Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).
MORTGAGE/LOAN RATE CHANGES
None here today, so far.
TERM DEPOSIT/SAVINGS RATE CHANGES
The Co-operative Bank raised its 6.10% nine month rate to 6.15%, effective Friday.
THE COST OF CATCHING UP
Higher power bills are coming to pay for electricity grid investment. The Commerce Commission tentatively approved Transpower and local lines company revenue increases to cater for growth and ageing asset replacements. The position is out for consultation.
RIDING A WHITE SWELL
Fonterra says it is targeting $8/kgMS 'midpoint' farmgate milk price for the upcoming season. It is picking a slightly higher milk price for the coming season, while increasing its earnings forecast for the current financial year. It also advised it is getting a 'high volume of interest' in the potential sale of its consumer brands. Today's update came as the overnightGDT Pulse milk powder auction brought mixed results for the 1652 tonnes of product offered by Fonterra. SMP slipped -1.1% from last week's full auction event but WMP rose +0.4%.
RATE CUTS EXPECTED, BUT STILL NOT BUYING
ASB's latest Housing Confidence Survey paints a 'complicated picture'. This updated survey shows more people are expecting interest rates to fall but they remain uncertain about prices and whether it's a good time to buy.
MARKET SITUATION PIQUES INVESTOR INTEREST
Latest Reserve Bank mortgage figures show while housing investors are not exactly piling back into the market, they are at least starting to sit up and pay attention. They now take the biggest slice of monthly new mortgages written in three years.
OLDER, MORE DIVERSE, MORE NORTHERLY
Stats NZ has started releasing the 2023 Census data. Today's release is about overall population changes. Since the 2018 Census our population has grown by almost 300,000 people, three out of four New Zealanders live in the North Island, Selwyn and Queenstown are still the fastest growing territorial authorities, almost 1 million New Zealanders were of Māori descent at the time of the 2023 Census, the population continues to age, and the population continues to diversify.
HOUSE-BUILDING RISES FASTER THAN POPULATION
The same Census data shows that in the period between the two censuses, the building of dwelling rose at a much faster rate than population growth, a somewhat unexpected result. If that trend keeps up, it will be hard for house prices to rise.
SOFTNESS EASES INFLATION PRESSURE
ANZ economists say their latest Business Outlook Survey 'makes for grim reading' but is encouraging for the Reserve Bank in its inflation battle. Business confidence may be down but so are inflation expectations.
MORE DRY POWDER, BUT STILL ONLY A SMALL PILE
You may recall that the RBNZ's foreign currency intervention capacity (F5) rose to a record-high $20.7 bln in March. In April it rose again but more modestly, now to $21 bln. But they could not take on the market to defend the NZD with that (just over US$12 bln) as that is the size of a war-chest for only one smallish international investment bank, and there are dozens of large ones out there. But perhaps it might be useful in a confidential 'nudge' strategy. Not market moving, rather 'encouraging a useful trend'.
BACK-SLIDING
In April 2023, Australia's monthly inflation indicator was rising at a 6.7% rate. One year later it is down to just 3.6%. But unfortunately the headlines feature its rise from March when it was at 3.5% and the three prior months at 3.4%. Insurance and foods costs are the main culprits. An up-trend is being sensed and that probably means the RBA may have to double-down on its inflation-fighting pressure. This just adds to the international sense that getting inflation back to the mid-point of the various target rates is hard, and keeping it there even harder. Don't expect central banks to throw in the towel on their core mandate.
AUSSIE CONSTRUCTION ACTIVITY SAGS QUICKLY
Meanwhile, construction completed in Australia is sagging, and in some sectors quite fast. In the March quarter total construction work done fell -2.9% to AU$64 bln to be just +1.2% higher than a year ago. In the quarter building work done fell -3.7% and engineering work done fell -2.1%.
IAG DEFENDING CLASS ACTION LAWSUIT BASED ON ASIC CLAIM
In Australia, well-known "ambulance-chasing" listed law firm Slater & Gordon is suing IAG in a class action based on ASIC accusations two subsidiaries of the insurer duded some clients of discounts they were entitled to. IAG said in August 2023, the subsidiaries IAL and IMA are defending the ASIC proceedings. IAL and IMA maintain they have delivered on loyalty promises made to customers and do not agree that they have misled customers about the extent of the discounts they would receive.
YUAN WEAKENS
In China, the yuan is trading at a six-month low against the dollar at 7.25, highlighting the divergent monetary policies of the world's two biggest economies. Authorities in Beijing are trying to speed things up from a weak base. In the US they are trying to slow things down from a very long expansion that just won't give in.
TARGET LOCKED IN
And staying in China, the IMF revised their GDP growth outlook to 5% for 2024 and 4.5% for 2025, both 0.4 of a percentage point higher than its April projections. The upgrades reflect strong first-quarter results and recent policy measures. In the first quarter, GDP grew 5.3%, keeping China on track to meet its growth target of "around 5%" this year.
SWAP RATES RISE
Given the day's theme is that inflation isn't beaten yet, it will be no surprise to see rates generally rising, internationally. Wholesale swap rates are likely to be higher at the long end again (+10 bps ?) but maybe less of a rise at the short end. Our chart below will record the final positions. The 90 day bank bill rate is still unchanged at 5.63%, a level it has hovered around for more than 70+ days. The Australian 10 year bond yield is up +15 bps to 4.46%. The China 10 year bond rate is now at 2.30% and down -2 bps. The NZ Government 10 year bond rate is up +7 bps at 4.96% from yesterday and the earlier RBNZ fix was at 4.88% and up +9 bps from yesterday. The UST 10yr yield is up +10 bps from yesterday at 4.56%. Their 2yr is now at 4.96%, so the curve has shifted to -40 bps inverted.
EQUITY STRUGGLE FOR DIRECTION
The NZX50 is little-changed in late Wednesday trade, giving up some early session gains. The ASX200 is down -1.1% in afternoon trade and knocked by that inflation data. Tokyo has opened down a minor -0.1%. But Hong Kong is down a full -1.5%, while Shanghai is up +0.3%. Singapore is unchanged at its open. Wall Street ended its Tuesday trade essentially unchanged on the S&P500, blocked from any gain by inflation concerns.
OIL FIRMS AGAIN
The oil price is +US$1.50 higher from this time yesterday, now just on US$80/bbl in the US, while now also at just on US$84/bbl for the international Brent price.
GOLD BASICALLY HOLDS
In early Asian trade, gold has risen by another +US$2 from this time yesterday, now at US$2358/oz.
NZD EASES
The Kiwi dollar has eased back almost -+¼c to 61.4 USc today. Against the Aussie we are similarly soft at 92.4 AUc. Against the euro we are have eased slightly at 56.6 euro cents. This all means the TWI-5 is now back at 70.6 where we were at the start of the week..
BITCOIN SLIPS
The bitcoin price has slipped today, now to US$68,445 which is down -1.2% from this time yesterday. Volatility of the past 24 hours has been modest, also at +/- 1.2%.
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Monthly CPI indicator rose 3.6% in the year to April 2024
Media Release
Released
29/05/2024
Source
Monthly Consumer Price Index Indicator, April 2024
The monthly Consumer Price Index (CPI) indicator rose 3.6 per cent in the 12 months to April 2024, according to the latest data from the Australian Bureau of Statistics (ABS).
Michelle Marquardt, ABS head of prices statistics, said: “Annual inflation increased to 3.6 per cent this month, up from 3.5 per cent in March. Inflation has been relatively stable over the past five months, although this is the second month in a row where annual inflation has had a small increase.”
The most significant contributors to the April annual rise were Housing (+4.9 per cent), Food and non-alcoholic beverages (+3.8 per cent), Alcohol and tobacco (+6.5 per cent), and Transport (+4.2 per cent).
"CPI inflation is often impacted by items with volatile price changes like Automotive fuel, Fruit and vegetables, and Holiday travel. It can be helpful to exclude these items from the headline CPI to provide a view of underlying inflation.
“When excluding these volatile items from the monthly CPI indicator, the annual rise to April was steady at 4.1 per cent. Annual inflation excluding volatile items remains higher than for the monthly CPI indicator,” Ms Marquardt said.
AFR: The ASX is waking up to the RBA’s wicked inflation problem
Equity market valuations assume a soft landing, but Wednesday’s inflation data suggests the RBA has a big problem on its hands, as CPI remains sticky despite weak spending.
Australian investors are starting to realise the soft landing they have priced into stocks is far less certain than the rich valuations on the ASX would suggest.
While economists and investors will be cautious about reading too much into Wednesday’s monthly inflation data – Barrenjoey interest rate strategist Andrew Lilley rightly points out this remains a noisy set of numbers that, so far, has limited predictive power – it did provide more evidence that the disinflationary process in Australia has stalled.
Interesting how they are simply around a year behind NZ in terms of what is happening, yet they have a majority of mortgages floating which likely leads to behaviour changes occurring sooner. When looking back in a few years time, a comparison between the actions and resulting impacts of the RBA vs RBNZ will be interesting indeed to learn from.
I'm not saying it isn't. I'm saying every time there's a new technology come to the forefront of public consciousness, the market wildly over values it, plenty of companies incorporate it into their business plans, and the path to profitability or mass adoption is a lot further away than people think.
There's some value there for sure, along with massive amounts of malinvestment and unsubstantiated hype.
Or most .com internet companies in the late 90s. Eventually internet commerce proved itself, but in the interim a whole bunch of shovelware businesses went to the moon and then imploded.
With nVidia, we have a company benefitting from billions of dollars being poured into AI ventures who are purchasing nVidias hardware, and those increased sales and affiliation with the AI mania is also driving up nVidias share value.
Most of those ventures won't make it.
Tracking insurance as part of inflation is a funny one. Your premiums are directly influenced by inflation, so central banks are effectively accounting for it twice, once as the cost of vehicles/boats/houses goes up, then again when your insurer factors last year's inflation into next year's rates.
New highs for silver price on Shanghai exchange. Reached USD37.47 this morning.
And last night nearly 85 million "digital ounces" of IOU silver traded in New York futures in 45 minutes. Paper attack by the investment banks - PM and Citibank are the largest two short sellers of silver on the planet who have been naked short selling 568 million ounces.
When the price of silver is up approx 45% in a matter of months, something's up. China encouraging people to buy silver as well as gold. Are they trying to expose the Western investment banks? Might seem the stuff of conspiracy theory but who knows.
Its not a conspiracy theory, China is actively trying to remove itself from the USD as the reserve currency, its a total no brainer for them and the USA is about to move from continually shooting itself in the foot for the last 30 years to finally shooting itself in the head with increased tariffs.
You can buy ounce bars from the supermarket in the US.
All we can really determine from the way a lot of markets are acting, is things are uncertain, and people are racing to put money anywhere they feel is safer than the status quo.
Gold and Silver have been rammed down our throats pretty hard core for quite some time, has to get traction at some point.
Small medtech company might have a valuation greater than what its core business model may suggest by bringing ratty on to its books. Strategic move.
Semler Scientific, a little-known medical technology company, saw its shares surge Tuesday after it said it has adopted bitcoin as its primary treasury reserve asset, taking a page out of MicroStrategy’s playbook.
The company, which develops products used in the detection of peripheral arterial disease, also announced a purchase of 581 bitcoins for about $40 million, inclusive of fees and expenses.
The stock soared 37% Tuesday, while bitcoin traded lower by about 2%, according to Coin Metrics. Semler, which has a market capitalization of about $210 million, is down more than 30% this year.
https://www.cnbc.com/2024/05/28/med-tech-stock-semler-scientific-surges…
Cheaper Aussie beef in Japan story getting some legs now as ABC runs with the story. Posted about this y'day. Aussie shoppers feel like they're getting shafted. You make the bed that you lie in unfortuantely.
https://www.abc.net.au/news/2024-05-28/australian-beef-cheaper-tokyo-su…
Completely agree. Funnily enough I moved to Melbourne 7 months ago and work as a supplier to construction industry. Mentioned to a lot of my merchants the industry is eerily similar to middle of last year when I was back in nz. Interest rates and flow on effects.
Another interesting point is we are taking a 2.3% price rise to the market first of July. Not much but increases are still happening, depends also what the retailers pass on!
Federal Reserve identity Neel Kashkari admits interest rates could stay high 'indefinitely.' Kashkari reinforced that rate cuts this year seem unlikely despite predictions for them at the end of 2023.
Kashkari is also warning of big losses from real estate. Smart move to show his hand.
https://www.startribune.com/inflation-interest-rates-minneapolis-federa…
"Federal Reserve identity Neel Kashkari admits interest rates could stay high 'indefinitely.'"
Does 'indefinitely' mean until there's a change in the US government and the 'fiscal hawks' take back control? Or have the 'fiscal hawks' become MMTs too? Either way ... Ain't going to go on forever.
In the US they are trying to slow things down from a very long expansion that just won't give in.
Why Central Bankers are FORCED to Lie
“Buy Now Pay Later” Issues Stark Warning to the Economy
More data released today which shows the US economy has taken a turn for the worse. Consumers are running out of options and are turning in huge proportions to alternate means to stay afloat. One of those alternatives, however, is being closed off as the American banks are now actively cutting back risk while going on a buying binge for safety.
"HOUSE-BUILDING RISES FASTER THAN POPULATION"
intentionally misleading and dishonestly manipulating the maths ignorance in much of the public. That the percentages are meaningless without the values they relate to. For instance a small amount of a very large number can outstrip a bigger percentage of a small number (several orders smaller). Hope that maths lesson helps.
Please anyone call them out when they do this as the best case scenario is they are intentionally trying to mislead and manipulate people yet the sadly more likely and worse case is the NZ public mathematics education is far worse then we thought. It calls into question not only the authors basic mathematics understanding but that of the editor and team doing review. Please QA the work being published for glaring issues like this that bring you into disrepute.
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