Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No changes today. Update: ANZ has updated its one year fixed rate by +5 bps to 2.55%, its two year fixed rate by +5 bps to 2.95%. And it reduced its three year rate by -9 bps to 3.15%.
TERM DEPOSIT RATE CHANGES
Kiwibank raised its nine month one year offer to 1.25%.
BIGGEST WINNER
Barfoot & Thompson's July sales reach a six year high with stock levels hitting a new low leaving buyers with little to choose from
BIGGEST LOSER
Air New Zealand now expects to lose up to $530 mln in the 2022 year, on top of about $450 mln in the financial year just gone - and it will need to tap more into the Govt's standby loan facility.
HOT LABOUR MARKET ► HIGHER OCR SOONER
Statistics New Zealand says unemployment dropped in the June quarter to 4.0% from 4.6% in March, 'under utilisation' also dropped sharply, seemingly pointing the way for Reserve Bank interest rate increases - maybe as early as next week. And some bank economists are saying the OCR could go from its 0.25% to a full 1.00% by the end of 2021.
PEAKED?
The ANZ World Commodity Price Index has stayed near its record level, easing just a minor -1.4% in July. Dairy continued to lose ground and they also recorded lower prices for logs this month. In NZD there was even less of a change from its record high.
SEEKING INVESTOR INTEREST
Westpac is seeking investor interest in a $350 mln parcel of mortgages originated by Avanti Finance in an RMBS transaction. About 94% of these mortgages will support investment grade rating.
WOBBLY
Dairy prices at the overnight auction fell -1.0% in USD terms, and earlier today we noted that in NZD terms they were down -2.3% from the prior auction, creating downside risk for the farmgate payout forecasts. But by the end of today, that decline in ZD has jumped to -3.2% adding to those risks. WMP is the weakest commodity, and Fonterra is reducing its offerings at future events, reinforcing the weak outlooks. Westpac has now cut its 2021/22 payout forecast by -25c to $7.75/kgMS.
WEAK RECENTLY, ROLLING BACK YEAR-ON-YEAR GAINS
Last week, the eight companies in the NZX50 energy sector fell more than the overall market, down -1.2%. And they are overweight on a year-on-year basis too rising +8.7% vs the overall market +7.6%. Just last week Vector shone (VCT, #30), rising +5.4%, but Mercury (MCY, #11) was down -3.1% and Contact (CEN, #7) down -2.5%. Overall, this 'energy' sector makes up 19.1% of the overall NZX50 capitalisation and a slight upweighting in a year from 18.7%.
NOT AS TOUGH AS FIRST INDICATED
In something of a surprise, the private Caixin services PMI for China reported a strong bounce for July, better than the official version.
PRESSURE IN NSW REMAINS INTENSE, EXTENDS TO QLD
There were 233 new community cases in NSW today with another 130 not assigned to known clusters, so still going backwards there. Victoria is reporting just zero new cases. Queensland is reporting 19 new cases so starting to grow there. Brisbane's snap lockdown has been extended. There were two new case in New Zealand at the border, but still none in the community.
GOLD MOVES FURTHER UP
Compared to where we were this time yesterday, the gold price is up +US$2/oz at US$1815/oz in early Asian trading.
EQUITIES TURN POSITIVE
The S&P500 kept on rising in today's Wall Street session, ending up +0.8%. Tokyo has opened down -0.1%, but Hong Kong has opened up a strong +1.3% and Shanghai has opened up +0.4% all in very early trading. The ASX200 is up +0.2% in afternoon trade. And the NZX50 Capital Index which is up +0.6% again in late trade today and in a further rising trend.
SWAP & BONDS RATES JUMP
We don't have today's closing swap rates yet and if there are significant ongoing changes we will note them here. They are probably sharply higher with the one year up +14 bps and the 2 year up +13 bps. The 90 day bank bill rate is up +5 bps at 0.55%. The Australian Govt ten year benchmark rate is up +1 bps at 1.16%. The China Govt ten year bond is also up +1 bp at 2.85%. The New Zealand Govt ten year however is up +8 bps at 1.62% and pushing on well above the earlier RBNZ fix of 1.58% (+7 bps). The US Govt ten year is now at 1.18% and down -1 bp today.
NZ DOLLAR JUMPS IN SYMPATHY
The Kiwi dollar has been firmer as well so far today and now at 70.7 USc following the labour market data and OCR rise expectations. Against the Aussie we are higher at 95.4 AUc. Against the euro we are up sharply at 59.5 euro cents. The TWI-5 is up to 73.4 and a +60 bps rise.
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BITCOIN SLIPS YET AGAIN
The bitcoin price is now at US$38,070 and another down another -2.2% from this time yesterday. Volatility in the past 24 hours has been low at +/- 1.7%.
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28 Comments
Wrong update re: deposit rates. The Kiwibank increase to 1.25% p.a. actually relates to the 9 months period, not 12 months.
Not that important anyway, as all rates (both deposit and mortgage) are shortly going to see a well-overdue increase anyway, starting from 18th August.
Bernard Heckay has been excellent in explaining how Jacinda led Labour government is killing FHB
https://thekaka.substack.com/p/dawn-chorus-rbnz-move-will-hit-first?tok…
The supply of housing is positively related to house prices, and the supply curve is upward sloping. However, supply is frequently inelastic because of time lags and legal complexities and, in the case of new-builds, because of the difficulty of obtaining resource consent.
Brendon Harre wrote an article a few years back about inelasticity in supply:
https://medium.com/land-buildings-identity-and-values/aucklands-housing…
Last time I looked up the research New Zealand had one of the least elastic residential housing markets.
Our supply merchant warned us yesterday that materials are on order stretching out to June 2020 - ie, if you order today some of your order will be available in June 2022. They also warned that in the immediate future we must budget for cost increases averaging 10% - & that would be only good for 3 months. You must budget on rapidly rising costs of new builds - & renovations
“could go from its 0.25% to a full 1.00% by the end of 2021”
Really - from quarter of nothing to a full nothing by the end of 2021.
A bit tired of Mr Orr’s constant bumbling - too slow, too much watching and waiting – so much damage having been done in the meantime.
If you thought Mr Orr’s execution of the NZ Superannuation Fund foray into the ultimate Portuguese pickle venture courtesy of Goldman Sachs was a total fiasco – it now appears that was just his opening act.
I don’t think the man is fit for the task.
well, well, well.. Regarding Housing:
Lot's of news articles and comments flying around the internet this week. I think the chickens have finally come home to roost.
The new reality-of-things is now dawning on [affecting] the general populace. Those of us in the know have had years to come-to-terms with and prepare for the New , New Zealand as we've watched this train-wreck happen in slow motion.
Those just waking up to things (no doubt a massive number) will find themselves in desperate, confused, hyperbolic states. It's due to their voting ineptitude really - stay away from such people. Use your knowledge and focus on making good decisions in your personal spheres.
If you're still in NZ in 2 years; hold your noise and vote Act, you'll learn to like them:
https://youtu.be/6VhSm6G7cVk
I'm fine with (relatively) high immigration if those who are moving here are high skilled and especially if there's a shortage in whatever field. I would end the visa rort. And allow a fixed/limited number of temporary low skill migrants.
I'm not particularly keen on families moving too. Perhaps if those others moving with them tick enough of the right boxes.
High skilled - it depends on your definition. My excludes low paid. I'm happy with the immigrant doctors who treated me and I doubt many NZ doctors are unable to find work. But I see too many immigrants doing low paid work that helps keep my adult kids wages low and their opportunities reduced. Define high skilled as high paid and I don't mind if they are chefs, bottle shop operators or tourist guides - leave it to the employer to choose between training a Kiwi or paying through the nose for a foreigner.
High skilled - it depends on your definition. My excludes low paid. I'm happy with the immigrant doctors who treated me and I doubt many NZ doctors are unable to find work. But I see too many immigrants doing low paid work that helps keep my adult kids wages low and their opportunities reduced. Define high skilled as high paid and I don't mind if they are chefs, bottle shop operators or tourist guides - leave it to the employer to choose between training a Kiwi or paying through the nose for a foreigner.
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