A review of things you need to know before you go home on Tuesday; a few rate reductions, inflation rises, low lakes cause high power costs, Chapman gets another gig, swaps rise, NZD up

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

MORTGAGE RATE CHANGES
The Cooperative Bank has cut their 18 month and two year home loan rates, setting them back at market competitive levels.

TERM DEPOSIT RATE CHANGES
RaboDirect reduced most rates for terms 18 months and longer. NZCU Baywide reduced most of its term deposit rates, and its Success Saver rates.

INFLATION SUDDENLY REAPPEARS
Stats NZ says prices rose +0.9% in the September quarter, giving an annual inflation rate of +1.9%. Economists had expected a rise from +1.5% in the year to June to +1.7%. The surprise result is both in tradeables inflation that is up to +0.8%, and non-tradables inflation which is up to +2.6% (none of which can be blamed on fuel costs). Transport costs have been juiced higher by higher fuel costs, up +5.6% year-on-year. Housing and utilities are up +3.1%. Alcoholic beverages were up +4.7%.

READ THIS. LOOK AT THE CHART. WORRY
New Zealand's giant batteries, the hydro lakes, are not as full as they should be. In fact, for this time of year, they are at their lowest point in 2018 when normally they reach this position in late July and start filling again through Spring. Hydro might be 'green' but it is also fickle. And markets are starting to worry about the consequences of these lakes not filling normally. Wholesale electricity prices have jumped to their highest point since 2011. Take a look at this chart to get the full impact of the market reaction. Petrol was inflationary in Q3. Perhaps electricity will be in Q4?

CHINA INFLATION RISES
Talking of inflation, the September data in China came in as expected at +2.5% pa, up from +2.3% in August. Producer prices were up +3.6% (and down from +4.1% in August.)

PORTFOLIO BUILDING
Ex CEO of ASB, Barbara Chapman, has picked up another directorship, this time at the big Aussie insurer IAG. This is on top of existing roles including the chair of Genesis Energy, and on the boards of NZME, The New Zealand Initiative and Fletcher Building.

NEXT MOVE UP
In Australia, the minutes of the RBA October 2 meeting showed they expect the weak Australian dollar to hold up domestic economic growth. They indicated that the next move in official interest rates is more likely to be an increase than a decrease, although they do not see a near-term change.

US DOWN, CHINA 'UP'
The equities slump suddenly appeared at the end of trading on Wall Street this morning with that market down -0.6% after level-pegging for most of the day. The Shanghai stock exchange has opened strongly in early trading with domestic insurers on the 'home team' heeding the call from their masters in Beijing. They were up +1% in the first hour of early trading. But it hasn't held. Now it is barely up. The ASX is up, the NZX is down.

NATIONAL SUPPORTS COMMERCE AMENDMENT BILL
The National Party will support the Commerce Amendment Bill that provides the Commerce Commission with a market studies regime, but wants the Government to axe fuel taxes, National’s commerce and consumer affairs spokesperson Brett Hudson says. He says National doesn't oppose minister-initiated market studies, but does object to studies initiated by the regulator without ministerial oversight.

SWAP RATES RISE, STEEPEN
Swap rates are up today. They are up +1 bp for 2 years, and up +3 bps for 5 and 10 years. The UST 10yr is marginally higher at 3.16%. The UST 2-10 curve is at +30 bps. The Aussie Govt 10yr is at 2.72% (up +2 bps), the China Govt 10yr is at 3.64% (also up +2 bps), while the NZ Govt 10 yr is at 2.71%, and up +4 bps. The 90 day bank bill rate is up +1 bp to 1.90%.

BITCOIN RISES
The bitcoin price is up +4.2% and now at US$6,510.

NZD UP STRONGLY
The NZD rose overnight and has kept on rising during the day. It is now at 65.8 USc. On the cross rates we up at 92.1 AUc, and 56.7 euro cents. That puts the TWI-5 up to 69.7.

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Daily exchange rates

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USD 
NZD
End of day UTC
Source: CoinDesk

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23 Comments

"Hydro might be 'green' but it is also fickle."

Well, the lakes are lower, but should there not be a mention of the Pohokura gas field, operated by Shell NZ? Apparently this gas field supplies some 40% of NZ gas, incl. gas to run gas powered electricity generators. The field is out of action since late September - till November I hear - because of a faulty valve. It's not only nature that is fickle, our infrastructure without redundancy is fickle too.

Did you see Genesis has to import coal, as gas supplies are currently dodgy ?? and hydro could be looking down the barrel of a long hot dry summer.

Not a good time to be on Flicks spot pricing plan. Only about 8x higher than normal.

It’s a good time to trawl the Flick Facebook page for all the comments from people who were “lied to and deceived” by Flick and are finding another power provider.

An app update logged me out so I never got a warning that prices had gone mental.
The big blocking highs are setting up already so there might not be much rain for the rest of the year.
Z Energy paid way over the odds for Flick and there is a real risk that Flicks customers will leave in droves. The other power companies have been cold calling.

I just saw a screenshot of someone's Flick spot price at 7:30 am on 15/10/18.

$10.16 per kw/h. LOL

So $240-300 to fill up your Nissan leaf... I thought those things were supposed to save you money :)

Because of the large anticyclone wind generation has been running at less than 10% of installed capacity.

Gas & coal are our only solution !

We need some sunshine to melt the snows. It's been so cold.

National unsold housing stock has risen from 35091 on Friday (Real estate.co.nz) to 35176 today, a rise of 0.24%
Auckland unsold housing stock has risen from 13259 on Friday (Real estate.co.nz) to 13,334 today, a rise of 0.6%
Auckland rental offerings (trademe) also continue their rise, from 4050 on Friday, to 4109 today, a rise of 1.5%

I just saw a funny comment in a financial news journal where the hack described the markets as "Global Markets wobble "

Lets hope thats all it is........ a wobbly wheel .

Wobbles may not be a good term to use , because wobbles often lead to not-so -good outcomes

https://www.youtube.com/watch?v=mJIn6gMlo6A

You picked a fine time to leave me loose wheel :-)

"Weebles wobble, but they don't fall down"

Lets talk snow levels on ALL NZ's mountains, before we panic about lake levels. Ruapehu has had an epic ski season by all accounts, Mt Hutt got 46cm on October 14 2018, and we know Queenstoen got a dump md September, I flew over Mt Taranaki and it had a great white top. So with a bit of snow melt lets see how things look in early December.
One swallow doesn't make a summer, but we have had a nearly tropical event come out of the COral Sea this spring.
Let's not panic yet please.

Correct. The south Island lakes are snow fed, not rain to a significant degree at this time of year .

https://www.meridianenergy.co.nz/about-us/our-power-stations/snow-storage/

Nothing special there, a fraction above mean for this time of year.. so low lake levels do matter.

Good call beachie!!!

Hey Nic

So I’m puzzled – my chicken scratching’s suggest rental listings are down significantly since June – what’s going on.

Sales numbers aren’t through the roof – sure, listings are up – but not OMG levels.

What has happened to these rental properties – empty? languishing on the market? new renters gobbling them up and no new rental stock being bought by investors?

So if investors or FB’s aren’t buying used or new stock – who is – and at what price level?

Does this then help to explain the 35% success levels – the “rational” buyer?

Custard. It is starting to look like this 'Rock Star' bollocks was all just a load of housing hype and debt. Good selling of a myth though. The one piece of good news from today is that it looks like the corruption of the previous administration is now being exposed. bizarrely though from within their own party! I'm still amazed that more hasn't been made public about how NZ was been sold for 30 pieces of silver - maybe more will get out as things get a little tougher. ... I wonder if the Nats have a team of spruikers and lobbyists working out of a dark office in Beijing?

Maybe SirBnB and BookABach? Someone should do a study to ascertain their effect on the rental market.

.... anecdotally seeing the rental market in my region thru job. No bnbs/book a bach on the books of clients at all, though I'm aware of several, thru their family trusts, info not always forthcoming when enquired about, FYI. These are kiwi's many gens, not recent immigrants. NZ Polic as well. Interesting

Shanghai stock exchange was up 1% in the first hour of trading but on news of Simon Bridges media interviews this evening fell back to close down another 0.85%. Fears grow in Shanghai that their political influence in New Zealand may have taken a major hit after 10 years of good times had by all.