A review of things you need to know before you go home on Wednesday; BNZ makes a TD adjustment, QV index rises slower, dairy prices up, December retail soft, tax inflow strong, swaps drift lower, NZD stable, & more

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

MORTGAGE RATE CHANGES
None so far today.

TERM DEPOSIT RATE CHANGES
No changes here today either, but BNZ have lowered their TD minimum deposit level from $5000 to $2000. Their rates are now the same for monthly interest all the way to interest-at-maturity

SLOWEST IN SIX YEARS
Nationwide housing values grew at their slowest rate since 2012 in the December year, with the annual change now up only +3.2% and the lowest rate of growth since 2012. But QV expects a 'busy' start to 2019 thanks to the RBNZ loosening LVR restrictions.

GOING UP?
The +4.2% rise in dairy prices at auction today is the fourth such rise in a row that now totals +10%. At least one analyst (Westpac) has used the event to trigger a rise in their forecast for 2018/19 milk prices, up to $6.30/kg and at the top end of Fonterra's current $6.00-$6.30/kgMS indication.

GOING DOWN?
Surprising analysts, December retail sales as measured by electronic transactions ended 2018 on a very weak note, even after removing the impact of falling petrol prices.

GOVT TAXES RISE
The latest report for the Crown's accounts is for the five month period to November 2018 which show a rising surplus. The OBEGAL surplus was +$519 mln in November and more than wiping out the previous four month deficits. Taxes from individuals were up +10% in the month compared with the same month a year ago (thank you bracket-creep), but taxes from GST were flat (confirming the weak retail data). Taxes collected from corporates are irrelevant in November as it is the low point in the IRD payment schedule. Fuel excise was up +5.6% on this same basis, customs duties collected jumped +15%, Fire Service levies were up +14%, EQC levies were up +28%. All up, in the year to November 2018, total tax revenues collected exceeded $82 bln (a new record high), or 28% of GDP. They collected another $302 mln in "Other Sovereign Revenues", also a new record high.

CONFIDENCE EVAPORATES IN AUSTRALIA
In Australia, the latest Westpac-Melbourne Institute survey shows pessimistic consumers outweighed optimistic ones for the first time in 13 months in a sign that "confidence has come under pressure" in Australia. It is even lower in China.

QUITE A LOT OF DEBT (UNDERSTATEMENT)
Global debt rose to US$244 tln and up +12% since 2016, and is now 318% of the size of the world's economic output (and more than 1200% larger than New Zealand's GDP).

EQUITY MARKETS ROUNDUP
The NZX50 is up +0.4% today, but the ASX200 is barely holding on for a gain in mid-day trade. Tokyo is sharply lower, down almost -1% while Shanghai is mirroring the ASX. However hon Kong is roaring ahead, up more than +2%. Someone has figured out a legal work-around for those American tariffs on Chinese goods and it will greatly benefit Hong Kong. Wonder how long that will last? By the way, the S&P500 closed up +1% earlier today, rising strongly in late trade.

END OF EMPIRE
The British are in a pickle with their Brexit government failing to get its separation plan agreed by their parliament. It is even less clear now what the path ahead for them is and it may well include a new general election. With only 72 days to go to a separation, and no plan in place, it is almost certainly now to be a 'hard' Brexit. Fortunately, that will have virtually no impact on New Zealand, but policy train wrecks like this one are fascinating all the same. Even markets seem confused on what to make of it. One thing is almost certain however, the London financial industry will quickly decamp, most likely to Frankfurt and the new favourite, Paris.

BLOCKCHAIN IN USE
HSBC settled US$250 bln worth of forex trades using blockchain in 2018. The bank has settled over three million forex trades and made over 150,000 payments since February 2018 using blockchain, it said in a statement. They would not give data on forex trades settled by traditional processes, saying only that those settled by blockchain represented a “small” proportion. Still, the data marks a significant milestone in the use of blockchain by mainstream finance.

SWAP RATES DRIFT LOWER
Local wholesale swap rates are soft yet again today. That pushes the short end to new all-time lows with the 2yr now below 1.90%. The UST 10yr yield is little-changed at 2.71%. Their 2-10 curve is just on +17 bps. The Aussie Govt 10yr is at 2.28% and down -1 bp, the China Govt 10yr is unchanged at 3.15%, while the NZ Govt 10 yr is at 2.31%, and also down -1 bp. The 90 day bank bill rate is down -1 bp to 1.90%. (The record low is 1.86% in December 2017.)

BITCOIN DOWN
The bitcoin price has moved lower today, now at US$3,591, a decline of -2.0%. Then there's this.

NZD HOLDS
The Kiwi dollar is holding its level at 68.3 USc. On the cross rates, we also little-changed against the Aussie at 94.8 AUc but are higher at 59.8 euro cents and up to 53.1 UK pence. That puts the TWI-5 marginally higher at 72.4.

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USD 
NZD
End of day UTC
Source: CoinDesk

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29 Comments

Britain will be better off with the upcoming hard Brexit, & can return to a true sovereign democracy, and secure its borders. And can trade with various countries on its own terms.
The EU can follow its own undemocratic and flawed destiny with Germany and France calling the shots turning its back on the USA and following/implementing the UN line.

There won't be a hard Brexit as anyone with any sanity recognises that will be an unmitigated disaster.

My favourite Brexit supporting moment is the British Curry Association, who bless them supported Brexit in the belief that voting for Brexit would mean more immigration from South East Asia, when the number one reason given for voting Brexit was taking control of our borders..... https://www.bloomberg.com/news/articles/2018-11-18/brexit-is-killing-the... http://csi.nuff.ox.ac.uk/?p=1153

"Curry house owners sought to avoid a system like that when they campaigned for the U.K. to leave the EU. Almost two decades after chicken tikka masala was unofficially declared Britain’s national dish, pro-Leave politicians promised restaurants higher inflows from South Asia with easier visa rules, shutting the door on European workers, allowing lower salary-thresholds to hire overseas staff and even regularizing undocumented workers"

EU Parliament elections are in May this year FYI.

And your solution for Ireland is....??

And your solution for Ireland is....??

A Wall

Brexit was promoted & encouraged widely by the same people who “helped” Trump
Keep up the naivety though
The deadline is closing & still logistics no customs clearing provisions for the thousands of trucks crossing border
Mostly it takes about 1 minute to clear a truck now but that’s all changing with massive delays expected with extra customs clearances required
Supply side systems have reduced need for large warehousing Now the Brit’s wont get instant supply of anything. Delays will become abominable until the Brits build enough larger warehouses
No idea at all on Ireland either Expect more troubles
The Brits which are my countrymen & women will fall hard.

Around 80% of New Zealanders have some British ancestry, and over 16% of NZers are entitled to British nationality - so I think we all have quite an interest in the Brexit phenomenon. Despite some globalists trying to deny NZs history.
Every divorce requires some relinquishment of previous benefits, but the freedom from a toxic situation is always better in hindsight.
Would NZers want to be part of a United States of Asia-Pacific?

Britain had the power of veto on most proposals and exercised that right frequently, much to the annoyance of the rest of Europe. There are issues with the EU, granted, but the answer is not to throw sticks from the outside.

I think there will be an effort to change the EU's current direction, which either real or imagined has become something of a bete noire for numerous populists, Britain as a triumvirate of 3 European powers, and party to/driving those changes would be far more beneficial, than shouting angrily at clouds.

The people who most stand to benefit from a departure are certainly not the people who voted for it, these charming individuals for example - https://www.theguardian.com/business/2018/dec/10/hedge-funds-make-big-be...

Having visited Strasbourg recently it makes you realise how non- democratic and cut-off the EU ‘parliament’ is from the citizens. Even architecturally the EU is unapproachable and not people-facing.
https://www.politico.eu/article/where-european-democracy-goes-to-die-eur...
.
https://www.telegraph.co.uk/news/worldnews/europe/10565686/The-farce-of-...

hmmm it's interesting that the EU elections are probably the most democratic of elections available to UK citizens. Whilst in Strasbourg you could have availed yourself of one of the tours around parliament if you so fancied - https://europarlamentti.info/en/visiting-the-EP/

Yes, you’re right - should have done the official tour rather than walk around the perimeter (which isn’t easy to navigate).
Not sure how a group of countries with quite different values and economies can really act as a democracy just because it contains elected representatives from separate countries.

They don’t really, not when compared to any other region around the globe, the E.U. is probably the most homogenous, in terms of politics at least, of blocks of countries. From Portugal through to Austria there’s not a huge difference in cultures, they’ve been invading/fighting each other for Millenia so there’s a lot of shared values. Outside of that central block it gets a bit more hairy shall we say. Compared to Asia or Africa for example it’s positively bland.

I’d compare it to supporting of football teams, sure you’ve got your local rivals, bit of fighting for the title and all that, but right now Europe has never been more peaceful.

A hard brexit will be good to show to some extent how important free trade is (in this case free trade with Europe). If Britain ends up better off (unlikely IMO but anything is possible) then a lot of other countries may follow. Interesting times.

MortgageBelt,

I lived in Scotland for most of my life,retiring here in 2003. I still have many friends and relatives there and not one of them wants any type of Brexit,far less ahard exit. There is a real possibility that this would lead to a further referendum on Scotland leaving the UK.

I doubt if you have any idea of the disruption a hard exit would involve. It would almost certainly lead to more financial companies moving business to Frankfurt,while car manufacturers would move more production overseas.

Ah, yes the dream of domination of world financial markets:
One thing is almost certain however, the London financial industry will quickly decamp, most likely to Frankfurt and the new favourite, Paris.

They might find they have to pay rather more than they expect to entice people to Frankfurt (wives have been known to complain of it being boring, apparently) and as for Paris, well, sensible French people have been fleeing ridiculously high French taxes for centuries and moving to .... London.

The main winner is more likely Dublin, the second city of the old empire (before German military intelligence engineered the Easter Rising and the silly old Brits shelled the new Post Office building in Dublin, provoking the backlash that led to rebellion and another sixty years of poverty for Ireland). It's not an accident that Google have their global headquarters in Ireland. The Irish government give them very generous tax breaks in order to get the high paid jobs (much to the chagrin of the French and German governments who feel it is the equivalent of under arm bowling).

The future of the City of London as a financial hub is very secure.
-it has very dependable rule of law, with least political interference of just about any jurisdiction
-speaks the language of trade; English.
-has a huge pool of highly talented and specialised international financial experts (network effects)

Maybe - but watch investors like Airbus who build all their wings in Bristol, Wales and surrounds who are on record saying that if there are any delays to shipment deliveries they will build new wing plants in the EU.

Goodby to some 115,000 of the highest paying jobs in the UK.

These are the drivers I believe we should watch more closely.

"Project Fear!!!!!"

Not to worry though, as straight off the bat the UK can trade solely under WTO rules, that will put Britain in an exceptional club, alongside Mauritania and ........... apparently no-one else. https://medium.com/@MrWeeble/who-actually-trades-solely-under-wto-rules-...

Interesting. Any delay in checking paperwork will be done by the country of entry. So Welsh jobs depend on the good will of French bureaucrats. My son is French; in France the bureaucrat rules.

But even if the French fall over backwards to be kind to the UK any rational business would not want a critical component from a country whose exchange rate might vary dramatically. I think it may be goodbye to Airbus in the UK. On the other hand that is rather exceptional - think of french wine and cheese and other agricultural products going to the UK. The only force more ornery than French bureaucrats are French farmers.

I think it interesting that the big three retirement village stock have all declined since late last year, Rymans almost 20%. This is interesting as these stocks are the closet match we have to the residential property market on the NZX. They may well be barometer of residential property, but unlike the timing lag we get via real estate transactions, these are real time. It would be interesting to put the share price trend line over Auckland ppty - anyone got the time to do it and report back?

Isn't that a different market and affected by other factors like funds rebalancing, risk appetite for stocks etc?

At the end of the day its real estate...the housing market affects the ability to pay. Therefore decline in stock price may well be the market factoring a bearish real estate outlook.

Thus comparing the share price moves of Rymans with Auck ppty over time might be revealing. Just a theory that Rymans share price is reacting in real time, not in lag time like real estate data.

Quinovic again.

That name is being run into the mud by the property mismanagement company.

“Your tenants may hate us. You will love us!"”
Wow

Your prospective tenants will see its a Quinovic property and run a mile.

Wow indeed. So symptomatic of the way tenants are viewed. Albeit this is extreme.
Such a cowboy country in many respects.

I think landlords forget they are running a business (until it’s time to claw some tax back that is). No decent business can treat everyone like a criminal just because some people are. And if you happen to get a bad tenant, that is just part of running the business, not a hard luck story to write to the Herald about. I have absolutely no sympathy.

Not pets. No you cannot hang a picture on the wall. And when you’re done with the place I’m going to see how much of your bond I can scam off you.