Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
None to report today.
TERM DEPOSIT RATE CHANGES
None here either.
LOOKING PAST RISING PRICES, SEEING OCR HIKES
Today's events have been dominated by the RBNZ Monetary Policy Statement. Full details here. They have left their monetary policy settings unchanged and now say the current price pressures visible 'will abate over the course of the year'. But they do expect to raise the OCR starting in September 2022 which is earlier than prior signals. Then they expect a steady, regular set of rises for at least a year. The NZD rose sharply on the release.
LOW RATES KEEP FHBs BUYING HIGH PRICE HOUSES
Mortgage lending was very strong in April, staying high after the March boom. The usual seasonal fall away didn't happen this year (after accounting for Easter and Anzac Day). Lending to first home buyers was particularly strong. (As it has been for a while, it undermines the narrative that FHBs are being shut out of the housing market.) More here.
FONTERRA TRIMS MILK PRICE FORECAST
Fonterra gave its quarterly trading update today. It trimmed its expected 2020/20 season milk price by -5c to $7.55/kgMS in something of a surprise. It also forecast an $8/kgMS price for 2021/22. You can compare all analyst forecasts here.
FONTERRA WARNS EARNINGS WILL BE POOR
Fonterra also said it is struggling with profitability in its second half of operations, and things will be very tight in Q4. That is a signal to investors earnings will be poor. Their share price (FGC) fell again, down -0.6% to $3.40 which is down from $5.15 just before their capital restructure proposal announcements. $3.40 is the lowest since September 2019 when it reached $3.19/share.
FONTERRA REVEALS ITS CHINA FARM SALE FAILED
And there's more. (Page 4.) The deal to sell its 85% interest in the Hangu Farm (to the 15% holder) has apparently failed. "Due to lack of progress in agreeing the specific terms of the sale, the right of first refusal was terminated earlier this month and Fonterra will now look to open up the sale process to a wider group of prospective buyers."
NO DEBT STRESS
The latest set of bankruptcy and NAP filings for April show debt stress is not re-emerging. In fact the trend is even less than the record low levels previously reported.
DOING BETTER
Fletcher Building (FBU #6) have upgraded their earnings forecasts to the top of their previous range.
COMMERCIAL PROPERTY VARIATIONS
Kiwis may be enamored by "property", but equity investors on the NZX are taking a more jaundiced view of many commercial property listings. The overall NZX50 capitalisation rose last week by +0.7% but the property sector stocks actually fell by -0.8%. Since we started tracking NZX50 capitalisation in September 2020, the market has gained +4.9%. But the property eight listings have gained only +1.8%. However, there is a wide spread in fortunes, ranging from +13.2% for Kiwi Property (KPG, #18), down to -7.7% for Investore Property (IPL, #37)
TRADE BALANCE PROGRESS
The April merchandise trade balance is +$388 mln. Comparing it with the April 2020 +$1.3 bln is probably not relevant given the sharp trade (import) distortions at that time. But it is similar to the +$361 mln in April 2019. Our trade with China. Our surplus with both China and Australia is declining, but we have converted a deficit in the year to April with the USA into a healthy surplus this year. Our trade with Japan is a smaller deficit. In April 2021, our exports to China represented 32% of all exports.
COVID WITH A CAR LOAN?
In Australia, a car finance firm in Port Melbourne is at the centre of Melbourne’s widening COVID-19 outbreak, which has grown to 15. Travel between New Zealand and Victoria has been paused.
GOLD FIRM
The gold price is now at US$1905/oz and up +US$28 in early Asian trading from this time yesterday. The NY market closed at US$1899/oz and London closed at US$1887.
EQUITIES LITTLE-CHANGED
The S&P500 ended its Wall Street session today falling away at the end to be -0.2% lower. The very large Tokyo market has opened its session up +0.2%, Hong Kong is up +0.8%, and Shanghai is up +0.5% early in their session. The ASX200 is up a minor +0.1% early afternoonwhile the NZX50 Capital Index is lower by -0.2%.
SWAP & BONDS YIELDS JUMP
We don't have today's closing swap rates yet but they rose with the RBNZ MPS track. The 2yr swap rate rose from 0.52% to 0.59%, 10yr swap rates rose from 1.89% to 1.96%. Other fixed interest yields all also rose. The 90 day bank bill rate is up +1 bp at 0.34%. That is a -5 bps fall in a week. The Australian Govt ten year benchmark rate is down another -2 bps since this time yesterday at 1.62%. The China Govt ten year bond is holding at 3.09%. But the New Zealand Govt ten year is now up a sharp +8 bps at 1.88% and now back well above the 1.76% in the earlier RBNZ fix (-2 bps) and presumably before the MPS was released. The US Govt ten year is down -3 bps at 1.58% as global bond markets stay in a risk-off tone.
NZ DOLLAR JUMPS
The Kiwi dollar jumped more than +¾c on the RBNZ signal the OCR will start rising next year and is now at 73 USc. Against the Aussie we are up to 93.8 AUc. Against the euro we are up at 59.6 euro cents. That means the TWI-5 is up at 74.4 and a gain of about +75 bps
BITCOIN RISES AGAIN
The bitcoin price is now at US$39,273 and up another +2.7% from this time yesterday. Volatility in the past 24 hours is still very high at +/- 4.1%.
This soil moisture chart is animated here.
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