Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
ANZ led out of the blocks today with some minor rises to short term fixed rates. But they were quickly overshadowed by a brave +30 bps hike to similar short rates by ASB. This is probably just the start of a new round of rate hikes.
TERM DEPOSIT RATE CHANGES
None here today - so far at least.
SMASHING IT
The Q2-2021 economic expansion was +2.8% from Q1 and far above the expected +1.2%. It was as very positive surprise even if the Q1 expansion was downgraded marginally. For the full year, our overall economy produced $340 bln in activity, even with the pandemic woes. In the full year to June 2020 it was a $317 bln economy; to June 2019 $310 bln. These are nominal levels, but the variation from 'real' is low given the low inflation impulse during these periods. It is all quite impressive really. Our currency rose. Our benchmark interest rates rose too, especially at the shorter end. No-one now thinks the RBNZ will hold back in three weeks.
SMASHED
We updated our median multiple data for the 26 urban areas we cover, bring it up to August. New records were set for the Auckland region (houses cost 11.8 times the median household income), Wellington City (9.5 times), Christchurch (6.8x), Hamilton (8.5x), Tauranga (10.5x) and Palmerston North (7.5x).
DELAYS
The Government said it will change the law to give itself another five months to put together a major plan for how NZ will reduce GHG emissions.
THE COST OF PEACE & QUIET AT HOME
The Government has topped up its Covid-19 response fund by another +$7 bln, having already put aside $62 bln (20% of GDP) for the response since the start of the pandemic.
TOUGH GOING
In Australia, their new lockdowns are skewing their labour market noticeably now. They lost -146,000 jobs in August, -78,000 were part time, -68,000 were full-time jobs. But participation fell as an unexpectedly large number of people dropped out of their workforce, and that left their official jobless rate at 4.5%. The number of hours worked fell by -3.7% in August from July.
EXPECTING FAST-RISING PRICES
At the same time, inflation expectations rose sharply in Australia from 3.3% in June to 4.4% in September.
PANDEMIC PRESSURE INTENSE STILL
In Australia, there were another 1351 new community cases in NSW reported today with another 1252 not assigned to known clusters, so going backwards there again. They now have 14,273 active locally acquired cases. Victoria is reporting another 514 new cases today, so it is worse there too. Queensland is reporting one new case. The ACT has 15 new cases again. Overall in Australia, more than 44% of eligible Aussies are fully vaccinated, plus 25% have now had one shot so far. There were three new cases in New Zealand at the border, and 13 more in the community, all in Auckland. So far, 35% of eligible Kiwis now have both shots, another 33% the initial shot. So far the New Zealand vaccination effort (68% of Kiwis and rising) isn't hitting the resistance seen in Australia (still at 69% despite starting earlier).
GOLD DOWN
Compared to where we were yesterday, the gold price is -US$12 weaker at US$1795/oz in early Asian trade. That is similar to where it closed in both New York and London.
EQUITIES MIXED
The S&P500 ended its Wednesday Wall Street session up +0.8% with a rising trend all day. Today, Tokyo has opened down -0.3%, Hong Kong continues its retreat, down --0.8% in early trade. But Shanghai is up +0.2% in its early trade. The ASX200 is up +0.8% in early afternoon trade, but the NZX50 is down another -0.1% near the close here.
SWAP & BONDS RATES TURN BACK UP
We don't have today's closing swap rates yet. But since the GDP result, they have been on the rise, especially at the short end. The one year is up +9 bps, the two year +8 bps. The 10yr is up +4 bps. We will update this if there are significantly different changes when the end-of-day data comes through. The 90 day bank bill rate is up +7 bps at 0.61%. The Australian Govt ten year benchmark rate is now at 1.24% and up +3 bps. The China Govt 10yr is now at 2.92% and up +2 bps. The New Zealand Govt 10 year rate is now at 1.84%, and up +3 bps, and still above the earlier RBNZ fix for that rate at 1.80% (unchanged and presumably fixed before the GDP result was known). The US Govt ten year is now at 1.30% and up +2 bps.
NZ DOLLAR MUSCLES UP
The Kiwi dollar is now at 71.2 USc and up about +40 bps from this time yesterday. Against the Aussie we are up at 97.1 AUc and its highest since April 2020. Against the euro we are firmer at just over 60.3 euro cents. The TWI-5 is just under 74.3, and shifting above the top of the 72-74 range we have been in for most of the past ten months.
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BITCOIN FIRMER AGAIN
The bitcoin price is now at US$47,965 and up 1.9% from where we were at this time yesterday. Volatility in the past 24 hours has been modest at just over +/- 1.8%.
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35 Comments
I've been trying to come up with a less essential and sympathetic scenario than a "cryptocurrency entrepreneur" flying to Wanaka, but I really can't. Anyone?
https://www.stuff.co.nz/national/health/coronavirus/300406612/cops-clea…
Then you clearly don't understand NZ's strategy of elimination. You are welcome to disagree with it, but it is the current strategy. Which means if idiots take COVID with them to the South Island then the whole country moves back into L4. It is not about being scared - it is about wanting to get back to normal, which means elimination (within NZ) for now. Until the government strategy changes, hell yes I'm reporting people potentially spreading the virus and getting us all locked down for longer.
Like I said, I'm obeying the rules [I am in ChCh].
I'm just not interested in controlling or narcing on others.
I don't fully know how I feel about State imposed restrictions on movement and commerce. I'll leave it to my fellow citizens to decide that for themselves too.
It's really between them and the State.
ASB has just started the next round of dancing. There will be a few more rounds, with all banks going to raise repeatedly and in quick succession.
The RBNZ is quickly losing relevance, as market forces are reasserting themselves. Orr will simply be forced to acknowledge reality by repeatedly raising the OCR just to reflect what swap rates and banks have already started to fully price. Anybody who has been paying any attention to the 1 year swap rates evolution in the last couple of months can see clearly what is going to happen.
The madness of the recent ultra-loose monetary policies has reached its peak, the tide is reversing and the RBNZ is again fighting a rearguard action while trying to fight the market in a losing battle.
The Covid excuse has run its course, and once the NZ population vaccination rates have reached enough penetration to allow NZ to fully re-open, interest rates will get another big push upwards.
I've been thinking about this for a while.
Low interest rates mean that lots of new money is being created(borrowed) but it goes straight into assets so doesn't actually create much inflation. If money starts getting pulled out of these assets as rates rise then these rises may start to feed into themselves.
Low interest rates mean that lots of new money is being created(borrowed) but it goes straight into assets so doesn't actually create much inflation.
Inflation is an increase in the money supply relative to available goods and services. New money being borrowed into existence is inflation by definition.
No mention of Evergrande in China yet ..Is this the world economy black swan event.
I'm following it and spread a bit of DGM y'day related to Evergrande. Likely not to see anything related to it in Granny Herald and TVNZ. Therefore, don't expect to see much interest from the suburbs.
Anyway, Dalian iron ore futures were down 4% today.
As contagion spread, risk is also hitting banks whose shares are suffering their fastest selloff in seven weeks. Furthermore, as discussed yesterday ahead of the coming Evergrande debt crisis, lenders in China are accepting the highest rates in four years to swap their dollars for yuan, a sign they may be preparing for what Mizuho calls a “liquidity squeeze in crisis mode.
Softness in the housing market -- which comprises about 28% of China’s economy -- is becoming more evident. Data Wednesday showed home sales by value slumped 20% in August from a year earlier, the biggest drop since the onset of the coronavirus early last year. Responding to a question on Evergrande’s potential impact on the economy, National Bureau of Statistics spokesman Fu Linghui said some large property enterprises are running into difficulties and the fallout “remains to be seen.” Economists have warned that China is squeezing its property market too far in its quest to avoid bubbles. Link
Three different estimates suggest that hidden local-government debt, mostly in the form of borrowing by LGFVs, amounts to roughly 45-50% of China's GDP. The authorities have been trying for years to clamp down on this hidden debt.
Without soaring debt and the continued creation of large amounts of false wealth, it is all but impossible to maintain GDP growth rates anywhere near what Beijing plans for the next decade or two.
Chinese consumers have pulled their horns in quite some time ago. Many NZ companies think it's an easy market for making a motza. Not at all. Potential is massive but you need a clear insight-driven strategy and there is an endless stream of risks and threats in the market.
Once you realize what's really happening in '21, and how this is simply a continuation of the last decade because it's not just about China, the really scary sh-- Xi is doing right now makes perfect sense given his and China's fundamentally Maoist root. https://t.co/1hmTJx8MNB?amp=1
Amazing to think this has gone on for 5 years. How can your cheat on integrity tests? Only at KPMG. This is not a rogue staffer. It obviously has been rampant.
The US audit watchdog has fined KPMG Australia $US450,000 ($615,000) over “widespread” cheating on tests designed to ensure partners and staff act with integrity and have the relevant skills for their work.
More than 1100 KPMG partners and staff “were involved in improper answer sharing when taking training tests” where they either received or shared answers between “at least 2016 to early 2020″, according to a decision published overnight by the Public Company Accounting Oversight Board (PCAOB).
https://www.afr.com/companies/professional-services/kpmg-fined-615-000-…
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