Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
HSBC raised all fixed home loan rates today. And late yesterday, both TSB and Westpac also raised rates. See here.
TERM DEPOSIT RATE CHANGES
TSB raised term deposit rates as well.
WHOLESALE MONET MARKETS STUGGLE
Uncertainty stalks wholesale money markets, suddenly raising the stakes for indebted homeowners, especially those who need to roll over soon. Swap rates have risen sharply this week, even if they didn't today.
CONSUMER CONFIDENCE FALLS, INFLATION GOES "BALLISTIC"
ANZ released its October consumer confidence survey results, and said: "Consumer confidence fell 7 points to 98 in October, with both perceptions of current conditions and expectations down sharply. The proportion of people who believe it is a good time to buy a major household item didn’t rebound from last month’s 20-point fall –it remained at -7. Inflation expectations went ballistic, rising more than 1%to 6.2%. House price inflation expectations lifted from 6.1% to 6.7%.
SAME OLE, SAME OLE
In September, total bank debt (C5) hit $506.6 bln, up +$3.1 bln in a month and up +$36.6 bln in a year. The fastest growing segment is for housing (no surprise there), up +11.6% in a year. Business debt grew +2.9% in the year to September, its fastest growth rate in 15 months. The slowest debt growth is in the farming sector, where rural debt is actually almost -1% lower than a year ago, continuing a declining trend that has been going on for about 20 months.
RECORD HIGH DEPOSIT BALANCES
Meanwhile, bank deposits (S40) rose to $411.5 bln, up +$3.7 bln in a month (and note: rising more than bank debt) and up +$17.2 bln in a year. Household balances accounted for $209.1 bln and rose +$2.1 bln in the month, up +$8.9 bln in the year. But household term deposits continued to shrink to $80.7 bln although the shrinkage was tiny this month suggesting the retreat may nearly be over. But the swelling of transaction (+$1.5 bln in the month) and savings account balances (+$861 mln in the month) continues.
FIXING A LONG-STANDING BIAS
Vero Insurance said today that it is working to remove gender-based factors from its pricing and underwriting for its consumer car insurance products.
A NO-GROWTH SECTOR
There were 36,753 home transfers in the September 2021 quarter, down more than -17% from the June 2021 quarter, Stats NZ said today. And this latest quarter data is -11% lower than for Q3-2020 and almost unchanged from Q3-2019.
RESILIENT JOBS MARKET
Stats NZ is reporting that there are now 2.28 mln paid jobs in September 2021, an increase of +5,690 (+0.3%) from the previous month. A year ago there were 2.195 mln paid jobs, so that is a 3.8% annual gain, or +85,000 in a year. At the same time, this data shows gross earning up +7.9% in the year. That equates to average pay gains of +4.1% in earnings. Analysts are looking at this data and finding reasons to be impressed. The labour market report for Q3-2021 is out on Wednesday next week and some think it will show our jobless rate down at 3.8% in Q3, down from 4.0% in June.
DIFFERING IMPACT
Of the 13 different household groups measured in the household living-costs price indexes (HLPIs), inflation in the September 2021 quarter was highest for superannuitant households, mainly due to higher prices for food, housing and household utilities, and transport, Stats NZ said today. Inflation for the superannuitant household group was 2.2% in the September 2021 quarter, compared with 1.5% for beneficiary households, which experienced the lowest inflation.
SHIPPING COs CAPTURE ALL THE GAINS
Local log prices are falling even though Chinese demand is good. It is the shipping costs that are preventing log growers from getting any of this benefit.
CONTACTLESS FEE WAIVERS EXTENDED
BNZ said it will extend contactless debit merchant service fee waivers until the end of November. Then ASB went one further, extending their waiver for these fees until the end of December.
A STATIC SITUATION
Fonterra is reporting lower New Zealand milk collections, saying "a colder and wetter start to spring this season compared to last September is impacting production volumes". Its milk collections are lower further in Australia. It main rivals in the US and EU are raising production. China is buying a smaller volume of dairy imports, but that is largely die to infant formula declines. Fonterra sol record volumes of WMP there in September.
BUYING UP
Meanwhile, giant listed Chinese dairy company Yili which has extensive New Zealand operations (Westland, Oceania), has revealed it will become the largest shareholder of Hong Kong controlled Ausnutria, an Australian goat-milk infant formula producer.
CHANGING ITS TUNE
In Australia, the RBA turned down another chance to suppress runaway bond yields, reinforcing the view the central bank will bring forward its cash rate guidance to no later than 2023 amid rising inflation. Buy skipping the opportunity, that has powered up their wholesale market yields - and it has turned a consolidating market in New Zealand into one where another late push is underway.
LOCAL PANDEMIC UPDATE
In Australia Delta cases in Victoria have risen to 1655 cases reported there today, and less than yesterday's spike. There are now 23,730 active cases in the state and there were another 10 deaths yesterday. In NSW there were another 268 new community cases reported today with 3,951 active locally acquired cases which is lower, and they also had 2 deaths yesterday. Queensland is reporting zero new cases. The ACT has 10 new cases. Overall in Australia, more than 76% of eligible Aussies are fully vaccinated, plus 12% have now had one shot so far. In contrast, there were three new cases in New Zealand at the border, and 125 new community cases including more in Christchurch. Now 87.5% of Kiwis nationally aged 12+ have had at least one vaccination, while the Australian rate is now at 87.6% of all aged 16+.
GOLD STABLE
In early Asian trading, gold is up a net +US$3 from where we were this time yesterday, now at US$1798/oz but fractionally lower than either the New York close or the London fix.
EQUITIES MOSTLY LOWER AGAIN
The NZX50 is up +0.2% late in its session but it is heading for a weekly loss of -1.0%. The ASX200 is down -0.7% in Friday afternoon trade and it is heading for a -0.5% weekly loss. The very large Tokyo market has opened today down another -0.9% in morning trade and if this holds it will be unchanged for the week. Hong Kong has opened down -0.6% and heading for a chunky -2.3% loss for the week. Shanghai has opened flat in their opening trade and if that holds it will post a -1.6% weekly retreat. The S&P500 rose +1.0% today which has been the main move of the week, largely driven by good corporate earnings.
SWAP & BONDS RATES GET AN RBA PUSH
We don't have today's closing swap rates yet. They retreated in early trade, especially in the 1-5 year terms in a market still very thin and illiquid. But they have probably turned a up a bit on the RBA non-intervention (above). The 90 day bank bill rate is up +2 bps at 0.80%. It has risen further since this RBNZ fix. The Australian Govt ten year benchmark rate is now at 1.94% and up +7 bps from this time yesterday. The China Govt 10yr is now at 2.99% and down -1 bp. The New Zealand Govt 10 year rate is now at 2.65% and up another +5 bps. That still leaves it above the earlier RBNZ fix for that 10yr rate at 2.60% (+7 bps). The US Govt ten year has recovered +1 bp to 1.56% after yesterday's large fall.
NZ DOLLAR STABLE
The Kiwi dollar is now at 71.8 USc and up from where we were this time yesterday although down from its overnight high. Against the Aussie we have dropped to 95.3 AUc. Against the euro we are soft at 61.5 euro cents. The TWI-5 is now at 75.1, little-changed but still well above the top of the 72-74 range we have been in for most of the past eleven months, and settling in to a new higher band.
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BITCOIN RECOVERS
The bitcoin price is now at US$61,716 and +.49% higher than this time yesterday. Volatility in the past 24 hours has been high at just over +/- 3.8%.
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38 Comments
"RBA non-intervention "
(From this arvos AFR) "The morning of Monday, October 18 was a dead zone, with no major market awake yet.Then New Zealand’s Stats NZ released its quarterly consumer price index data, and with it, unleashed a shockwave that is still reverberating through fixed income trading floors 10 days later....Even 100 basis points of increases would have profound consequences for asset pricing, and house prices could correct about 15 to 25 per cent.
Interesting read. There really does seem to be a lot of factors coming together that make house price falls increasingly likely.
We are chipping away at the supply shortage with high levels of construction, while net migration is held flat. Inflation is quickly getting out of control, leading to rising rates. The combination of rising interest rates and changes to LVR/DTI/interest deductibility are all putting a squeeze on the amount of money people can borrow. Add this to massively overvalued house prices, and high levels of debt, it sounds like a correction is all but guaranteed
The real question is what will the response be from the government and RBNZ.- it wouldn't shock me for them reverse some of the recent regulatory changes, try and restart immigration, or nearly anything in a desperate attempt to stop a necessary correction.
They will raise the OCR gently and incrementally. Any hint of more than a slight house price correction and they will halt the rises, and possibly cut.
I know I am a broken record on this, but I see some pain coming for the economy in Autumn / winter next year. I really do think that will limit the extent to which the OCR is raised.
Drops the exchange rate, petrol price goes ballistic, everyone buys electric cars, overburdens the grid, coal is unavailable, load shedding begins in Auckland, crime explodes, Covid explodes, hospitals don't cope, national emergency declared, nobody is listening, trying to survive, 1pm conference, power cuts the feed, people wake up, realize nobody is in charge. I crack a beer.
So Facebook moving to the 'metaverse'. A bit of clarity is warranted from a good colleague in S'pore as to what it all means:
-- FB isn't attempting to build the metaverse — it is building for the metaverse. Like the early days of the internet, this is an open ecosystem many companies will develop for.
-- FB don’t see this as a VR-driven world with everyone walking around wearing Oculus goggles — technologies and experiences will bridge across phones, laptops, tablets.
-- Mass adoption is still 5-10 years away, even though behaviour is shifting now. FB wants to start building (rebuilding!) credibility and work closely and collaboratively with other businesses, governments, regulators.
-- Exciting times ahead — the shift from Web2 to Web3 represents an existential question for the centralised platform-era businesses of Facebook, Amazon and Google. Interesting to see how they balance revenue and shareholder demands with the challenges and opportunities of a more open and decentralised ecosystem.
It took me a little while this morning to cotton on to what was happening. It may be my imagination but the price started moving when the media was posting Zuck's announcement. The ultra orthodox might be a bit upset about this. They shouldn't be. It doesn't invalidate Bitcoin in any way. The ETH and BTC blockchains can coexist.
Electricity sector has reached peak coal use, Genesis shareholders told
Genesis Energy says the use of coal for electricity generation has peaked, despite high levels of burning this year.
It said coal plays a key back up role for power, but its use is dropping as other sources increase.
The company's shareholders were told this morning that Genesis will run a trial in burning biomass at the Huntly power station next year.
If successful, the company would seriously look at biomass supply, transport and storage options, chief executive Marc England said.
But he said coal will still be needed for the next few years.
Stats NZ is reporting 2.28 mln paid jobs in September 2021... a year ago there were 2.195 mln paid jobs, so that is a 3.8% annual gain.
This can be very misleading. We're comparing a season of recovery to a season of pandemic aftermath, the upside move is contorted by the base.
The other issue with using these numbers is wage growth. There is little to cheer about if the number of paid jobs increased while wages remained stagnant or decreased (which would effectively mean the net incentives of a higher number of paid employment is actually negative).
I don't see how the narrative that the NZ economy is overheating based on inert strength is holding up. Rising interest rates may be the last straw on the camel's back before we enter nominal negative interest territory.
(A few months old, but probably still relevant)
" The American economy's unprecedented jobs rebound masks a difficult truth: For millions of people, the jobs they lost are never coming back. It's clear that the pandemic is doing some fundamental damage to the job market....759,000 people were laid off from jobs that won't be coming back. That marks the second-largest monthly increase the United States has ever seen, topped only by an 805,000 jump in January 2009, in the depths of the Great Recession."
https://edition.cnn.com/2020/07/07/economy/job-losses-coronavirus/index…
"Cryptocurrency, Squid, which was trading around 1 cent on Tuesday, reached $2.34 (£1.70) on Friday - a more than twenty-fold jump."
The indomitable Christopher Joye forecasting Aussie house prices falling 20% after only a 100bps increase in interest rates. Our Chris pulls no punches. Hang on to ya hats.
https://www.afr.com/wealth/personal-finance/house-prices-could-fall-as-…
Plenty of inflation for light rail: https://www.greaterauckland.org.nz/2021/10/29/light-rail-veers-off-cour…
Underground is very expensive and even over ground properties would need to be purchased and demolished so its a lose lose these days. Should have built a train track 50 years ago, would have been as cheap as chips and kept the line free for an upgrade to electric. I mean imagine the cost of trying to build the London underground these days.
check out the Tesla Graph
https://tradingeconomics.com/tsla:us
new paradigm phase perhaps?
https://transportgeography.org/contents/chapter3/transportation-and-eco…
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