here. The global tally is now 7,113,400 and up +107,000 from this time yesterday. This is still rising at a faster pace than recently. American cases rose by +20,000 since yesterday to 1,960,6500. US deaths now exceed 111,000. Global deaths now exceed 404,000.

EQUITY MARKET UPDATES
The S&P500 rose +1.2% in trade earlier today, a sharp contrast to the falls of about -0.5% in European markets overnight. At the open in Shanghai, they have booked a modest +0.3% gain, Hong Kong is looking at a larger +1.0% rise, while Tokyo did its dash yesterday with a big +1.3% rise, but today is giving back about -0.6% of that so far. The ASX200 has opened +2.3% higher while the NZX50 Capital Index is in reverse today, down -1.7% in late trade.

SWAP RATES UPDATE
Swap rates may have changed 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 has retreated sharply today by -11 bps to 1.06% but really only just giving up all of yesterday's equally sharp rise. The China Govt 10yr is down -2 bps to 2.85%. And the NZ Govt 10yr yield has slipped slightly to be just under the 1% benchmark at 0.99%. The UST 10yr is down -5 bps since this time yesterday at 0.85%

NZ DOLLAR FIRM
The Kiwi dollar has held on to its overnight gains to be still at 65.5. Against the Aussie we are staying firm at 93.6 AUc. Against the euro we are also holding firm at 58.1 euro cents. That means the TWI-5 is still up at 70.1 with no sign of a retreat from its recent gains.

BITCOIN HOLDS
The price of Bitcoin is little-changed from this time yesterday at US$9,689 which is only marginally softer. 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 ».

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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38 Comments

by Becnz | 9th Jun 20, 4:18pm 1591676284

A slow bandaid removal in process.
37 percent of businesses expect to cut jobs but the government keeps propping up zombie jobs most likely because they would like to win a few votes.
Best to let the market deal with it.

by frazz | 9th Jun 20, 4:22pm 1591676521

Can you give me evidence of a zombie job? I would like to apply..

by Becnz | 9th Jun 20, 4:32pm 1591677143

20-30 percent of AIRNZ ontop of those cut already
Half of the staff at most councils do very little compared to private sector
75-80 percent of tourism jobs
many middle management who will soon been culled for cost saving as we are now seeing across the board
and the firms taking the goverment job money to stay afloat for another 4-8 weeks.
Just remember we just had a lockdown and people who had to keep working are the non zombie jobs that should be safe in the longterm everyone else is just a number that maybe cut.

by paashaas | 9th Jun 20, 8:40pm 1591692013

"Half of the staff at most councils do very little compared to private sector"
indeed ...but they will not be losing their jobs - or do you think they will ?

by Houseworks | 9th Jun 20, 8:54pm 1591692877

Council staff I know and others I have observed are good workers, just I wish they weren't so idealistic. There is a couple of bad eggs

by oldbloke1 | 9th Jun 20, 4:34pm 1591677243

Me too - I have the lurching off pat, but I'll have to work on the groaning.

by Glitzy | 9th Jun 20, 5:58pm 1591682291

Today in Remuera some folks were trimming the tree branches on a small roundabout half way down Upland Road. Seven people were working onsite. Two doing the trimming and five doing traffic. I dont know what the answer is but that's a whole lot of labour.

by Masher | 9th Jun 20, 8:09pm 1591690196

Unintended pun, but well played.

by theglc | 9th Jun 20, 10:19pm 1591697961

Just another example of grose inefficiency

We cant increase GDP per capita with attitudes like this, and thats how you reduce costs and increase standards of living....

by Ezy | 9th Jun 20, 6:12pm 1591683146

Anything in council or government

by Officebound | 9th Jun 20, 4:25pm 1591676742

Entirely better to pull economic band-aids off slowly, things happening all at once cause panics, and the various downstream chaos that comes with panics.

Also reccomend a re-read of this earlier Interest article that highlights the benefits of keeping people connected to employment (even if it's expensive)
https://www.interest.co.nz/opinion/105293/masseys-alison-brook-looks-ho…

by powerdownkiwi | 9th Jun 20, 4:33pm 1591677214

Despite being attached to a university, she has no idea. They just don't teach them.

http://www.lifeworth.com/deepadaptation.pdf

Read the lot of it. Twice. What does it say about academia? What does it say about us? And remember, he only looks at one aspect......

by Officebound | 9th Jun 20, 9:46pm 1591695987

I'm too lazy to read 36 pages twice, so jumped to the conclusion.

It basically says we're screwed because of climate change, and should move to mitigating harm, rather than risks, as the risks have landed already.

Valid stuff, but related to my comment how?

by Jarlaith | 9th Jun 20, 8:41pm 1591692116

Is this the same market that sorted out the Great Depression?

by J.C. | 9th Jun 20, 4:31pm 1591677094

Paymark is reporting that spending in the economy continued to rise during the last week of May. A core set of merchants that are indicative of underlying spending patterns saw electronic payments increase by +2.4% last week. However this still leaves spending amongst the group down by -1% compared with the same week last year.

This is very good news. if consumer spending has only decreased 1% yoy, that is very positive for the economy. However, I'm not sure why I'm sceptical that data is accurate.

by Eudaemonic | 9th Jun 20, 5:56pm 1591682190

One missing factor here is cash transactions. If they were about 1/3 of transactions prior to COVID, you would expect electronic payments to jump +50% if literally all cash stopped being used (and all retail activity to return to normal). Anecdotally, I've heard of retailers suddenly being completely pay-wave transactions where they used to accept significant amounts of cash.

If you guess that perhaps we now have half as many cash transactions as before, we would actually still be in a massive hole.

by J.C. | 9th Jun 20, 7:10pm 1591686622

Good thinking

by Miguel | 9th Jun 20, 11:09pm 1591700981

Great point. Its also just the result of us having very few job losses so far (compared to what may be coming round the corner).

A lot of people have been spending far less than usual during lockdown, as they couldn't eat out and didn't spend as much on transport. That has left people with a bit of extra cash in the pocket.

The real question will be how things look after the wage subsidy ends.

by Wrong John | 9th Jun 20, 4:33pm 1591677209

On the above numbers, if you catch covid in the USA you have a 5.6% chance of dying. Put another way, if you catch covid in the USA you have a 94.4% chance of surviving. I wonder what the percentages would be for the BLM protesters & rioters?

by frazz | 9th Jun 20, 5:43pm 1591681386

Your point?

by Lanthanide | 9th Jun 20, 9:29pm 1591694999

Only of you look at the officially recorded stats. There's likely at least 5x as many cases of COVID that don't get officially diagnosed because no test is done.

by sit23 | 9th Jun 20, 10:27pm 1591698440

Possibly 5 times as many false positives on notoriously inaccurate test kits. And also hospital accountant induced false covid deaths. A substantial number.

by Rhumline | 9th Jun 20, 10:32pm 1591698759

Try doing the numbers a different way. If you look at deaths in the US as a proportion of recovered cases (a more valid comparison), you've got a more than 20% chance of dying than recovering - double that if you're black or hispanic,

Get off your comfy chairs people and face up to the facts.

by Newbie | 9th Jun 20, 4:33pm 1591677239

Will NZD go above 67c on USD, this year's high in Jan, given that FED report is as bad as expected?

by Glitzy | 9th Jun 20, 6:02pm 1591682530

The dollar index is looking like the wholesale printing of dollars we have seen in the past two months is starting to come home. Something has to give and in this case it's the mighty greenback.

Will be interesting to see the result of the crypto RMB when it gets released. If replaced even a small fraction of EM business conducted in USDs more dollar weakness is on the cards.

by theglc | 9th Jun 20, 10:30pm 1591698630

So our dollar has increased almost 10% against the greenback over the last month which means that the net price increase of the dow jones over that time is almost irrelevant

by J.C. | 9th Jun 20, 4:39pm 1591677550

Investors piling into bankrupt companies. Car renter Hertz Global Holdings Inc., oil driller Whiting Petroleum Corp. and retailer J.C. Penney Co. Many 10x+ returns.

https://www.latimes.com/business/story/2020-06-08/bankrupt-stock-hertz

by bw | 9th Jun 20, 7:15pm 1591686925

"Drop GST for 6 months!" (Brad Olsen, Infometrics)
Cool.
Then in 6 months time, when households have spent their accumulated savings on a splash to 'save' 15%, and the economy drops dead when GST is reintroduced households will have less of a buffer to insulate themselves from whatever unknown position the World is in at that stage. Then what?
"But we'll be out of it by then!". Let's hope so. Because New Zealand households stripped of whatever liquidity buffer they have will not need another round of virus/economic challenges. Neither households or the country have the financial capacity for a second go.

by Masher | 9th Jun 20, 8:12pm 1591690336

If you invested $10k in Hertz the day after it filed bankruptcy, that investment would now be worth $125k.

Go fed.

by blobbles | 9th Jun 20, 8:38pm 1591691891

Essentially capitalism is broken, everything is propped up by the fed, nothing is allowed to fail. Zombie companies galore. Productivity almost certainly dropping, companies borrowing (or getting payouts) to inflate their share price.

by Officebound | 9th Jun 20, 9:39pm 1591695560

iTs GoOd ThE fEd CaN't FaIl ThEn

by Rhumline | 9th Jun 20, 10:34pm 1591698864

Actually, capitalism is alive and well, and ever-evolving. It's just the US version that's broken beyond repair?

by blobbles | 10th Jun 20, 10:58am 1591743523

Where is your evidence for this? Even in NZ companies that are doing the best are those who are able to milk as much printed money as possible. See THL (had millions sitting in the bank, but got the government to bail them out with $4m), the Warehouse (took heaps of wage subsidy money, then fired 1000 staff) and so many other companies it's not funny. That's the new normal, if you can convince the government you need funds, the just give it to you. No longer need to be viable, in fact it's better if you aren't, because then the government will REALLY bail you out (see Air NZ).

Capitalism only works when the weak/insolvent etc are allowed to fail. When nobody can fail, there is no real capitalism which relies on continuous improvement and stripping away of insolvent companies. One of which is no longer encouraged (it's only how much you can inflate your assets, not about productivity) the other is not allowed to happen (bailing out zombie's galore).

by theglc | 9th Jun 20, 10:33pm 1591698837

bananas!!!!!

by j reacher | 9th Jun 20, 7:25pm 1591687502

Air NZ not returning flight refunds and using wage subsidy to lower overdraft.The workers of all companies should have been paid the wage subsidy direct Too many restaurants etc are sacking workers,some of them migrants and keeping the money .The Govt will never get around to trying to reclaim it.

by waymad | 9th Jun 20, 7:44pm 1591688684

Oh, honestly, showing up with a comment like that after a single registered day on this site? The very first thing on the subsidy application form is the employer's credentials (IRD number etc). And every single employee IRD number is required in the body of the form in order to claim it.

In accounting terms, the subsidy belongs 100% to the employee......geddit?

by sit23 | 9th Jun 20, 10:32pm 1591698775

I normally don't defend airlines, but the only fares Air NZ is not refunding are those deliberately bought as non refundable. That is the whole point of cheap fares. One takes the risk, and doesn't bleat on and on about the results of taking that risk.

by theglc | 9th Jun 20, 10:36pm 1591699008

yes but... remember anyone who invests in anything risky expects to be bailed out these days