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A review of things you need to know before you go home on Friday; no retail rate changes, construction drags, commodity prices jump, worry about costs & housing, bond and swap rates rise, NZD falls, & more

A review of things you need to know before you go home on Friday; no retail rate changes, construction drags, commodity prices jump, worry about costs & housing, bond and swap rates rise, NZD falls, & more
ID 22702269 © Daniaphoto | Dreamstime.com

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

MORTGAGE RATE CHANGES
No changes to report today.

TERM DEPOSIT RATE CHANGES
None here either.

COMMERCIAL CONSTRUCTION A DRAG
There was a small increase in the volume of construction work completed in the December quarter, led essentially by good levels of home building. The amount of building for factories, warehouses and office building is still sagging, but residential completions were up more than +8% compared to the same quarter in 2019. Interestingly, renovations and alternation activity completed was unchanged. This data is one of the later sets to come before the GDP result for Q4-2020 is released in about two weeks. Today's weak commercial data suggests that construction activity won't be boosting that GDP result.

IT'S TOUGH BEING AN AUCKLAND HOME BUILDER
Statistics NZ has surveyed home builders in the large Auckland market and they report substantial negative pressures on many builders, and in some categories, on most builders. Cashflow was an issue for 40% of them, costs were an issue for 54% of them, labour availability for 51% of them, just getting materials for 62% of them. These pressures affected productivity negatively of course, and 56% reported being affected. The same impacts were very much lower in the rest of the country. (We note Statistics NZ was careful not to survey what builders thought of the major parts of their activity that interacted with Auckland Council, or any council.)

TSUNAMI ALERT OVER FOR NOW
GNS Science has advised that the largest waves have now passed, and therefore the threat level is now downgraded to a Beach and Marine threat for all areas which were previously under Land and Marine threat. All people who evacuated can now return. But keep an eye on the alert status because it could be upgraded as scientists monitor a deep, dark region for tell-tale signs.

NOT UP TO STANDARD
The FMA has taken the unusual (for them) step of naming an AFA financial adviser they say inappropriately warned his clients about risks in the wake of market uncertainty caused by COVID-19, telling then to shift to low risk funds via a "bulk email". “The FMA believes that Mr Gannon tried to ‘time the market’ by advising clients to switch investment funds multiple times within a short period without adequately explaining the risks of doing so,” the earlier warning said. “When providing this advice, Mr Gannon failed to have proper regard to each client’s risk profile and personal circumstances.” Now they have named him publicly.

"WE WANT 6%+"
China has set an economic growth target of ‘above 6%’ for 2021, Premier Li Keqiang confirmed at the Chinese National People’s Congress (NPC) earlier today (Friday) in Beijing.

OIL DRIVES INFLATION TREND
Crude oil prices are rising strongly today as buyers bet rising demand in China and elsewhere as the pandemic winds down will come up against limited supply from producers reluctant to raise output. This is another key cost that feeds into the reflation trade. At the start of 2021 the international price was US$52.50 /bbl. Today it is US$64/bbl, a gain of +22% in just 64 days.

WHOLESALE ELECTRICITY PRICES STAY VERY ELEVATED
It is not as though our 'green' hydro/geothermal/wind electricity will insulate us. That cost is staying sky-high, and is +260% higher that at this time last year. They are up +110% since the start on 2021. At some point soon these costs will have to flow though to consumers. They are hitting large industrial users right now. It is an uncomfortable irony that this 'green power' is rising very much faster than the crude oil price. (And remember three of the biggest gentailers are State owned.)

IRON ORE PRICES ARE UP SHARPLY
Commodity trading today in iron ore sees prices still rising.

FOOD PRICES ARE RISING EVEN FASTER
And for those who missed it this morning, the very sharp rise in global food prices is a sobering event.

WE WORRY ABOUT LIVING COSTS & HOUSING
New research reveals we are anxious about the cost of living and housing availability in the wake of the pandemic. Colmar Brunton’s Better Futures report released today in conjunction with the Sustainable Business Council (SBC) surveyed 1009 New Zealanders, finding the COVID-19 pandemic continues to have a significant impact on livelihoods and wellbeing.

THE FRONT FELL OFF
The Antarctic ice shelf is calving
. Two huge bits have broken off, one very large one in 2019, and one 1270 sq kilometers just last week. (Auckland is 1070 sq kilometers.)

GOLD LOWER AGAIN
Gold is trading in Australia, and soon in Asian markets. So far today it is at US$1693 and down another -US$23 from where it was at this time yesterday. That's a nine month low. This is a -3% or -US$50 drop since the start of March and a -13% or US$232 drop since the start of 2021. At the close of New York trading earlier today this price was at US$1697/oz, while in London it had also closed earlier at US$1712/oz.

EQUITIES SHARPLY LOWER AGAIN
The S&P500 ended today down another -1.3% with a further retreat on top of yesterday's. Reflation fears hit stocks more broadly today. The S&P500 is down -1.1% so far this week after giving up all of Monday's gain and is heading for a third consecutive week of declines. It is catching. At its opening, the very large Tokyo market is down -1.8%. Hong Kong is down -2.0% and the Shanghai exchange has opened down -1.1%. The ASX200 is down -1.0% today in early afternoon trade and compounding yesterday's loss, while the NZX50 Capital Index is down another -0.7% in late trading.

SWAP & BONDS RATES RISE FURTHER
Yesterday swap rates rose sharply today across the curve with the two year up to its highest in nearly a year, and the ten year up to near its highest in 20 months. We don't have today's closing swap rates yet. If there are movements today, we will note them here later when we get the data. But they likely tracked offshore moves higher. Today the 90 day bank bill rate is up +1 bp at 0.32%. The Australian Govt ten year benchmark rate is up another +7 bps at 1.85% as the reflation trade is in full flight. The China Govt ten year bond is stable at 3.29%. But the New Zealand Govt ten year is also up, and by +9 bps to 1.93%. And that is above the earlier RBNZ fixing at 1.89% (+9 bps). The US Govt ten year has also risen sharply again in the past 24 hours and is up another +8 bps at 1.56%.

NZD SOFTER
The Kiwi dollar is down to 71.7 USc and almost a full -1c lower than this time yesterday. On the cross rates we are down to 93 AUc. Against the euro we softer to 59.9 euro cents. That all means our TWI-5 is lower at under 73.7.

BITCOIN WEAKER
The price of bitcoin is falling sharply today, now at US$46,658 and down -8.0% from this time yesterday. Volatility over the past 24 hours has been a very high +/- 5.6%.

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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End of day UTC
Source: CoinDesk

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35 Comments

Once every few years New Zealand has a period of elevated electricity prices. Government announces that it will do something but has no impact on the market. We return to square a few years later. It's the cycle of politics in New Zealand. Infrastructure isn't really a vote winner though, better off sticking to school lunches and such.

Should be a no-brainer to build Lake Onslow and surround it with a billion dollars of solar.
That would drive down the price of power and drive up local manufacturing and productivity.

Which govt will build this? The current one has zero ambition so hopefully the next one will.

And why are wholesale electricity prices up? Wait, let me guess, market manipulation by the gentailers?

No it's because we all buy EV's now.

I'm going to assume that was sarc:
But even if we all bought EVs, there was an NZ Govt report a couple of years ago which said that if half the fleet switched to electric it would add 3% to power demand.

That must be true then. Hard to believe.

OK, so I did some googling and found this from March 2018:
https://www.infometrics.co.nz/big-ev-fleet-can-new-zealands-grid-handle/
"According to Transpower, current electricity generation stands at 9,284 mega watts (MW)....
Scenario analysis from the Ministry of Transport suggest that electric vehicles will make up 10% of the fleet in the late 2020s. At 10% of the fleet, electric vehicles will be adding up to an extra 800-900MW to daily grid demand. This additional demand shouldn’t be a problem for grid capacity if they’re charged at night – which is when most EV owners charge their electric vehicles anyway."

So you are right, the stat for EV power I mentioned looks too light compared to the above (if you believe that). Even converting 10% of the fleet would add about 10% to power consumption.
Infometrics expects us to need significant investment to improve capacity by the 2030s.

Reforms that were a failure from the get-go.
https://www.nzherald.co.nz/nz/power-rise-leaves-bradford-red-faced/QUX3M...

Thanks Max.

Yes by splitting it up and making it a market it has lined the pockets of the shareholders. At the expense of the consumers. The idea was that central planning was making big mistakes. Alas, those few overbuilds have long ago been brought into use. And they were built when things were cheaper. So in hindsight there was no overbuild whatsoever. Actually it wasn't all overbuilds, there were underbuilds too. eg HLY-SFD
To have the clearing price for all the surplus power of the generators being set at the bid price of the marginal generator was always going to be a windfall for the shareholders. Better to have a bulk supply tariff set by a benevolent govt. And that way there would have been added incentive to build renewable supply. (Where the sale price is very hard to identify, sunk price vs free source of energy, so a more financial/ cost of debt market sort of pricing).

Hummm. Electricity prices up. Strangely I have not had a new offer from Genesis. They pay me 12c (plus gst) for what goes out the gate, and 33c for what comes in. (in January four times energy went out versus what came in)

Same here (for the last 4 months). At this rate my solar will have paid for itself after 5 years.

Who did you use for solar?

DP

There is not less fossil generation than there was a year ago. The green energy component is mostly the same hydro power we have had for years. the dry year shortages are the same as before , only more frequent and from a deeper base. The cost of producing hydro power don't change, the markup at high spot prices must be staggering. i.e from 5 c/kwh to 37c kwh, around 700 %.

"as scientists monitor a deep, dark region for tell-tale signs."
Eh? Is this a euphemism?!

Wasn't there an IPO today that traded like a lead baloon?

My Soggy Food Bag

12
up

Overpriced, overhyped.

It's the grocery equivalent of We Work, but they got paid so who are we to scorn.

Unless they can crack Australia they are doomed to be average. NZ as a market is too small.

As I stated the other day this one isn't for me.

Actually I feel sorry for the new, less sophisticated retail investors who used services like Sharesies that really pumped this. They should have a far greater duty of care to new investors and stop exploiting them to slop up dodgy IPOs.

Largest IPO for 7 years?
Recent governments should be embarrassed by this.

I agree, a brown paper bag with some miso glaze, rice and and a salmon fillet. What does that say about NZ?

Housing is the only game in town. New Zealand's share market is a tiny backwater by comparison. A lot of local companies don't even bother with an NZX listing.

Re ice shelf and Auckland. Many of us would be happy for it to break off and float way ;)
Is this what you meant?

Can't have that , we 'd have to take a ferry to Northland.

The way that bridge is going, you still might

Kaeo bridge?? or Auckland Harbour??

So with interest, off the subject admittedly, I watched a stern identity from civil defence, I think, just prior to the PM’s CV19 grandstanding, telling us, quite severely of how various systems and alerts had saved those in at risk locations from a tsunami that didn’t happen. And I was so very much relieved and grateful, that with a little bit of luck they might one day, be able to replicate that presentation for one that does actually happen.

Could you use less words next time? So you want a real tsunami to hit?

Not at all. Surviving the Canterbury EQs would not allow myself, or any normal person I suggest, to be flippant about natural disasters. The point is I would prefer and applaud, such grandstanding after the successful handling of an actual event rather than it being promoted on a potential that did not materialise.

Call me cynical, but it feels like they are enjoying exerting all this control over us.

Never let a good crisis go to waste

Yes hearding sheep is so much fun.

useless information