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A review of things you need to know before you go home on Tuesday; some small rate cuts, truckometer speeds up, retail sales blossom, eyes on Orr, swaps unchanged, NZD holds, & more

A review of things you need to know before you go home on Tuesday; some small rate cuts, truckometer speeds up, retail sales blossom, eyes on Orr, swaps unchanged, NZD holds, & more
ID 22702269 © Daniaphoto | Dreamstime.com

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

MORTGAGE RATE CHANGES
WBS cut both its one and two year fixed rates today.

TERM DEPOSIT RATE CHANGES
WBS also cut all its term deposit rates.

'BACK IN BUSINESS'
ANZ's traffic monitoring tool, the Truckometer, confirms a broad economic pickup. Light traffic (cars) in the month of July was nearly +10% higher than the same month the previous year, while heavy traffic (freight) is up more than +10% on year-ago levels. But they comment: "... it is too early to draw any conclusions about where the data will settle in trend terms. Just as business and consumer confidence and activity measures have started to wobble, traffic may also give up its overshoot in coming months. But the data certainly highlights how lightly New Zealand has gotten off in terms of disruption to everyday life for most people".

RETAIL SALES BLOSSOM AGAIN
The 'back in business' meme is also showing in today's release of July retail sales, as revealed in Stats NZ's electronic cards data. Overall, it is up an impressive +6.3% year-on-year and nearly at the pre-lockdown-inspired February spend-up level (of +7.5%). Apart from that February spurt, you have to go back to October 2018 to get a higher gain. And as Stats NZ points out, spending on durables was quite strong, as was spending on hospitality in July. The weakest spending was on petrol.

GOVT EXTENDS AND INCREASES LGFA LIQUIDITY FACILITY
The Minister of Finance and Local Government Funding Agency (LGFA) have signed an amendment to the LGFA's Crown Liquidity Facility extending the term of the facility to 31 December 2031, from 31 December 2021, and increasing the size of the facility to $1.5 billion from $1 billion. The Facility was established in December 2011 and provides LGFA with the ability to borrow from the NZ Treasury.

INEFFECTIVE LEGAL CLAUSE
The New Zealand Law Society has seen a growing trend of licensees including a ‘solicitor’s approval’ condition in sale and purchase agreements. Some parties are being led to believe the clause is an acceptable replacement for having their lawyer check the agreement before they sign it, and so they think they can cancel the agreement if they are not happy with it. This is not the case. Real estate agents are being told they should recommend to both buyers and sellers that they get legal advice before signing an agreement and not use a 'solicitor's approval' clause.

EYES ON ORR
All eyes are on tomorrow's RBNZ Monetary Policy Statement. No rate changes are expected but there will be considerable interest in the medium term signals on "unconventional policies" (ie QE). Recent economic developments have been more positive than the RBNZ expected, with activity indicators such as heavy vehicle flows (above) and retail spending (above) pointing to a vigorous rebound in demand post-lockdown. The very large fiscal and monetary stimulus so far has helped to prop up confidence and support spending. However, the wage subsidy scheme and loan deferrals are coming to an end soon and the preparations for what follows will receive intense interest tomorrow.

OUR MATES ARE IN STRIFE
Australian business confidence is falling again. The July NAB survey shows that having recovered substantially in June, it has fallen back sharply in July. And this survey was conducted prior to the escalation to stage 4 restrictions in Victoria, so it has undoubtedly weakened further since that. The survey itself shows forward orders still contracting, but business was expecting improvements because they hired strongly in July. However investment capital expenditure remained very negative. But it is being all being further undone as August unfolds, and a weak Australian business environment is of no help to New Zealand.

RISING CAR SALES
The peak Chinese industry group said that July car sales were up 16.7% in July 2020 compared to July 2019.

EQUITY UPDATES
The NZX50 Capital Index is heading for a flat session today. In Australia, the ASX200 is up another +1% so far again today, taking the two-day gain to +2.7%. The Shanghai market has opened up +0.5%, Hong Kong has opened up a very strong +2.1% in early trade and Tokyo has opened up +1.7%. Wall Street closed up a modest +0.3% and according to the futures index (SPX), Wall Street is looking like it will open up a similar amount.

SWAP RATES UPDATE
Swap rates were probably little-changed again 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 different movement. The 90-day bank bill rate is marginally lower at 0.29%. The Aussie Govt 10yr is unchanged at 0.87%. The China Govt 10yr is unchanged at 3.00%. And the NZ Govt 10yr yield has held on to all of last week's gain and is up another +1 bp at 0.78%. The UST 10yr is also slightly firmer at 0.58% today.

NZ DOLLAR HOLDS
The Kiwi dollar has stayed at its lower level at 66.1 USc. And against the Aussie we are unchanged as well at 92.1 AUc. Against the euro we are firmer at 56.3 euro cents. And that means the TWI-5 is marginally firmer at 69.3.

BITCOIN SOFT
The price of bitcoin is lower today, now at US$11,860 and down -1.3% from this time yesterday. 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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End of day UTC
Source: CoinDesk

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25 Comments

11
up

The RBNZ Monetary Policy Statement has all the anticipation and thrill of a prostate examination, one done by Orr himself.

Plus the twist that you are female right?

That bitcoin looks to have turned into a sort of mainstream investment going by its up and down range these days, as apposed to the past roller coasters. I wonder how the old school bitcoiners feel about that.

The idea is it is a speculative store of value. At some point in the future, the market cap might be much much higher (say $100k even), but then it will be much harder to push the price around. That and the fact you can short and long means that the price discovery is more efficient. So the trade off is less volatility, but less chance of it crashing to zero. Let's face it, you can't get 1000% gains per year forever.

That bitcoin looks to have turned into a sort of mainstream investment going by its up and down range these days, as apposed to the past roller coasters. I wonder how the old school bitcoiners feel about that.

I think the cut-off point to be an "OG" in the bitcoin space would be 2013. Dollar cost averaging would be returning approx 1,400% for them. That's with the bubble and everything. Buy and hold around up to 24,000%.

Bitcoin has outperformed all asset classes on the whole in 2020.

@thebrian, BTC these days is a better alternative to gold, as unlike with gold you can earn interest on your BTC holdings (through staking). BTC is highly mobile and can't be confiscated. It is still volatile yes, but this comes with its relatively young age as an asset.

"It is still volatile yes, but this comes with its relatively young age as an asset."
That was mostly my point, going by the last year, and the chart im looking at, it seems to be relativity stable. certainly based on its history.
But even though im skeptical, all power to those that believe. :)
Its all really of no concern for me, as i went all in on gold a year ago, so im on a different track and train. toot toot. :)

thebrian, "old school" bitcoiner here. I don't feel one way or another about bitcoins market behaviour atm. When we became interested in the tech and then started mining for fun, we liked the idea of a store of exchange outside of central and corporate bank control. It was an experiment, post 2008, it was a revolutonary thought experiment with fun tech. That hasn't really changed, it's just that the thought experiment has turned into a mucn more widespread phenomenon. The distortions of central banks and danger in the financial system have increased, if anything. Gold is one vote against the system potentially, so are cryptos. arguably cryptos are more so, and embraced by a younger generation. I don't so much like all the ICO pump and dump shenanigans we have seen over the years, or some of the other scams out there, but you get that in any market. We have always used Kraken and found it very reliable.

@gingerninja, agreed the cryptos are 'nu-skool' digital assets and preferred over PM's by the young ones. Important to keep in mind that BTC is scarce: only 21 million units max in circulation. Like ever.

The problem with gold is that we do not know whether it is really scarce. Worse case scenario you have a gold-loaded meteor strike earth that wipes out the gold market over night. Or it will be found somewhere else.

And contrary to popular belief, silver is not a 'rare' metal at all.

Cryptos were created to be a solution to a perceived problem, the scarcity was a huge part of that, as was the effort in procurement, derived from the history of effort our ancestors experienced in procuring gold and the perceived scarcity of gold, millennia ago when it became a desirable store of wealth. But there have been other stores of wealth. Maybe the oldest being shells. And ultimately, what we assign and believe has value *has* value. Trust, faith and belief in the store of value is still a hugely significantly factor, no matter how rational we hope we are.

1) If a meteor hits earth I think the gold market will be the least of our concerns

2) At current rates, we'll run out of silver by 2030.

Yes as we all recently discovered, when the shit hits the fan, it's toilet roll or "white gold" that suddenly becomes the item of most value LOLOLOL

only 21 million units max in circulation. Like ever.

Until they change the protocol, which some of the core developers have publicly mused about on twitter, since transaction fees are unlikely to ever be enough to secure the network alone and actively work against adoption of Bitcoin as a means of exchange - it's a vicious circle really, fees go up so transactions go down, meaning fees have to go higher etc.

"a gold-loaded meteor strike earth that wipes out the gold market over night"

yeah, I remember the last time that happened. (/sarc)

Ineffective Legal Clauses?
“It is a commonly held, but completely erroneous, belief that there is a cooling-off period when a sale and purchase agreement is signed."

This is down alot.
Supply chains are moving from just in time to just in case.
And from all China, to China plus1.

Singapore's recession deepens with worst ever quarterly contraction of 13.2%

https://www.straitstimes.com/business/economy/singapore-lowers-2020-gdp-...

Mr Chan Chun Sing, the minister of trade and indutry said; “This is our worst quarterly performance on record. The forecast for 2020 essentially means the growth generated over the past two to three years will be negated.”

Here is Chan Chen Sing, with a realistic appraisal of the economy and the tactical plan Sing Govt is implementing...

https://youtu.be/LCh5Tx36eAk
CNA tv

The contrast to the current COL Govt could not be greater. It is our great shame that our PM doesn't "get" business or the econmy. Her blind spot is our loss.

That is the real world and we get roads that will somehow save us.
There is no way in hell that Labour has got the nous or delivery to save us.

How is the Govt screwing the vaccine issues and openly lying to NZ not a major topic in the press today?

Is Woodhouse on the way to being homeless?

Nah. Merv from Manurewa will take him in.

I think the RBNZ will keep negative interest rates for a rainy day. For example, if there is a credit crisis as J Key suggests.

Well, I'm guessing that's my next month buggered then.

Great level 3 again in Auckland. More disturbances for students. This isn't good for them.
Is this really the right way?

Profile dosen't agree......
Guessing most of NZ would earn to stay CV free as a country till we know more.

Days to the General Election: 26
See Party Policies here. Party Lists here.