A review of things you need to know before you go home on Friday; higher inflation expectations, PMI higher, Chapman switches, M&A activity strong, swaps hold, NZD softer, & more

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

MORTGAGE RATE CHANGES
None to report here today.

TERM DEPOSIT RATE CHANGES
None here either.

TAPERING
The number of New Zealand citizens returning home from overseas is starting to taper off. Migration is adding fewer than 5000 people a year to our population, compared to almost 85,000 a year earlier.

HIGHER INFLATION EXPECTED
Yesterday we got the RBNZ survey results for business expectations of inflation (M14) which sees inflation at one year at 3.02% and at 2 years at 2.27%. Today we got their survey of consumer expectations (M13) and that shows expected average inflation in one year at 3.8% (its highest since 2012), up from 3.4% three months ago. (Actual June 2021 inflation was recorded as 3.3% pa.) Every measure is now well above the RBNZ target range and now every analyst expects the RBNZ to raise the OCR next Wednesday.

FACTORIES BOOMING
New Zealand factories are in boom territory. BNZ says the July PMI portrayed an industry champing at the bit. Not content with its very high reading of 60.9 for June it pressed up to 62.6 in July. Only twice before has it been speedier - once in March 2021, when it hit a record high of 63.6, and once back in June 2004 (with 62.8). Encouragingly, deliveries of raw materials (57.9) continued to pick up, to an above-average rate of expansion, while the PMI’s index of finished stocks (56.9) was comfortably above trend too in July. Still, production (66.0) and new orders (65.0) were even further above their respective norms, suggesting supply is still struggling to keep up. Labour demand is also now at a record high.

CHAPMAN ACCEPTS MCEWAN'S OFFER
Former ASB CEO Barbara Chapman is joining BNZ's board as an independent non-executive director from October 1.

CONSOLIDATION ACTIVITY STRONG
M&A activity was strong in Q2-2021 - and driven by local buyers. That is according the PwC. They say that while 2021 started off slowly, with just 11 deals completed in Quarter 1, Quarter 2 saw record levels with 47 deals announced or completed. Deal activity was driven by local buyers: 70% of deals completed involved locally-based buyers, compared with 51% in 2019 and 51% in 2020. Private equity deals made up 10 of the 47 deals similar in proportion to previous years. Almost half of the private equity activity was focused on the technology, media and telecom (TMT) sector. TMT and Consumer sectors accounted for almost half of total deal activity.

NZU REACHES NZ$50/TONNE
The carbon price is now touching $50/NZU (actually NZ$49.80/NZU) so expect some official reaction as a consequence. The EU carbon price is now at €56.26 (NZ$93.80) and it can't seem to push on over €58 despite three runs at it in the past 90 days.

PRESSURE IN AUSTRALIA INTENSIFIES
The Australian Capital Territory is now in lockdown because of a school outbreak and 3 new cases. There were another 391 new community cases in NSW today with another 250 not assigned to known clusters, so they are still not getting on top of their outbreak. It has spread into regional NSW now. Victoria is reporting another 15 new cases today and their lockdown is extended. Queensland is reporting 8 new cases. Overall in Australia, more than 24% of eligible Aussies are fully vaccinated, plus 22% have now had one shot so far. There was one new case in New Zealand at the border, but still none in the community. New Zealand reports 22% of its eligible population having been fully vaccinated with a further 15% having had one jab so far.

GOLD UP
Compared to where we were this time yesterday, the gold price is up at US$1756 and a rise of +US$7 from this time yesterday. At this level it is up +US$2 from the New York close and up +US$6 from the afternoon London fix.

EQUITIES GENERALLY FIRM
The S&P closed its Thursday session up another +0.3% on Wall Street to a new record high. Tokyo has opened today up +0.2%. Hong Kong has opened flat, and Shanghai is up +0.3% in early trade. The ASX200 is up +0.5% after yesterday's flat result. They are heading for a weekly rise of +1.1%. The NZZ50 Capital Index is up +0.9% in late trade which should allow it to close up +0.2% for the week.

SWAP & BONDS RATES HOLD
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 little-changed. The 90 day bank bill rate is down -1 bp at 0.67%. The Australian Govt ten year benchmark rate is up +2 bps at 1.22%. The China Govt ten year bond is unchanged at 2.89%. The New Zealand Govt ten year however is up +1 bp to 1.74% and now well above the earlier RBNZ fix of 1.71% (unchanged). The US Govt ten year is now at 1.35% and unchanged since this time yesterday.

NZ DOLLAR SOFTENS SLIGHTLY
The Kiwi dollar has softened slightly today, and now at 70.1 USc. Against the Aussie we are little-changed at 95.5 AUc. Against the euro we are softer at 59.7 euro cents. The TWI-5 is now a touch lower at 73.3, still in the middle of the ten month 72-74 range.

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BITCOIN DOWN
The bitcoin price is now at US$44,919 and down -2.3% from this time yesterday. For the week, this is up +10% however. Volatility in the past 24 hours has been moderate at just over +/- 2.7%.

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