Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
None to report today, yet.
TERM DEPOSIT RATE CHANGES
Rabobank was one to cut term deposit and saving account rates today. WBS also cut rates.
CUTBACKS BUILD
The latest NZIER Quarterly Survey of Business Opinion shows businesses still very downbeat, with 25% of them expecting weaker demand in the next quarter; construction sector most pessimistic. 28% of businesses plan to cut staff in the July to September quarter.
SELLING WELL
Barfoot & Thompson's auction rooms are twice as busy as this time last year. Sales rates ranged from 45% to 100% at this Auckland realtor's auctions last week.
TWO TOP ROLES FILLED
The RBNZ has made two new appointments to its 'Money Group'. Ian Woolford, who oversaw RBNZ's review of bank capital requirements, moves to new role as RBNZ's Head of Money and Cash. Steve Gordon has been appointed to head up a new Payment Services Department
TOO MANY TRYING TO RETURN
Government is now trying to limit the flow of people back into the country as quarantine facilities fill up and it has persuaded Air New Zealand to halt inbound bookings in the meantime.
HOSPITALITY THE LAGGARD
Paymark is reporting that retail shops are experiencing higher-than-trend growth rates, up +11.6% in June after taking a big hit earlier. Hospitality merchants are not getting this rebound however and are still negative on a year-on-year basis. This data is also reflected in the positive survey by Retail NZ.
COALITION CONFUSION
Update: The Government launched a somewhat lame and confusing primary sector plan that emphasised "productivity", "sustainability" and "inclusiveness". It confuses 'productivity' with production, consigns strong wool to an secondary 'other' category, and yet sees primary export earnings grow by $10 $44 bln in ten years to $57.65 bln pa. This is wildly unrealistic given that their own SOPI says the growth from now to 2024 will average about +2% and be slowing over that period. Few of the heavy hitting primary sectors who could achieve the required increases get much encouragement and a few minor ones (favoured by NZ First) get a lot. The document also includes support for "small scale water storage". Thanks to KW for clarifying what some of the unclear press release claims actually mean.
MORE HOUSES
Stats NZ says there were +33,200 more dwellings in New Zealand as at June 30, than a year ago. 10,600 of those were added to the rental stock. All up there are now 1,928,900 private dwellings, up +1.8%.
THE BUSINESS LOAN MARGIN SQUEEZE
The weighted average yield on all business loans from all banks is falling faster now that for mortgages. In May, the RBNZ reported it at 3.43%, down sharply from 4.57% a year ago. Most of that fall has happened since February 2020. In that time, lending to businesses has risen +5% to $117 bln.
SECOND WAVE STARTS IN VICTORIA
Community transfer in Victoria, Australia is now almost out of control and the State is about to go back into lockdown. More community transfer cases are popping up in NSW and Queensland (although small by comparison). The economic impact won't be helping their economic bounceback. And the trans-Tasman bubble is even less likely now.
EQUITY MARKET UPDATES
The equity market gains continued on Wall Street today, ending up +1.6%. Overnight European markets rose similarly. Now Shanghai, which rose a spectacular +5.7% yesterday, is up another +0.7% in opening trade. Hong Kong is however down -0.4% and Tokyo is down -0.6%, neither able to keep up with China. There are growing speculation that the Shanghai boom is from coordinated buying by the 'home team'. In late trade, the NZX50 Capital Index is up +0.5% while the ASX200 is up just +0.1%.
SWAP RATES UPDATE
Swap rates are probably unchanged at the short end and firm at the long end today. We don't have final 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 unchanged at 0.31%. The Aussie Govt 10yr is down -3 bps to 0.91%. The China Govt 10yr is up strongly again, this time by another +10 bps to just over 3.10%. The NZ Govt 10yr yield is down -1 bp however to 1.00%. The UST 10yr is also down -2 bps at 0.67% although it did get up to 0.71% earlier.
NZ DOLLAR FIRMER AGAIN
The Kiwi dollar just keeps on firming, now at 65.6 USc. Against the Aussie we are softer at 94.1 AUc. Against the euro we are little-changed at 58 euro cents. And that means the TWI-5 is now just at 70.3.
BITCOIN TURNS UP
The price of bitcoin is up +2.2% from this time yesterday at US$9,322. 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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45 Comments
Hospitalizations due to COVID-19 went from 2000 to 8000 in just 27 days (between June 8th and July 5th) in Texas. That'll be a quadruplin' in the good ol' lone star state. Pretty soon the hospital system there is gunna be busted...........
https://www.cnbc.com/2020/07/06/coronavirus-hospitalizations-grow-in-mo…
One of the fascinating things about the rise in case numbers in USA over last 3 weeks is that deaths have continued to trend slightly down (and yes I realize there is a 2 week lag). Could it be more of about increase in testing revealing more infected than an actual increase in cases? Seems also that America is finally getting wise to the idea of masks, so maybe their outlook isn't so bleak as it seems, add to which there have been a few significant improvements in treatment protocols that will reduce IFR by 30% or more.
In the last two weeks we have seen infection numbers double and looking like they will double again in the next few weeks to arround 100k per day. The last few days due to the US holiday have been down by 10k per day but will be revised up in the next few days.
Death stats will not be relevant for about another 7 or so days. Also the hospital system in a few states looks to be nearing saturation point which will see death numbers skyrocketing.
The US is in a very dangerous position, their only hope is a vaccine to be found in the next few months.
The US is in a very dangerous position, their only hope is a vaccine to be found in the next few months.
Eh, a little bit overstating it. Other methods that are effective: widespread wearing of masks, varying degrees of lockdown and social distancing. This requires a compliant population. They haven't been particularly compliant so far, but that doesn't mean they couldn't change, and change quickly, given the right impetus (eg, probably not anything Trump says).
Effective treatments for COVID could also help ease hospital pressure.
The US knew exactally how many people were dying in China due to sat imagery, spys etc and did not control what was coming. Nothing has changed, the US infection rates will increase massively as they are not capable of handling it.
Blaming Trump... it was also the Dem mayors and all the others who screwed it.
Could it be more of about increase in testing revealing more infected than an actual increase in cases?
No, because over recent weeks the number of tests has increased (from around 500k per day to around 650-700k per day) but the positive rate is *also* increasing, to around 6-7% positive, up from 4-5%.
So more tests are being done, but also more of them are positive. If the rate of infections was steady but the only change was more tests, you'd expect the positive rate to drop or stay flat at worst.
One possible explanation is that they're targeting their tests better now, at people who are more likely to have it. But that seems unlikely given the fairly large increase in overall testing, which is likely to be a similar situation to NZ where tests became more readily available for anyone who wanted to receive one, rather than testing becoming more targeted.
https://www.bloomberg.com/news/articles/2020-07-06/china-imposes-checks…
Behind the paywall but PRC now getting more nervous about bank runs
Xi must be in a precarious position - this is just the kind of stuff that ambitious underlings hope to use as a wedge to allow them to ascend further. That likely makes Xi dangerous - he will be more likely to throw his weight around with aggressive moves against local and foreign targets if embattled.
A good read.
" China is one of few subjects these days about which there is a genuine bipartisan consensus. It is a sign of the times that Democratic presidential candidate Joe Biden’s campaign clearly intends to portray their man as more hawkish on China than Trump. On Hong Kong, Nancy Pelosi, the Democratic speaker of the House, is every bit as indignant as Pompeo."
Niall Ferguson labels it 'CWII'.. RTWT. Reposted via ZH if the Great Paywall of Bloomberg harshes yer mellow....
Dammed if they do dammed if they dont. Shut down early get under control - average punter says they over reacted and ruined ecomony/cost jobs. Wait till more cases less resistance to lock down, told waited too long cost more lives/jobs.
Democracy has an achilles when it comes to tough unpopular decisions.
Bank of America analysts forecasting gold price to hit $3000 (an approx 70% gain from current prices) by end of 2021.
https://markets.businessinsider.com/news/stocks/gold-price-target-recor…
doubling the average of the last decade seems highly unlikely. 'Analysts' have no idea where gold will go. If they did they would all be billionaires. They are just trying to talk the market up
Not sure why it's "highly unlikely" mainly because I don't know. However, I do understand stock to flow models and I would not be surprised if gold goes to $3000 by end of 2021. I think the price of gold is suppressed to some extent and as a store of value it is highly attractive in these times of unlimited money printing.
Compared to what I've seen, this is a positive forecast. I've seen more extreme forecasts (north of $30k / oz).
"Stats NZ says there were +33,200 more dwellings in New Zealand as at June 30, than a year ago. 10,600 of those were added to the rental stock."
Some seemingly pleasing aspects to this:
Presumably then that 68% are owner-occupier - reflects a realistic desirable level of home ownership. Hopefully a good number of the new build owner-occupied are FHB.
The 10,600 rentals will go a little way in addressing housing shortages.
Hopefully, whoever wins, and with whatever policy they use, we will get the housing market moving in the right direction.
"National’s new housing spokesperson has admitted the party was wrong to sell and convert more state houses than it built when it was last in office."
https://www.stuff.co.nz/national/300050892/national-party-admits-it-sol…
I hope the govt has a Plan B. Plan A appears to be predicated on the rest of the world consumerism, trade etc being pre COVID19 BAU.: https://www.stuff.co.nz/business/farming/122055134/prime-minister-jacin…
Life imitating Art.
In a playbook way.
Confusing Primary Sector Plan
Further important background:
Policy & COL negotiations
https://www.dailymotion.com/video/x3frf2
Tommy Less says.....
Worth a read , Authors cite "precautionary savings increase " as an effect of a pandemic ,dont say we were not warned .......... there is historical empirical evidence supporting what is unfolding .............. A new working paper by the Federal Reserve Bank of San Francisco looks at the issue of a pandemic through an assessment of rates of return on assets in the wake of 19 major pandemics, going back to the Black Death of the 14th century. One of its findings is that relatively low interest rates may be with us for quite some time. Or maybe not.
The authors of the study, entitled “Longer-Run Economic Consequences of Pandemics,” ask: “What are the medium- to long-term effects of pandemics? How do they differ from other economic disaster
Significant macroeconomic after-effects of pandemics persist for decades, with real rates of return substantially depressed, in stark contrast to what happens after wars… capital is destroyed in wars, but not in pandemics; pandemics instead may induce relative labour scarcity and/or a shift to greater precautionary savings,” the authors, Jordà Òscar, Sanjay R Singh and Alan M Taylor, note.
A bigger boats always nice. Otherwise if you have the patience, wait out the next few weeks/months/into 2021 and put your money back in equities. If they dont drop significantly again from present standings then Ill personally be folding my cards re equities maybe for the rest of my life because it will mean I have no idea what Im doing. The values are just not justified, NZ or US markets. Im 95% cash and quite happy to play the waiting game.
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