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
No changes to report today. But given that market behemoth ANZ currently has market-leading carded fixed rates, it seems unlikely their main rivals can stay comfortably higher than them without leaking market share. Stay tuned. All rates are here.
TERM DEPOSIT/SAVINGS RATE CHANGES
AMP said it will be reducing its TD rates on Monday. All rates less than 1 year are here, for 1-5 years, they are here.
DOWN, BUT NOT OUT
Somewhat surprisingly, July car sales came in at recent-average levels. Given media reports about stressful trading by some car dealers, we had expected that to show up in the July sales data. But in the end, 6341 new car sales were registered in July, 542 of them EVs and 2267 hybrids. In total that is +45% more than the same month a year ago but to be fair that was an unusually weak month. (In the five Julys prior to that the average was 8440.) In addition, 9003 used imported cars were registered in July, also much more than in July 2023, but down on the prior 5 year average of 11,900.
INTERIM RECEIVERSHIP ORDER
The Auckland-based controversial and big-noting property developer Du Val Group has had its entities placed into interim receivership at the request of the FMA, and its owners/directors, Kenyon and Charlotte Clarke, were also constrained by the interim receivership and related 'asset preservation orders'. (At the point of this order, there were only 120 debt holders left. Hopefully the others got paid out. For their sake, hopefully they didn't fall for the debt-to-equity swap that was offered.)
WAREHOUSE TAKEOVER APPROACH REBUFFED
The Warehouse says talks with private equity group Adamantem Capital Management Pty, which had the backing of The Warehouse founder Stephen Tindall, about a takeover offer are off. Adamantem's proposal valued The Warehouse shares at a range of $1.50 to $1.70 each, and Warehouse Chair Joan Withers says the Scheme of Arrangement proposal doesn't have the backing required to obtain the 75% shareholder support required. The Board has decided to "defer further talks until such time as the proposal receives wider shareholder support," says Withers. At the time of writing The Warehouse shares are down more than 9% at $1.28.
SELLER PRICE EXPECTATIONS CAPITULATE
Real estate asking prices sinking like stones while new listings flood the market, says realestate.co.nz. They report average national asking prices were down -$110,500 since February, with Auckland down by -$143,000.
LITTLE RESILIENCE
There were some very worrying electricity market price signals this morning, sharply higher prices everywhere for some time, especially in the South Island. And worse, the Cook Strait transmission capacity was running over 90% of capacity. There is no resilience. Prepare for brownouts.
SHARP LENDING PULLBACK
New residential mortgage lending was down more than -11% in June from the same month a year ago, down -22% from May. Only the small lending activity to residential investors held its own. More broadly, lending to business, including the ag economy, was also sharply lower in June.
CREDIT STRESS LEVELS LOW & NOT GETTING WORSE
Equifax's June report is interesting in that it isn't noting much change in credit stress from Q1. As it notes, these levels remain low and apart from a small deterioration in personal loan stress, all the other categories (home loans, credit cards, utility accounts, etc) saw minor improvements.
CHANGE-AGENT REQUIRED
The Public Service Commission is looking for a new Treasury Secretary. Incumbent Caralee McLiesh has taken the role of Australia’s Auditor-General. The NZ Treasury Secretary has often been sourced from overseas. The job ad seeking candidates says: “The Secretary is expected to be a change agent who will challenge the status quo to lift economic performance, improve public service fiscal management, and extract better value for money from Government investments”.
SELL-OFF UNDERWAY
In case you usually skip reading the equity market summary below, you might want to take a look today. There is a big sell-off underway internationally. A worrying start to August which seems to be related to a reassessment of the AI-induced runup.
SWAP RATES FALL
Wholesale swap rates are probably lower today across the curve. Our chart below will record the final positions. The 90 day bank bill rate is down -2 bps at 5.44% and still a 120 day low. The Australian 10 year bond yield is down -3 bps from this time yesterday to 4.07%. The China 10 year bond rate is down -3 bps at 2.12% and we think that is an all-time record low. The NZ Government 10 year bond rate is down -5 bps at 4.27% and the earlier RBNZ fix was at 4.22% and down -8 bps from yesterday. The UST 10yr yield is down another -9 bps at 3.96%. Their 2yr is now at 4.13%, so that curve is now inverted much less, now by -17 bps. That is near the least inversion in two years.
EQUITIES IN BIG DAILY RETREAT
The NZX50 is down -0.6% in late trade and probably pleased it doesn't have a big tech exposure. But the ASX200 is down a very sharp -2.1% in afternoon trade. Worse, Tokyo has opened its Friday trade down an extreme -4.9%. Hong Kong is down -1.9% at its open. Shanghai is down -0.5%. Singapore is down -1.0%. Wall Street ended its Thursday trade with the S&P500 down -1.4%. But if it holds that tomorrow (no certainty) it would end the week little-changed. It all depends of the influence of the July non-farm payrolls report.
OIL RETREATS
The oil price is down -US$1.50 from this time yesterday at US$76.50/bbl in the US, and at just under US$80/bbl for the international Brent price.
CARBON PRICE RISES
Today the carbon price rose to $53/NZU today from $51/NZU at this time yesterday. That puts it -16% lower than the same day a year ago. Please note that we have a new daily chart tracker of the NZU price for carbon, courtesy of emsTradepoint.
GOLD UP AGAIN
In early Asian trade, gold is up another +US$16 from this time yesterday at US$2455/oz.
NZD HOLDS
The Kiwi dollar is little-changed from this time yesterday, now at 59.5 USc. Against the Aussie we are up +20 bps at 91.4 AUc. Against the euro we are +10 bps firmer at 55.1 euro cents. This all means the TWI-5 is still basically at 68.8.
BITCOIN HOLDS LOWER
The bitcoin price is little-changed from this time yesterday, now at US$64,181. Volatility of the past 24 hours has been moderate at just on +/- 2.6% however.
USE OF AI
No articles on this news service are produced with AI. Occasionally we use AI to derive images. They are always identified in the attribution.
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108 Comments
The North Island of New Zealand generally contributes a larger share of the country's exports compared to the South Island. This is due to the North Island's higher population density and more extensive agricultural and industrial activities. However, the South Island, despite having a smaller population, is significant for its contributions in sectors like dairy, meat, and forestry
In terms of proportional contribution relative to their populations, the South Island does have a notable impact, especially in primary industries. But overall, the North Island leads in total export volume.
https://www.stats.govt.nz/tools/which-industries-contributed-to-your-regions-gdp.
Worse, Tokyo has opened its Friday trade down an extreme -4.9%. Hong Kong is down -1.9% at its open. Shanghai is down -0.5%. Singapore is down -1.0%
Nikkei now down 14% in 20 days - 3rd worse decline in history. All fingers pointing at the BoJ.
With everyone piling into the JPY carry trade, the moves in JPY and Nikkei were only going one way.
But if the unravelling isn't controlled, things could get very nasty.
Selected Japanese banks and finance coys today:
Mitsubishi UFJ - -8.4%
Mizuho - 7.6%
Sumitomo Mitsui - -8%
Nomura - -9.5%
"The Warehouse takeover bid falters..".
Those who sold at ~$1.50 last week might thank themselves lucky. Currently, offered $1.28 - Bid $1.24
Throw in "$458m sale of Auckland’s Vero tower ditched: Year’s biggest property deal off" and it's looking very much like the current price of many things is expected to be a lot less tomorrow.
Ah, yes. But lest we forget, the answer is more Debt; much more and cheaper Debt..... It's worked before, and you can bet, they'll reckon it will again. All that's needed is a reason...
I'm a betting type of person and your summation is what I have my money on. Powell and Orr have their fingers hovering just above the button. All the boffins know what they have to do.
Yes aware of this but unless private debt falls our GDP is going to be rubbish as interest expense is going to keep chewing up too much disposable income.
The young with the debt are going to suffer while the boomer retirees think they are rich by owning a lot of overpriced assets (while taking superannuation payments from the taxes of young over indebted people who can’t afford to pay for it)- it is an extremely daft way of configuring an economy.
The result = extremely poor social and financial stability.
This solves both the financial and social instability issues we face.
It really doesn't.
The debt hides the fact we're poorer than we think, and we drove society off a cliff long ago, into this industrialized, depersonalized hellscape we inhabit.
Happy Friday everyone!
Yeah not sure why it'd be a tough day.
If you want to invest in a business, it should probably be your own. That way you have direct understanding and control of what your money is being used for.
If you need to borrow off people for your business, and can't even pay them back plus 10%, probably not really a business. And your "investors" are really a source of cheap, little risk assessment credit.
I also won't do work for such crowds either. And they're usually pretty easy to spot, by all the useless extravagance.
Good use of space.
That era of cars was sort of the pinnacle of reliable engineering, but enough basic comforts, AC, Electrics, half decent stereo.
Since then, many Japanese cars are now "world" cars, Japanese on the outside, crummy french (or other) componentry underneath. A new Nissan is practically disposable, yet young teens are still able to do O rings in a 91 Cefiro.
And we're not selling as many new cars, and we're not importing used cars that don't meet fairly modern standards.
I found reading ‘The 4th Turning’ a great book for understanding the paradigms each generation generally views the world through.
Good luck convincing the typical boomer they have a responsibility for the outcomes of greater society and the economy - for that particular generation the ‘self’ is generally far more important than the collective. So issues of society wide financial and society stability generally don’t register with them (their default is ‘not my problem’) - this is because this role was always played by their parents the greatest generation who after WW2 and the depression, wanted to create financial and social security for their children. As a result boomers just assume it is something that is taken for granted (and they despise the thought of being anything like their parents as their role in the 60’s/70’s was to rebel against their conservative parents who cared about society as opposed to the self) as opposed to being something that is created through a selfless view towards these issues. Sacrifice for the greater good isn’t something that resonates with boomers but it generally did for the greatest generation. (And the 4th turning predicts that millennials are the next hero generation that will restore order in the 2030’s - 2060s after the boomers relinquish power).
Anyway a great read (4th turning) and what is happening globally and inter generationally makes far more sense after reading the book.
Here’s a short summary by one of the authors:
To some extent. But remember, in the GFC, NZD was one of the worse performing fiat currencies among developed nations. JPY was the best performing fiat currency, partly because of the unwinding of the carry trade. NZD, AUD were smashed. JPY - low cost of debt service; NZD/AUD - higher cost of debt service.
Cash is king when you're living paycheck to paycheck.
Having liquidity at a time like this is usually good. That includes having that liquidity in a form you can quickly deploy in the market you operate in.
Trying to guess where relative values of various types of money might go, and having your wealth tied up in a form of money you can't readily use, can be problematic.
There is a big sell-off underway internationally.
Huge moves all over the markets today. Hell, even stocks took a second to wonder if recessions are actually good for share prices. Rates have plunged not because of Fed cuts but why the Fed will be forced to cut in a series (just as Powell hinted at Wednesday) Link
Major hedging in forward rate markets. Those markets aren't pricing one or two Fed cuts. Once they start they won't be able to stop. That's where SOFR futures are already. Not only a higher probability of a series, greater chance that series goes on longer and lower. Link
Here is a good chart showing the problem the US (and by default the rest of the world) are facing..
https://x.com/gameoftrades_/status/1819049146076340680?s=46&t=MUwQeKa7M…
Debt growth is logarithmic/exponential - in the adult lifetime of the boomer generation US national debt has gone from $1 trillion to $35 trillion! This is a serious issue which I don’t see a good solution to.
A nice/short video summarising the yield curve inversion and noting the only time we’ve had a longer rate inversion was just prior to the 1929 sharemarket crash/Great Depression.
https://x.com/gameoftrades_/status/1819115060520014214?s=46&t=MUwQeKa7M…
The corrupt party among the Aussie ruling elite goes on.
Businessman Ziggy Switkowski — who was paid by PwC to conduct a governance “review” — personally interviewed the head of PwC for the entire tax leaks affair but later shredded his notes.
Switkowski has told a Senate inquiry that he met with ex-PwC Australia CEO Luke Sayers “way down the track” during his review last year but had not records of the meeting.
The meeting had been held “at a hotel over coffee” and while members of his eight-person support team had been present at some other interviews they were not present at the Sayers meeting.
https://theklaxon.com.au/switkowski-shredded-notes-after-meeting-ex-pwc…
The Du Val people, Kenyon and Charlotte, were recording a series a little while ago. Whoever has it should release it.
It’s about time people with zero technical capability and zero ethics started going to jail. If you cannot show competency with financial forecasting, interest rate risk management and refinancing risk management then they should go to jail.
The whole property sector, even many of the listed ones, is just too unskilled. Take a look at the hedging policy profiles that don’t change as they go through the property cycles. It’s just moronic.
At least Finance Ministers have to front. To parliament, to the electorate along with their respective governments . From memory from the mid sixties up until 1984 various NZ Finance Ministers implemented seven or so devaluations of the NZ$. That introduced volatility, uncertainty and confusion to all involved in NZ’s global trade and hardly inspired confidence. On the other hand, the fast grown empire at the RBNZ has through sequences of extreme adjustment of the OCR viz, crash dive, rocket up and crash dive pending, have introduced volatility, uncertainty, and confusion together with severe financial hardship to households, businesses and industry. Not a heck of a lot of having to front to the electorate about it though, is there.
This was the teaser: The Property Developers (Season 1) - Promotional Trailer
If anyone likes what has become know as the Buffett Ratio - the ratio of the total value of a countrys' entire stock market values - divided into its GDP - 50-75% is about average, more than 100% is overvalued, under 50% is undervalued. US markets have recently been at 190%. Locally, NZ and OZ sit at about 100%. Definetly time for some revaluations.
No central Banker can ever let it go, they have to avoid deflation. The problem, though, is the debt bubble just expands. At some point the printers go Brrrrrrrrrrrrrr will not work as there will be a massive run to Gold or BTC or something non fiat that they cannot print. You cannot print food or oil or electricity. If you take cash out of a system even electronic numbers and buy gold you deflate a banks balance sheet... once out they need to replace that capital.
I make it NZ GDP at 410 billion and market cap around 165 billion, ratio of about 40%.
I wouldn't give too much weight to it though, depends heavily on the balance between publicly listed and privately held companies in a particular country, and doesn't account for companies listed overseas (unless I'm missing something).
For example, if FPH got bought out tomorrow does that mean the rest of the market becomes 10% better value?
Yes its a rough guide - but where did you get the figures from?
https://www.nzx.com/markets/NZSX - add up the figures in the RH column. This is just the main board of course..
Divide into: https://www.stats.govt.nz/indicators/gross-domestic-product-gdp/
I got my data from here:
https://www.theglobaleconomy.com/New-Zealand/stock_market_capitalizatio…
Your link also quotes the total market capatilisation at the top of the page at $171 billion, pretty close to my link. The top two in the list itself are Westpac and ANZ which are dual listed on the ASX - the majority of this valuation should accrue to Australia rather than New Zealand. I'm not really sure how the link above or the NZX total market cap does the split for companies like this. Maybe it is based on primary listing location, which would mean these companies only count towards the ASX market cap.
This only shows how problematic the ratio is - there are huge numbers of companies listed in 2+ stock exchanges. Not to mention New Zealand companies like XRO that are only listed elsewhere now.
Maccy B reckons in terms of household incomes and consumption, the current recession is Australia’s worst in modern history.
https://www.macrobusiness.com.au/2024/08/australias-recession-worst-in-…
There seems to be racial slurs aplenty occurring in parliament here though. Except it is the same race slurring one another. Or is one parliamentary tribe against another, more accurate. The first seemingly has had to absorb abuse and insults generally and because of that feel justified in hurling abuse and insults at the other party even though the recipient of that had nothing to do with what the first party has had to withstand. This is our parliament behaving worse than a bunch of loutish school yard bullies. Any reasonable, responsible person understands that if a stranger should unfortunately punch you, there is neither reason nor justification to then yourself, go and punch another stranger.
The best insights on the NZ economy continue to be offered by Maccy B across the ditch. The mortgage data is ‘interesting’…
https://www.macrobusiness.com.au/2024/08/reserve-bank-has-lifted-rates-…
Interesting to read Norway's current fortunes, the only country with a relatively higher OCR hike:
Norway’s economy is slowing as inflation and higher interest rates weigh on consumption and investment. The labour market is tight and wage growth robust, while labour shortages and job mismatches are high and rising. Inflation is falling but still way above the target of 2%. The fiscal stance is expansionary. It should become contractionary to support monetary policy. While Norway is one of the OECD’s most productive countries, productivity growth over the past decade has been weak. Making skills more relevant, notably by strengthening vocational education and training, could help raise productivity and ease tight labour markets.
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