A review of things you need to know before you go home on Friday; food prices lower, equity markets fall, dairy futures weak, Aussie lending up, swap rates lower, NZD holds

A review of things you need to know before you go home on Friday; food prices lower, equity markets fall, dairy futures weak, Aussie lending up, swap rates lower, NZD holds

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

TODAY'S MORTGAGE RATE CHANGES
No mortgage rate changes to report today.

TODAY'S DEPOSIT RATE CHANGES
No term deposit or savings rate changes either.

FOOD PRICES FALL
Despite the rise in monthly food prices in January, prices are still -0.6% lower than a year ago. The fall was led by lower grocery food prices (down -2.1%), due to lower prices for fresh milk (down -9%), cakes and biscuits (down -6.2%), and yogurt (down -11%). The fall was partly offset by price rises for chocolate and cheese. Fruit and vegetable prices decreased -1.2% over the year. A decrease of -4.7% for vegetables was partly offset by a rise of +3% for fruit.

FALLING BUT NO CALAMITY
Equity markets are falling again today, continuing the bear trend that originated in Europe and flowed through Wall Street last night. Most media are dining out on the tumbles. London was down -2.4%, Frankfurt down -3%, Wall Street was down -1.2%, all before we opened today. Now the NZX50 is down -1.1%, the ASX is down -0.9% and Hong Kong is down -0.4%. The point of this list is to show that the declines are not really all that steep, despite the headlines. Gold has jumped sharply. It was up US$50 overnight to US$1,246/oz, but in Hong Kong trading some of these rises have been given back. US$1,239 is the current price.

MORE DISAPPOINTMENT
Dairy futures are still pointing to continuing low prices. Next week's auction is unlikely to show any gains - more likely to bring more disappointment.

WHAT SLOWDOWN?
In Australia, lending commitments for housing (established dwellings) were up +2.1% in January, but lending commitments for new-build dwellings are up an impressive +12.4% pa. Average loan size there is AU$373,000.

'DON'T WORRY'
And the governor of the RBA has told their parliamentarians today that the gloomy mood isn't warranted by markets. But he also said he had 'flexibility' if the mood change becomes self-fulfilling.

WHOLESALE RATES EVEN LOWER
NZ swap rates were -1 and -2 bps lower today. The 90-day bank bill rate also slipped -1 bp and is now at 2.62%. These recent falls are accumulation now, and greatly overshadow the recent rise in credit spreads (which banks are very keen to tell you about).

NZ DOLLAR JUMPY BUT UNCHANGED
The NZD rose sharply today and later in the session fell back to levels we started out at this morning. It is currently at 66.8 USc, 94.1 AUc and the TWI-5 is now at 71.1, almost the same we reported here yesterday. Check our real-time charts here.

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12 Comments

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Gold up tony beets will be happy for once

'The point of this list is to show that the declines are not really all that steep, despite the headlines.;

???

Nikkei down 5.34% today, having fallen 6000 points from the August 2015 peak.

https://in.finance.yahoo.com/q/bc?s=%5EN225

Re "Bernard Hickey suggests removing cash" article on 7 Feb, here an antidote for his wayward thinking:

BANNING CASH: SERFDOM IN OUR TIME

http://www.freemansperspective.com/banning-cash-serfdom-time/

As far as I can see it would be one of the worst things to happen to societies freedom.

Its definitely not a calamity, it is the financial disaster act two
In the first act shonkey securitisation was papered over with quantative easing leaving a mountain of
non performing loans
In the second act a clearly flawed central banking system will desperately introduce untried negative interest rates and the outcomes are completely unknown...
Hard to promise a happy ending

You are right about one thing , this is likely to not have a happy ending , the causes of the first phase on the GFC have never been addressed

Remember "kicking the can down the road "

At some point either the kicker will run out of steam , or the road will come to an end

The Sovereign Wealth Funds have around $7 Trillion of assets. Russia liquidated a couple of billion at the end of last year but the longer and lower the oil price stays then the cheaper assets are going to become as the New Year sales will continue.
Cash is king for a while yet.

US FED telling banks to prepare for negative interest rates:

http://www.cnbc.com/2016/02/09/from-zirp-to-nirp-whats-the-feds-next-mov...

How does anything bad happen ?

Slowly at first and then very quickly .

I don't trust equity markets at all right now , they have run too far ahead of themselves

Equity markets as an asset class are probably relatively cheap against the bond market and property BUT there is a fire sale going on right now and so they will probably get quite a bit cheaper yet.The SWF's are yet to start selling their property portfolios as they are more illiquid.

I don't know who has the collective wealth to replace the money of the SWF's as everyone one else is leveraged out.

Either way you look at it , sovereign wealth funds are not usually net sellers , take a long term view and hold out for the dividend stream

They wont sell , even in a severe slump .

Ordinary leveraged players in the market cannot afford big losses and look to exit the river at the top of the waterfall ( as we saw in China )

Boatman,

The majority of the Sovereign Wealth Funds(excluding the likes of Singapore) were set up to invest the surplus revenues created from oil/commodity revenues.
If we take Saudi Arabia as an example. Their cost of production is say around $20 per barrel so even at current prices they are making decent profits. However they are in the middle of a lot of sand with no industry and very few people actually working with a dominant controlling family. So what do they do to keep the majority of the population happy and prevent an uprising? They make very generous payouts.
To maintain the status quo with the populous it requires an oil price of around $80 per barrel so at the current oil price the Saudi's have a budget deficit of around $50 per barrel so the only way to fund this is to draw down on the Sovereign Wealth Fund.
Russia had to sell $1.5bn of assets in December alone to balance the books.
Norway is not too bad.It has only sold down around $5-600m as has a relatively small population.

Do not underestimate the impact of the falling oil price. Who would have thought a year ago the price of oil would more than half? No one.The knock on affects are far and wide.