A review of the things you need to know before you get home on Wednesday; some rate changes, price pressures build up, the job market is strong, factories are occupied, Auckland stars, swaps fall, NZD is held, etc.
Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
Resimac reduced its variable rate for LVR
CHANGES IN TERM DEPT RATES
Asset Finance raised its 1-year rate to 3.50%.
PRICE PRESSURE OUT OF BALANCE
Latest ANZ Business Outlook Survey shows an unprecedented net + 85% of companies expect higher costs to come. In May, they suggested that economic conditions were at their peak; but they spread from there until June. Inflation expectations are now 2.33%, the highest since November 2017.
JOB MARKET PRESSURE IS BUILT
The latest BNZ / SEEK employment report shows vacancies to a new record in May, recording one last expanding job market.
GO WITH HIM
ANZ’s June update on its Truckometer indices shows a lot of volatility and revision. But it also shows strong growth in traffic both for personal use (cars) and for heavy goods vehicles (heavy). ANZ suggests that some activities are higher because companies struggle to adapt to supply chain disruptions. But they also suggest that this is largely due to the fact that “businesses and people get along well.”
HIGHER RATES AND FEES
Local authorities saw their rate and ‘regulatory revenues“(Which includes fees and fines) increases by + 4.5% over the year until March 2021. That’s turn higher again after a year 2020 which saw this growth drop to only + 2.2% per year at one point.
BREAKDOWN OF PROFITS
Energy Mercury (MCY) strongly reduced its profit forecast to $ 460 million, down from the previous $ 520 million. They say declining hydropower generation is at the root of this, given past dry conditions and an unplanned and possibly long-term outage at its Kawerau geothermal power plant. These declines prevented them from getting any additions thanks to the higher income from its Tilt Renewables investment. It’s an ugly result that would have been even uglier without Tilt.
“MORE AMBITION REQUIRED“
The Climate Change Commission has published its final emission reduction budgets, saying New Zealand’s starting point is worse than expected, so more needs to be done.
THREE TIMES + SUBSCRIPTION
The New Zealand government bond of May 2032 was issued by syndication for $ 2.25 billion. These bonds carry a 2% coupon, attracted $ 7.5 billion in the book-making process, and were issued with a yield to maturity of 1.8725% pa at the bottom of the benchmark range on their announcement. The “joint leaders” (note cutters) were ANZ NZ, BNZ, Commonwealth Bank of Australia and JP Morgan Securities Australia. As we noted earlier, subsequent normal tenders from the NZGB have been reduced.
CONSTRUCTION STOCKS OCCUPIED FROM FACTORIES?
Manufacturing sales increased by + 2.7% in the March quarter compared to March 2019 (data for March 2020 is of course affected by the pandemic). Manufacturing volumes are + 2.2% higher on this basis. These are not impressive gains, but at least they are gains. What is concerning is that finished stocks are up almost + 13% on the same basis. Manufacturing to build up inventory can be an indication that things are not sustainable at current levels. This March data contrasts with the strong June business confidence survey above.
NZX-listed real estate stocks rose + 2.4% last week and + 3.6% since early October 2020. Last week’s driving force is Vital Healthcare (VHP) which was up +1 place to 27th place in the NZX50. This is a sector with an aggregate capitalization of $ 11.4 billion or 9% of the aggregate capitalization of NZX 50. It is not a sector that appears in the overall index. Interestingly, these 8 companies together have a capitalization less than Fisher & Paykel Healthcare’s $ 16.6 billion.
A WORLD # 1
Auckland topped The Economist ranking The 2021 Global Quality of Life Index. Sydney fell from the top ten. Osaka Japan was No. 2, Adelaide No. 3 and Wellington No. 4 sharing this place with Tokyo. (Housing affordability does not appear to have been a major factor in this survey. The main scoring categories were crime and threats, health care, culture and environment, education and infrastructure. .)
AN INFLATION MOTOR
from China producer price rose + 9.0% in May from a year ago, the fastest rate of increase in 13 years and above the + 8.5% expected. In April, they increased by + 6.8% on the same basis, so the pace is accelerating. Their consumer price grew by + 1.3% year-on-year and although this was faster than the previous month, it was below the expected + 1.6% per year.
Compared to this hour yesterday, the price of gold is down from -US $ 8 and now at US $ 1892 / oz. It closed in New York at that same US $ 11,893 / oz and in London at US $ 1,893 / oz.
LOCAL ACTIONS POSITIVE TREND
Wall Street ended its session virtually unchanged from the previous day. The Tokyo market started down -0.3% and Hong Kong has opened -0.1% so far. Shanghai is up + 0.3% in early trading. The ASX200 is down a minor -0.1% at the start of the afternoon, but the NZX50 Capital index is heading for a gain of + 0.4% at the end of the session. Auckland Airport (AIA # 2 + 2.0%) and Ryman (RYM # 9 + 1.8%) lead the NZX50 winners. AT M # 10 + 1.6% and FPH # 1 + 1.2% also posted good gains.
SWAP & BONDS RETURNS FLEXIBLE AGAIN
We do not yet have today’s swap closing rates. If there are any significant changes again today, we will update this item. They probably fell. The 90-day bank note rate is unchanged at 0.32%. The benchmark ten-year Australian government rate is down -7 basis points to 1.53%. The 10-year Chinese government bond was little changed at 3.14%. The ten-year New Zealand government is down -4 basis points to 1.78% and now above the previous RBNZ fix of 1.77% (-5 basis points). And the ten-year US government fell -4bp to 1.53%.
THE NZ DOLLAR
The Kiwi dollar is holding at 72 USc and where it was when we opened this morning. Against the Aussie, we changed little at 93 AUc. Against the euro we are soft at 59.1 euro cents. This means the TWI-5 is now at 73.5 and very little changed from where we opened this morning.
The price of bitcoin is now at US $ 32,555 and very little different from yesterday’s time. But in between, things have been volatile, dropping at one point to US $ 31,035 and close to 2021 lows. Volatility over the past 24 hours has been very high at +/- 4.5%.
This soil moisture table is animated here.
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