Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes to report.
TERM DEPOSIT RATE CHANGES
None here either.
WORSE THAN IT SEEMS
Dairy prices fell -1.0% in US dollars in the auction early this morning. But in NZ Dollars the decline was -3.3% from the prior auction. The rising Kiwi dollar is undermining returns.
BIG JUMP
Barfoot & Thompson's August sales volumes rose a remarkable +41% year-on-year, as average selling price set new records again beating the March highs. Median prices however were flat. Volumes sold made August the second best August in the past 16 years for Barfoots, exceeded only by the outlier 2015 year.
HIGH DEMAND GIVES OPPORUNBITY TO TRIM THE MARGIN
Mercury's $200 mln seven year unsecured, unsubordinated, fixed rate "green bond" issue is probably being well received, because they have just lowered the interest rate calculation from +1.3% over swap to +1.2% over swap. Their bookbuild will end on Friday.
RETAIL TRADE IN TROUBLE
The latest Retail NZ Retail Radar report shows that retailer confidence fell significantly on the back of the Level 3 lockdown in Auckland during August.
YILI SPEEDS PAST FONTERRA
Rabobank is reporting that Fonterra slipped from being the fourth largest international dairy company in 2019 to sixth in 2020. Nestle is still #1, and Fonterra was passed by Yili who rose from 8th to 5th on the way up. Fonterra is now 60% as large as Nestle but despite the ranking fall, that is better than the 58.8% on #1 Nestle last year. The fastest growth however was posted by DFA of the USA, up from 6th to 3rd.
WE ARE A WINNER IN THE SERVICES TRADE
Statistics NZ released trade data for both goods and services, allowing us to look at New Zealand services trade for the full year to June 2020. We have an annual services trade deficit with Australia (-$788 mln) and the EU (-$369 mln) both of which are probably far smaller than you might expect. We run a huge services surplus with China (+$2.0 bln), and also with the USA (+$830 mln) and Japan (+$541 mln). Overall we have an annual surplus in services trade of +$2.0 bln, which is actually larger than our merchandise surplus of +$1.7 bln. Our services surplus is 8.3% of our services exports whereas our goods surplus is only 2.8% of our goods exports. We sell 2½ times more goods internationally than services, but the margins on services are much greater.
BEST EVER TERMS OF TRADE
New Zealand’s goods terms of trade (NZ’s export prices relative to NZ’s import prices) hit a fresh record high in Q2-2020. Overall, the terms of trade lifted +2.5%, exceeding the previous record set back in Q4-2019.
THE STREAK ENDS AT 29 YEARS
In Australia, they have just officially entered into recession (two consecutive quarters of declining economic output), their first since 1991. Their Q2 National Accounts confirmed that output plunged by -7.0%, which was weaker than anticipated, and follows a -0.3% decline in Q1. It's a shock that has created significant labour market stress, with the unemployment rate spiking as a result. But even though the GDP result was worse than expected, the equities market has ignored it.
AUSSIE HOUSE PRICES FALL AGAIN
Australian home prices fell for a fourth straight month. Sydney prices declined another -0.5% in August, Melbourne prices another -1.2%, adding to a negative quarter and sinking the year-on-year gains.
EQUITY UPDATES
The S&P500 ended its session with a spurt, closing up almost +0.8%. Shanghai has opened down -0.7%, Hong Kong is down -0.6%, but Tokyo is up again, up +0.3% so far in early trade. The ASX200 has recovered much, but not all, of yesterday's thumping, up +1.6% in early afternoon trade. And the NZX50 Capital Index is up a modest +0.3% near its close.
SWAP RATES UPDATE
Swap rates fell sharply yesterday especially at the short end. Two year swaps fell -4 bps to just 0.04% (that is $4 of interest per year for a $10,000 position), five year rates fell to 0.15%. These are notable moves down and are approaching 0%. Update: Swap rates for 2-5 years bounced up off yesterday's very low levels, back closer to the levels of Monday. Stll low, however. If there are notable changes again today, we will update this item. The 90-day bank bill rate is unchanged at 0.30%. The Aussie Govt 10yr is down -4 bps at 0.95%. The China Govt 10yr is up +1 bp at 3.07%. But the NZ Govt 10yr yield is down by -4 bps to 0.59%. The UST 10yr has retreated from yesterday's close again, down -3 bps to 0.68%.
NZ DOLLAR FIRMER
The Kiwi dollar has risen again, now at 67.8 USc as the greenback fades even further. But against the Aussie we are sharply higher, up almost +1c and back at 92.2 AUc. Against the euro we are up +½c at 56.9 euro cents. That all means our TWI-5 has risen to 70.4. It is a very odd event when our wholesale interest rates fall sharply in expectation of an OCR rate cut, and our currency appreciates.
BITCOIN RISES
The price of bitcoin is up 1.8% at US$11,648. 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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43 Comments
BBC Australia in first recession for nearly 30 years. "Australia's economy has plunged into its first recession in nearly 30 years, as it suffers the economic fallout from the coronavirus. Gross domestic product (GDP) shrunk 7% in the April-to-June quarter compared to the previous three months.
This is the biggest fall since records began back in 1959 and comes after a fall of 0.3% in the first quarter."
https://www.bbc.com/news/business-53994318
What's wrong with America
https://thesoundingline.com/the-decline-of-the-american-dream-in-one-ch…
And this, from Angelo Codevilla over at Claremont - the 'finger in the dike' election.
Americans need to cast their votes in a more decent direction if they want to save themselves. Trump is insane and wants a monarchy/dictatorship, he has already stated that he's looking for a third term which is illegal. David Pakman: Trump COLLAPSES, Says He'll Seek THIRD TERM. https://www.youtube.com/watch?v=JMI9UkK7Fuw
She's his favorite. Did you not see that at Trumps RNC? Even this clip gives the Trump family tensions away: When Melania met Ivanka onstage at the RNC https://www.youtube.com/watch?v=2VD3fb8o_A0
Hard to disagree!
Any neutral observer can see what is happening over there. Only there are so many with Trump derangement syndrome that many find it hard to have a neutral eye.
IMO opinion they have a better chance of surviving a bit longer under Trump, but essentially they are delaying the inevitable. All empires rise and fall...
There are some horrible stats in that article. And yet we still think we are going to inflate our way out of this debacle? How is that going to happen with "93% of Americans born in 1940 ended up wealthier than their parents by 30, but just 45% of people born in 1980 did so. In other words, most people born since 1980 made less than their parents by 30."
The obvious problem is that they got lazy. They did so well be being ahead of the rest of the world in size and scale and technology and freedoms. But they haven’t evolved, they still expect to be able to pay themselves good money to make 1970s technology like petrol cars. And the likes of Trump and trade wars will never be able to make that successful. They need to get off their arse, educate, and be at the forefront again.
Broken up they won’t compete on a global scale. As much as some would like to romanticise that the world was better before globalisation etc, the reality is that technology has caused globalisation, you can’t stop technology, you have to go with it. They could be another Russia making Lada
Jimbo - I don't agree with your technologically determinist argument - technology is not 'progressive' per se and neither is it 'neutral'. It can be implemented or swayed and to an extent, have its own agendtic capacities. So yes they can be broken up and that might mean they won't be able to compete on a global scale, but it does not follow that this is impossible nor, possibly, desirable.
Another piece of the puzzle (as Peter Schiff expounds) is that Breton Woods gave the US world reserve currency status, and then they destroyed the trust when times got tough by abandoning the gold standard and printing the currency to oblivion. Pete doesn't think anyone will trust anyone else to do that again - its back to gold standard.
"a very odd event when our wholesale interest rates fall sharply in expectation of an OCR rate cut, and our currency appreciates".
Unexpectedly! Why, it's almost as though we're a dinghy on the ocean, with rogue (rouge?) waves sloshing all around. Michael Reddell has some context about that Possible OCR Cut. As well as castigating the quite evident corruption inherent in the Shovel-Ready Projects troughing.
NZDM publishes offshore short term funding details - New Zealand Government European Commercial Paper on Issue
Nope. Just pursuing different responses to Covid. RBA has only commited to $30B of QE, RBNZ has committed to $100B, proportionate to GDP thats 23 times the stimulus!
There's been a lot of research showing that Aus and NZ property markets effectively operate as one market (which makes a lot of sense if you think about it given the level of economic integration and the fact we share the same banks).
House prices in Auckland being higher than Melbourne or Sydney for extended periods of time is probably unlikely, we should start to see falls.
Then again who cares about fundamentals. It's all free CB money running the markets now
Nope. Just pursuing different responses to Covid. RBA has only commited to $30B of QE, RBNZ has committed to $100B, proportionate to GDP thats 23 times the stimulus!
Fiscal stimulus - government deficit spending financed by bond issuance is where the money printing occurs - The RBA presents a detailed description of deposit creation by banks to facilitate this process.
New Zealand Debt Management has issued $38.595 billion new $NZ Government debt from 1st April until yesterday.
Australian Office of Financial Management details can be viewed here. AUD 79.9 bn issuance YTD, NZ Government NZD 37.26 bn issuance YTD.
QE serves to reinforce lower term interest rates when the RBNZ buys government fixed coupon bearing bonds in exchange for government floating rate (OCR) debt.
Final post for year. When Mr Orr cut the OCR in 2019 , the subsequent fall in mortgage rates saw the interest payable on a median priced New Zealand home , (based upon a 100 percent interest only mortgage) fall below the annual rent for a median rental property for the first time. It being reasonable that the median priced rental property is also not equal to the median priced home The subsequent falls in mortgage rates thru 2020, have only amplified the situation, where those in rental properties or those that may fall into rental accommodation, will find their financial situation ever more difficult. With the average mortgage interest cost of 3.8 percent across all mortgage debt as of the June quarter, set to fall further ,by way of flow, and the RBNZ set to introduce negative rates, never has their been such disparity between the asset rich and the others in the team of a five million. That disparity looks set to widen further, as credit will more likely be extended to those that are already asset rich .
Trump closing in on Biden in the critical battleground states, only a couple of points in it, and Trump's drawn level in betting odds. https://www.realclearpolitics.com/elections/trump-vs-biden-top-battlegr…
Democrats need to defenestrate the clearly confused Biden now if they want to be in with a chance.
I have decided to finally "Automate" the entire World so that undesirable idiots cannot rule the entire planet for their own ends.
Otherwise the World will end...pretty shortly. Boom and bust. don't work...so why Work.
Poisoning anyone who disagrees with them and killing off opposition...is a short play. Who in their right minds would ever Vote for these idiots is why I think there is something in the water...
Plastic Fantastic, has dumbed us all down.
Hence why Automation is the only answer.
Do have a nice day....on the Money Go Round....
If that is all you have to live for.......keep pedaling.
As appalling as Trump is, if Biden is what the DNC candidate selection processes brings forward as the best candidate then they seriously deserve to lose. Pretty much anyone, with the possible exception of similarly decrepit and too-extreme Sanders, would have been a better choice.
Yeah what a joke!
After 4 years of whinging, a hoax Russian investigation and a weak impeachment attempt, they wheel out Joe Biden who is clearly loosing his marbles.
They should have spent those 4 years building some serious contenders. Its like they think they only have to turn up to win!!! and remarkably that may happen...
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