A review of things you need to know before you go home on Wednesday; dairy prices stun, house asking prices weak, labour market 'too good'?, China services rise, swaps flatten, NZD holds

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

TODAY'S MORTGAGE RATE CHANGES
No changes today

TODAY'S DEPOSIT RATE CHANGES
No changes here today, but we did publish a note on 'best rates' for TDs.

A WEAK START, WORSE TO FOLLOW
The day started with a weak dairy auction. Fonterra's recently revised milk price forecast is under pressure again after global dairy prices sank a further -7.4%. Things got worse for dairy prices as the day wore on; futures prices tumbled sharply.

A WOBBLY PATCH
This was followed with data that raises questions about the momentum of the housing markets. The number of homes being listed for sale on Realestate.co.nz is well down on a year ago, and asking prices dropping in Auckland but rising elsewhere.

BELIEVE IT OR NOT
And then, Statistics NZ reported the unemployment rate was 5.3% in December, down sharply from 6% in September. This took financial markets completely by surprise and raised more than a few eyebrows. The participation rate fell as some more people than expected left the jobs market, but our participation rate is still unusually high.

BUT WHERE THE WORK IS, IS CHANGING
Most analysts read the QES data released today as showing wage inflation is still modest. And time may well vindicate this assessment. But the data detail shows raw total gross weekly earnings up +2.8% pa, and that is after two sectors reported very weak results - mining & forestry, and [surprisingly] "Information, media, and telecommunications". The growth in construction work was quite impressive.

A NOTE FOR SCEPTICS
This is what today's labour force data is based on: "The sample contains about 15,000 private households and about 30,000 individuals each quarter. We sample households on a statistically representative basis from areas throughout New Zealand. The HLFS is sampled so that is representative of geographic region, urban and rural areas, ethnic density, and socio-economic characteristics of the population. Households stay in the survey for two years. Each quarter, one-eighth of the households in the sample is rotated out and replaced by a new set of households."

IT'S NOT ALL NEGATIVE
Even though its manufacturing PMI is in the doldrums, the China services PMI for January came in at a six month high at 52.4 in data released this afternoon. That mean the combintion shows the China economy is just holding its own.. Separate data shows improving car buying sentiment.

'WE'LL TAKE ANYTHING'
BNZ-owner and Andrew Thorburn-run NAB are desperate to get out of Clydesdale Bank. They have finalised pricing for their IPO spin-off at nearly AU$1 bln less than the upper range of market cap hopes.

WHEELER DEFIANT
And we ended the day with some defiant explainers from Graeme Wheeler. He says he will interpret the 1-3% inflation target 'flexibly' and he won’t be ‘mechanistic’ about cutting rates just because headline CPI inflation is below the target. He reiterated he still sees Auckland housing a financial stability risk.

WHOLESALE RATES FALL & FLATTEN
We have had a fall and a strong flattening bias today. The one year term is up +2 bps, the two year term is down -1 bps which sinks to -5 bps for five years and -7 bps for ten years. The 2-10 curve is now just 73 bps. The 90 day bank bill rate rose +1 bp to 2.66% on the resistant signals from Graeme Wheeler today.

NZ DOLLAR UNCHANGED
Despite all the data and other news, the Kiwi dollar has held its position today. It is still at 65.4 USc, at 93.2 AUc, and at 59.8 euro cents. The TWI-5 is at 70.9. Check our real-time charts here.

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