A review of things you need to know before you go home on Monday; listing and inventories decline, dairy prices rise, terms of trade drop irrelevant, Shanghai celebrates, Aussie data weak, swaps and NZD firm, & more

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

MORTGAGE RATE CHANGES
The Police Credit Union reduced their one year fixed rate.

TERM DEPOSIT RATE CHANGES
No changes to report.

MORE NORMAL
Property listings and stock levels declined nationally in November. But Auckland still remains a buyers market. Nationally there are now 16 weeks of unsold inventory, down from 20 weeks in October. In Auckland the inventory levels fell from 25 weeks to 19 weeks. The new levels are about the average over the past two years.

DAIRY CONUNDRUM
There is another dairy auction coming up on Wednesday morning. This time might be different. There is the possibility of a rise in prices, and if that happens that would the first time in 15 auction events. In that time, prices have declined more than -20% putting dairy prices into a bear market. But the derivatives traders are sensing a turn and have bid up option prices by more than +5% for WMP and SMP by a similar amount. Growth in EU production has stalled, adding to market sentiment. A day later, Fonterra will be reviewing its farm gate payout price. If they lower it as some believe, it will be in the face of a firming market - in USD at least. The sharp rising NZD will dampen their view.

AN OUT-OF-DATE DETAIL
How quickly some economic stats date. The September quarter terms of trade data was released today and despite overall export prices reaching their highest level in more than nine years, the index declined from a high level. Driving this data was a rise in import prices, up +2.6% in the quarter alone, led by a +6.4% increase for petroleum and petroleum products. The maintenance shutdown of Marsden Point was part of that, but oil prices in Q3 were very high. Since then of course they have collapsed and the next terms of trade will jerk strongly in our favour again. It is the continuing high commodity prices that are the real driver. This all goes to show that our economy is quite capable of tolerating a high exchange rate. Complaints to the contrary are just self-serving.

CORE FUNDING STRONG, BUT WEAKENS
Bank core funding has been unchanged in the four months to October at $369 bln. But loans and advances to customers has grown by +$5.5 bln to $422 bln. That has pushed the overall core funding ratio down to 87.5% - but miles above the regulatory minimum of 75%. ANZ and Kiwibank have the strongest position at 89.5%, while Westpac is the weakest of the main banks at 83.8%.

THE ART OF THE NO-DEAL?
The US-China trade 'deal' is pretty confusing for those of us who like to read the source documents. There aren't any. But there are Statements by both sides. Here is a way to compare what each said of the Xi-Trump talks. It is hard to be clear about anything. Markets might move higher, but it will be based on nothing substantial. The only thing that is clear is that US 'delays' are a win for China.

AND THE WINNER IS ...
Early trading for the new week in Shanghai shows a large jump with their index up +2.7% in the first hour. The ASX200 is up +1.6% and the NZX50 is up 0.7%. Amazing how buyers pile in on so little real information, just a bet that China has won this trade war skirmish. All eyes will now shift to Wall Street tomorrow.

HOUSING CONTRUCTION STALL
A huge drop (-23%) in building consents for apartments in Australia has seen overall dwelling consents drop -12% in October compared with the same month a year ago. On a twelve month basis there is no growth. On October, even consents for houses showed no growth. In other data out today, the growth in construction payrolls was only +1.7% in September compared with +4.3% in the overall economy. Payrolls are growth fastest in mining (+8.1%), backoffice admin services (+9.9%), and in arts and recreation services (+9.2%), the latter two dominated by their public services. It's a classic case of stealing from the future.

ALMOST A -10% DROP IN 17 MONTHS
And staying in Australia, CoreLogic reports that since peaking in July last year, Sydney’s housing market is down -9.5% which is on track to eclipse the previous record peak-to-trough decline set during the last recession when values fell -9.6% between 1989 and 1991. Melbourne dwelling values peaked four months later than Sydney, in November 2017, and have since fallen by -5.8% through to the end of November 2018. (In New Zealand QV data out tomorrow is expected to show New Zealand median prices rose more than +6% in the same period.)

SWAP RATES FIRM
Wholesale swap rates are up +2 bps across most of the curve. The UST 10yr, which ended last week below 3% is now back up to 3.04%. But the 2-10 curve has remained low at just +20 bps. The Aussie Govt 10yr is at 2.62% and up +3 bps, the China Govt 10yr is up +4 bps at 3.42%, while the NZ Govt 10 yr is at 2.61%, up +2 bps. The 90 day bank bill rate is down -1 bp to 1.97%.

BITCOIN UNCHANGED
The bitcoin price is now at US$4,081 and little changed since this morning.

NZD FIRMER
Earlier today the NZD popped over 69 USc for the first time in five months but has since slipped back under that level now at 68.9 USc. On the cross rates we are unchanged at 93.8 AUc and at stronger 60.8 euro cents. That puts the TWI-5 up at 73.4. (We are also over 54 UKp and that is a 14 month high.)

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