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In a very brief statement issued on Wednesday evening, Winston Peters' NZ First says we can expect to find out who the Government is going to be on Thursday afternoon.
Here's the NZ First statement.
New Zealand First will be in a position tomorrow afternoon to make an announcement on the result of negotiations following the 2017 General Election.
New Zealand First Leader Rt Hon Winston Peters said he had spoken to the leaders of the National Party and the Labour Party today and, amongst other matters, advised them of that.
New Zealand First's caucus spent Wednesday talking in Bowen House, after meeting with their board over Monday and Tuesday.
Just before 5pm Wednesday, MP Fletcher Tabuteau left the building, telling Newshub that talks were now “at a stage now where the caucus is no longer needed”.
Peters did not front to media after sending out the statement. MPs Shane Jones and Ron Mark declined to comment.
Source: Latest stories from interest.co.nz | 18 Oct 2017 | 12:31 amNew Zealand Online Property Market, Home of NZ Real Estate Agents
Another dry up week in the South, but with some days of good sunshine and warmth, pasture growth rates have lifted close to achieving a balance day mark.
Canterbury has soils now much wetter than average, and this has caused some delays in crop establishment, pasture renewal and preparing ground for next year’s winter crops.
The North Island continues to struggle with wet conditions, and this week Fonterra adjusted downwards their milk production forecast from 3% ahead of last year, to just 1%.
With mating now getting close in the south, dairy staff are monitoring heats, mineral status, and body condition scores, to ensure cows are in their best possible order when the day of joining arrives.
In the north where mating has started, intervention procedures are in place to try and stimulate ovulation, with some cows lighter than normal, and pasture composition still too wet to maximise improvements in condition scores.
Rabobank believes dairy prices may have peaked, and global production has lifted in response to these levels, but they are also confident strong Chinese demand will sustain good returns for a while yet.
Latest Oceania prices confirmed this theory, with butter prices falling US$375/tonne, whole milk powders by a $100/tonne, while the other two main commodities remained steady.
The global dairy auction overnight also showed more weakness with the index falling again by 1%, lead by skim milk powders with a 5.6% drop, but also falls from whole milk powder, which is only $14 from the $3000/tonne mark.
This was on the back of a falling milk derivative market, increasing peak volumes offered by Fonterra, and a weaker currency that failed to stimulate prices
Bank economists are now also getting nervous, with ANZ and BNZ both adjusting downwards to the low $6 mark, but the ASB still predicts commodity prices adjusting back up later, and allowing the $6.75 forecast to remain.
The disease outbreak in South Canterbury/North Otago reached it’s next stage, with officials deciding to cull all 4000 cows from the infected farms.
This will be devastating news to the owners, but the correct decision to try and isolate this disease at its source, and reports suggest neighbours and those dairy farms close by, are supportive of MPI’s response.
Source: Latest stories from interest.co.nz | 17 Oct 2017 | 10:01 pmNew Zealand Online Property Market, Home of NZ Real Estate Agents
Here are the key things you need to know before you leave work today.
MORTGAGE RATE CHANGES
No rate changes today.
DEPOSIT RATE CHANGES
None here either today, so far at least.
A second consecutive drop in dairy prices overnight, although not large, is getting analysts concerned about the 2017/18 payout level. The expected firming is not arriving. It has prompted economists to drop their forecast milk price from $6.75 to as low as $6.30.
ANZ NZ, the country's biggest bank, is to get ex-PM John Key as its local board chairman from January 2018.
WHERE THE JOBS ARE
The number of online job advertisements remained steady with an increase of +9.6% in September 2017 from the same month a year ago, according to the latest Ministry of Business, Innovation and Employment (MBIE) Jobs Online report. They report the largest occupation increases were for labourers (up +27% in a year) and machinery drivers (up +28% in a year). In contrast, managers only saw a +3.8% rise, and professionals saw a +5.4% rise in demand.
The NZ Super Fund has reported at +1.66% return in September 2017 from August, and a +19.2% return over the year to September. This is an before-tax, after-fees return and far above its benchmark, and that is up from the +12.5% gain it has shown in the past three years. Since inception 14 years ago (2003), the Crown has contributed $14.9 bln and from that the fund managers have earned another $27.7 bln in gains, and out of that has paid the Crown back $6.1 bln in taxes. By any measure this is outstanding - and yet the
Auditor General State Services Commissioner thought the NZSF boss was not worth what he is being paid. Fortunately the NZSF board ignored the Auditor General's advice.
Australia reported its updated life expectancy (at birth) data today. That shows Aussie females can expect to live to 84.6 years and males to 80.4 years. The equivalent NZ expectation is 83.4 yrs for females, and 79.9 yrs for males. At aged 65, an Australian female can expect to live to 87.3 years while a male can expect to live to 84.6 yrs. (NZ equivalent numbers are 88.6 yrs and 86.2 yrs. So, it seems at retirement you can expect to live at least a year longer in New Zealand, even if at birth we start behind the Aussies.)
IGNORING THE LAW
And staying in Australia, Melbourne's James Packer-owned Crown Casino altered poker machines to get around regulations and lower returns to players, and large transactions were hidden from money laundering authorities, former staff allege in sensational and damning evidence tabled in the Australian Federal Parliament.
WHOLESALE RATES REVERSE
The rises we reported here yesterday at 4pm subsequently evaporated in late-day trade as offshore influences grew. And today, we have seen the long end decline further by up to -3 bps. The 90 day bank bill rate is unchanged at 1.93%.
NZ DOLLAR UNCHANGED
The NZ dollar is holding at 71.6 USc. On the cross rates we up a little at 91.3 AUc and 60.9 euro cents. The TWI-5 is still at 74.4. The bitcoin price has dipped -3% today to US$5,484.
You can now see an animation of this chart. Click on it, or click here.
Source: Latest stories from interest.co.nz | 17 Oct 2017 | 9:31 pmNew Zealand Online Property Market, Home of NZ Real Estate Agents
The insurance industry is supporting the Reserve Bank’s (RBNZ) move to improve the way it regulates the sector.
However questions are being raised around whether the Bank should be the entity conducting the review of the legislation that gives it its mandate.
Releasing a feedback statement on the 42 submissions it received on an issues paper sent out in late March, the RBNZ says stakeholders generally believe the Insurance (Prudential Supervision) Act 2010 (IPSA) has improved the “soundness” of the insurance sector “without unduly restricting competition or innovation”, or introducing “inappropriate compliance costs”.
They acknowledge there’s room for improvement, but don’t believe any fundamental changes need to be made to the legislation as a whole.
Nonetheless, some submitters feel a review of the legislation should be conducted by an independent agency. The RBNZ “does not see a strong case” for this.
It says: “The current Review is being under taken by the Reserve Bank under terms of reference agreed by Cabinet. The Review will be completed transparently and with wide consultation.
“Any legislative changes recommended from the Review will happen only with due Parliamentary process i.e. any legislative change would ultimately require the support of and be the responsibility of the relevant Minister (currently the Minister of Finance is responsible for IPSA) and Parliament.”
The RBNZ’s Head of Prudential Supervision, Toby Fiennes, made his stance on regulation quite clear when he in May told interest.co.nz he wasn’t keen for the RBNZ to be as “intrusive” as its counter parts around the world.
He said New Zealand runs a “different model” that’s cheaper and more efficient.
More engagement necessary?
Yet a number of submitters on the issues paper want the RBNZ to engage more with its stakeholders and provide them with more clarify and guidance.
In fact, 12 of the 36 insurers the RBNZ assessed between February and June in its Insurer Disclosures Thematic Review had compliance issues when it came to disclosing solvency in their financial statements. Twenty-two didn’t disclose their financial strength ratings properly.
The RBNZ notes the International Monetary Fund (IMF), in its Financial Sector Assessment Program (FSAP) made similar recommendations to the submitters about the RBNZ’s approach towards regulating insurers.
“The Reserve Bank is reflecting on this issue, as a part of our response to the IMF FSAP recommendations, rather than in the IPSA review,” the RBNZ says.
“The focus for the IPSA Review is that the legislation continues to allow for a risk-based approach to regulation and supervision, and permits a range of supervisory approaches to be taken by the Reserve Bank within the limits of its resources.”
Overseas insurers and disclosure
Back to the issues paper, the RBNZ says the following areas received the most support from submitters:
- the scope of the legislation: which business lines and entities are subject to the requirements of IPSA and Reserve Bank prudential supervision, including ensuring the legislation caters appropriately for innovation arising from the increased use of technology within existing insurance business models and the potential for disruptive new entrants;
- overseas insurers: the treatment of overseas branch operations, which should balance the value of overseas insurer participation in the New Zealand market, including reinsurance firms, against potential risks to New Zealand policyholders’ and broader economic interests;
- disclosure: to ensure that disclosure requirements and data collections are reasonable, and able to be efficiently complied with, including facilitating the use of technology to aid compliance; and
- enforcement tools: balancing the enforcement tools available to the Reserve Bank with the Reserve Bank’s enforcement and supervisory approach.
The RBNZ will consider both submitters’ feedback, as well as the IMF’s recommendations, in Phase 2 of its review. Phase 2 will extend into 2019.
Source: Latest stories from interest.co.nz | 17 Oct 2017 | 7:12 pmNew Zealand Online Property Market, Home of NZ Real Estate Agents
By David Hargreaves
Timing is everything.
And some of the timing around decisions ultimately affecting the housing market is not looking great at the moment.
It is anybody's guess when we will get a government sworn in and up and running.
What's rather more predictable is that Christmas and the end of the year are both approaching with great speed.
Even if the shape of the next government is settled this week, it's very questionable how much can now be achieved before Parliament goes into recess in December.
Given the delays that have occurred since the September 23 election, would our MPs consider staying on in Parliament for longer than usual this year to get the new government up and running?
Well, you can argue that maybe they should. But I wouldn't bet on it.
The interesting thing then will be priorities and what things logistically the new government will attempt to tick off - and what is physically possible before the end of the year.
The portents in all this are maybe not good for the housing market.
At the moment obviously uncertainty rules. Anecdotally the banks' lending policies are getting tighter and tighter - possibly in some part due to the uncertainty.
The latest iteration of the Reserve Bank's LVR restrictions - the 40% deposit rule for investors - is still seemingly having an impact too.
We are just at the point when the question is worth seriously asking about whether the RBNZ should now be considering backing off with the LVRs.
LVRs a blunt instrument
I would imagine the RBNZ itself is still pretty happy with how things are at the moment. But LVRs are a somewhat blunt instrument - and there would be a risk in the restrictions going on for too long in their current form.
However, the RBNZ's probably reluctant to look at lifting them without further back-up insurance. Of course, it is still keen on debt-to-income ratios, but the National Government effectively pushed that down the road and beyond the election through getting the RBNZ to consult on it first before any agreement was considered for including it as one of the options in the 'macro-prudential toolkit'.
Separately both Prime Minister Bill English and Labour leader Jacinda Ardern later poured cold water on the idea of DTIs. And indeed it's possible depending on the hue of the future government that there may be a push-back against the RBNZ's use of macro-prudential tools.
Also, there's the possibility the RBNZ's Policy Targets Agreement with the Government may be reworked - potentially removing inflation as the sole target of monetary policy and adopting a broader focus.
And, whoever forms the Government, it's likely that some move towards a formalised committee process for interest rate decisions will be established. Such a process has informally been in place at the RBNZ in recent times - but officially the decision is still that of the Governor and the Governor alone.
A new Governor would be good
All these kinds of issues will be occupying the mind and thoughts of the new RBNZ Governor. Oh, and that's right, we haven't got one of those yet.
It will be up to the new Government to sign off on a new Governor to replace Graeme Wheeler, who left in September.
The previous Deputy Governor Grant Spencer stepped up to the plate as Acting Governor for a six month term that will expire in late March.
Under Spencer then a steady-as-she-goes course can be expected. But it's difficult to see much inclination on his part to undertake substantial new initiatives - certainly not till there's a new Government in place and some indication when a new RBNZ Governor will be appointed.
What then if the Government doesn't get around to appointing a new Governor before the end of the year?
Well, that could be pretty interesting to say the least.
If a Government was up and running by the start of November and able to swiftly appoint a new Governor, then it's to be imagined said Governor may well still be able to take up their appointment by the time Spencer is leaving in late March. It does of course depend whether the appointment is internal or external.
A bit fraught
But leave a decision till after Christmas and things are likely to get a bit fraught. It's to be imagined that a lot of the decisions that will need to be made by a new Governor simply won't be able to be addressed.
Within all that then is what happens to the housing market.
With the uncertainty still hovering around who will govern the country, it seems we can now definitely kiss goodbye to any prospect of a meaningful rally in the market before Christmas.
After the 2014 election, when the status quo was returned to Government, the housing market exploded in the run-up to Christmas.
That would not have happened this year in any case, given the LVR restrictions on investors and the conservative line being taken by banks to new lending.
A quiet housing market
But the probability, with the way things have panned out, is that the market's now going to be real quiet up to Christmas and therefore, real quiet till probably March.
I think there is a risk that with the RBNZ not having permanent new leadership in place, and not even knowing properly what rules it will be having to abide by under a new Government, that the currently very tight regime on the housing market will be left in place for too long.
Now, with the market as it is at the moment, we are some way off (I would have thought) any suggestion of investors feeling pressured to sell properties. But if interest rates do, partly based on uncertainty, start to push up again in the new year, will this be a trigger for more investors to look to offload properties.
The risk then would be that the LVR policy - designed to stop sharp corrections in the market that might put banks under pressure - could actually lead to such a scenario.
Food for thought
I don't want to be alarmist. But I just hope people are thinking about these things.
The housing market looks fairly balanced at the moment and could probably tip either way.
It needs vigilance and responsiveness from the powers-that-be. With no Government and no permanent RBNZ Governor this is a far from ideal situation.
Whenever a new Government is formed, it is to be hoped that things like the new RBNZ Governor and the Policy Targets Agreement are given urgent priority.
Otherwise there is some potential for matters in the housing market to get away from us.
Source: Latest stories from interest.co.nz | 17 Oct 2017 | 6:16 pmNew Zealand Online Property Market, Home of NZ Real Estate Agents
Former Prime Minister John Key is to replace outgoing ANZ Bank New Zealand chairman John Judge.
ANZ confirmed the move on Wednesday, which has been rumoured in the banking sector for some time.
Judge is set to retire in January. He has been on the ANZ NZ board since December 2008, and its chairman since June 2012. Key joins the board today, October 18, and will succeed Judge as chairman in January.
David Gonski, chairman of Australian parent ANZ Group, said Judge’s tenure included significant change at ANZ NZ.
“The National Bank and ANZ brands and technology systems were successfully merged in 2012 and the business has grown significantly. ANZ New Zealand now has the biggest market share for home loans, deposits, credit cards and KiwiSaver, and is leading the way with digital services," Gonski said.
Gonski said Key would add "great value."
“Sir John Key’s strong international career in banking and his understanding of and contacts across the Asia-Pacific – where many Australian and New Zealand companies are increasingly trading - will add great value to the governance of ANZ,” said Gonski.
Key, a former head of global foreign exchange with Merrill Lynch, was Prime Minister from 2008 until his surprise resignation late last year. Since stepping down as PM he has also joined the Air New Zealand board as an independent director.
During his time as PM Key was popular among the banking fraternity. Former Westpac NZ CEO George Frazis said of Key in 2011: "The Prime Minister has a business background, an ex-banker, and this is resulting in quite decisive, responsive decision making based on really sound, fundamental economic objectives."
"For banking what that sees is a government much more focused [than Australia's] on growth and credit availability, which in turn is contributing to the improved economic outlook," Frazis added.
Key follows in the footsteps of another former National Party leader, Don Brash, who was on the ANZ NZ board, when it was known as ANZ National Bank, from 2007 to 2011. Brash is now chairman of the Chinese government controlled bank, ICBC NZ.
ANZ NZ’s other current independent directors are Tony Carter, Mark Verbiest and Joan Withers. Executive directors on the board are ANZ NZ CEO and group executive David Hisco, ANZ Group chief risk officer and group executive Nigel Williams, and ANZ Group CEO Shayne Elliott.
Source: Latest stories from interest.co.nz | 17 Oct 2017 | 5:26 pmNew Zealand Online Property Market, Home of NZ Real Estate Agents
By Alex Tarrant
New Zealand First’s caucus was meeting Wednesday morning to discuss whatever came out of Winston Peters’ meetings with Bill English and Jacinda Ardern last night, and to possibly begin discussions on government structure and desired Ministerial positions.
The party’s MPs filed into Bowen House at different times and through different entrances through the early morning – some stopping to speak to media, although not much was gleaned from them outside of what leader Winston Peters said Tuesday evening.
The caucus has just sat through a joint two-day meeting with the party’s board Monday and Tuesday. Leader Winston Peters said Tuesday evening that the party had reached 95%-98% consensus on what the two policy platforms on the table from National and Labour “both mean”.
Interest.co.nz sought clarification on whether Peters had meant there was consensus on what the party would go back to National and Labour with in terms of any tweaks they would seek to each policy platform, or whether the comment meant there was consensus on what each package – as reviewed over the past two days – would deliver for NZ First policy-wise?
“The latter,” was the response.
I put to another NZ Firster that taking two days to understand the two policy packages that came out of last week’s negotiations seemed quite a long time for just that, while having nothing else come out of the meeting.
The response was that the board and caucus had covered off and clarified what Labour’s and National’s positions were on each policy in each package, and where New Zealand First stood on each one. This required a lot of work, it was said, as a huge amount of policy was reviewed – not just five or ten items.
We're getting close
Fletcher Tabuteau was the first New Zealand First MP to enter the building where the media pack was waiting Wednesday morning. He is the party’s spokesman on commerce, tourism, trade, energy and revenue, and was consistently part of last week’s negotiating teams with Labour and National.
He said he had “no idea” how things would go through the morning. “I’ve been in negotiations and then caucus and board, and we go from here." Asked whether we might get an announcement today, he looked skyward for a few seconds before replying, “I’m not sure. I couldn’t say that with any…well we’re getting close, right?”
New MP Mark Patterson was next. “We’re at the business-end. There’s no doubt about that, so we’ll find out,” he said. “It’s probably beyond us, a lot of this stuff now – there’ll be other parties that make, that have to make that call.”
“Winston was pretty candid with you last night. We’re about 98% of the way there, with the stuff, with the policy stuff. So, that’s just about done and it’ll be up to the leadership now.”
It was then Shane Jones’ turn. He wouldn’t comment on whether he expected a decision today. “Our Rangatira Winston, he’ll be handling all that.” Jones said there would be re-engagement this morning. “Come on folks, it’s still a good day, and people are getting paid,” he said before telling the media pack that today was the day he was getting his wedding ring fitted for his upcoming nuptials in Rarotonga. “It’s ring-sizing day.”
“We shouldn’t overlook the hard work that’s already happened. And of the decisions that you’re looking for, Winston will, at the duly appointed time, be making an announcement,” he said. “I’m not sure if I’m going to go for - my ring – whether it will be sapphire or ruby, but I’m getting married and I’ve got ring-sizing today.”
'I don't want to lower the 5% threshold'
Meanwhile, Winston Peters issued the following release regarding a comment in the Dominion Post's editorial Wednesday morning that he'd like the 5% threshold the be reduced. He's not a fan of the idea, apparently:
LET’S STOP THE LIES
Fairfax claimed before 446,287 votes were even counted in the 2017 General Election that I was holding the country to ransom.
Second, that I had tried to get a deal on an electorate seat.
Today’s editorial is slovenly and deceitful in the extreme and it begins by saying I want to reduce the 5 per cent parliamentary threshold for political parties. What is so bad about that lie is that it is so blatant.
On the review of the electoral system, to which political parties made submissions, New Zealand First submitted that the threshold should remain at 5 per cent. That view was made public by us and was widely broadcast at the time.
That being the case, why have you attempted to deceive readers for the umpteenth time where New Zealand First is concerned?
In 24 years New Zealand First has never tried to do a deal with another political party prior to the election.
Would you please tell your readers where you get your evidence, or is making it up as you go along your professional forte?
Source: Latest stories from interest.co.nz | 17 Oct 2017 | 5:09 pmNew Zealand Online Property Market, Home of NZ Real Estate Agents
By David Hargreaves
Another weak performance in the latest GlobalDairyTrade auction has prompted some economists to cut their forecast milk prices for the current season.
Economists at ANZ and BNZ were previously in line with the official Fonterra forecast, which is for a price of $6.75 per kilogramme of milk solids.
But not now.
ANZ's now forecasting between $6.25 and $6.50, while BNZ economists are picking $6.30. However, the long-time economist bulls at the ASB are retaining their pick of $6.75 and believe that global dairy prices will rise again before the end of the year. Westpac economists though, who are currently forecasting a $6.50 milk price, are now seeing some downside risk to that.
All this follows the latest dairy auction, which saw overall prices slip a further 1% and the key Whole Milk Powder price fall 0.5% to now be just above the US$3,000 per metric tonne mark.
Overall prices as measured by the GDT Index are down 4.6% since May, while WMP prices are down 9% in the same period.
BNZ senior economist Doug Steel said the general level of dairy prices at this auction combined with an NZD/USD hanging around in the low 70s makes forecasts for Fonterra’s milk price of $6.75 for the 2017/18 season "more tenuous".
"If current market conditions were to persist for the remainder of the season, our calculations suggest the milk price would be around $6.40. Even that may prove a bit on the high side given the potential downward price pressure stemming from the EU and the fact that dairy prices still look a bit stretched relative to international oil and grain prices.
"US milk production continues to rise. Strong milk fat prices (albeit with signs they will soften ahead) have not been enough to offset the decline in powder prices. All this sees us tab down our milk price forecast to $6.30 from the $6.75 we had nudged it up to a couple of months ago.
"Something a bit lower is possible on the EU news, while something higher is possible, if NZ milk production continues to lag last year, and Chinese demand was to prove strong over coming months. We think $6.30 currently sits more comfortably in the middle of a wide range of possible outcomes. An outcome of $6.30 would still see this season’s milk price comfortably above the previous season’s final milk price of $6.12."
ANZ rural economist Con Williams noted that longer contract delivery periods for WMP into next year were showing prices below US$3,000 per metric tonne, with the price 'curve' showing short term prices higher and longer term prices lower.
"The curve for WMP and SMP/milkfat both remain in backwardation suggesting either reasonable near-term demand for the Chinese free-trade window or the market feeling future supply will be more plentiful – we suspect it is a bit of both," he said.
However, Williams felt that even "near-term" delivery prices for the key products "are no longer high enough to justify a milk price forecast of $6.75/kg MS".
"They [the prices] are indicating something closer to the mid-$6/kg MS range. However, prices for key products to be delivered in the New Year are signalling something even lower and broke below the key US$3,000/t level overnight (WMP and SMP/milkfat combined).
'This warrants some caution'
"Combined with higher than expected milk flow from Europe in the New Year and possible unfavourable changes to the European intervention scheme, we believe this warrants some caution.
"Hence we downgrade our milk price forecast to $6.25-$6.50/kg MS for 2017/18."
ASB senior rural economist Nathan Penny said that "D-day" had arrived for NZ dairy production.
"Wet weather has now stalled spring production. And weak production at this time of the season is likely to impact the season as a whole. "Subsequently, we have revised down our nationwide (i.e. for all processors) milk production growth forecast for the season to 3%, from 4% previously. This is a similar revision (albeit a tad smaller) to Fonterra’s forecast revision on Monday; Fonterra revised its growth forecast for the season on its collections down to 1%, from 3% previously. "With this in mind, the auction result came as a surprise. After all, NZ production is the dominant driver of dairy prices for the products that matter to NZ. There are some factors in play which may have contributed to the weak result. In our view, however, these factors are all secondary to the material change in NZ production. "Accordingly, we stick with our 2017/18 milk price forecast of $6.75/kg. Indeed, we expect weak NZ production to translate into higher auction prices by the end of the year."
Risks to production
Westpac economist Shyamal Maharaj said Westpac saw that the current risks to production will limit the total volumes milk collections for the 2017/18 season.
"However, we maintain our view that production volumes have room to pick up above the expected collections from Fonterra’s update despite the poor weather.
"On a global scale, we expect supply to certainly point to the upside of the previous season’s volumes. Of the factors driving demand, we expect that the outcome of the National Congress will provide colour around the size of influence an economic reforms may have on Chinese demand for our dairy products going into 2018.
"On balance, we retain our forecast farmgate milk price of $6.50/KgMs, though the risks are mounting to the down side. Our forecast is already lower than Fonterra’s $6.75/KgMs, where other market forecasters have been to date."
Source: Latest stories from interest.co.nz | 17 Oct 2017 | 3:25 pmNew Zealand Online Property Market, Home of NZ Real Estate Agents
The NZD is trading slightly higher against the majority of its rivals after yesterday’s inflation data came is ahead of expectations. The NZDUSD traded to a high of 0.7200 before a disappointing dairy auction led to a NZD sell-off.
Yesterday’s consumer price index (CPI) climbed 1.9% y/y with the September quarter increasing by 0.5%. Both results were higher than forecasts with economists predicting an increase of 1.8% and 0.4% respectively.
A tapering off of demand resulted in another negative result at this morning’s dairy auction. The new season auction results are now evenly balanced at 5 positive and 5 negative outcomes. The GDT price index fell 1% from the previous auction a fortnight ago to US$3,204 a tonne, volume also fell with 35,669 tonnes of product selling under the hammer, down from 37,990 tonnes at the previous auction.
Better-than-expected economic data releases out of the US has helped support the USD. Industrial production for the month of September increased by 0.3% (exp 0.2%) after falling by 0.7% in August, while both import and export prices increased more than forecast during the same month. US import prices rose 0.7% following a 0.6% increase in August, while export prices climbed by 0.8% in September following an upwardly revised 0.7% increase in august.
UK inflation for September increased to 3%, up from 2.9% in August and in line with expectations, but the GBP failed to take advantage of the data after new deputy Bank of England governor Sir Dave Ramsden said he was not part of the majority of policymakers who favoured a rate hike.
Global equity markets remain mixed - Dow +0.07%, S&P 500 -0.06%, FTSE -0.14%, DAX -0.07%, CAC -0.03%, Nikkei +0.38, Shanghai -0.19%.
Gold prices are down 1.2% trading at $1,285 an ounce. WTI Crude Oil prices have edged lower, down 0.7% overnight currently sitting at $51.55 a barrel.
Current indicative rates:
NZDUSD 0.7169 0.0%
NZDEUR 0.6089 0.2%
NZDGBP 0.5434 0.4%
NZDJPY 80.44 0.1%
NZDAUD 0.9141 0.1%
NZDCAD 0.8991 0.2%
GBPNZD 1.8394 -0.4%
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Source: Latest stories from interest.co.nz | 17 Oct 2017 | 3:07 pmNew Zealand Online Property Market, Home of NZ Real Estate Agents
More of the same. Low volatility, small price changes and the US equity market cracking another milestone, this time 23,000 for the Dow Jones index. NZD is relatively flat against a backdrop of broad increased support for the USD.
Within minutes after hitting the send button yesterday, there were reports that Trump had met with Stanford economist John Taylor as a possible candidate for the Fed Chair position and he was impressed. The same report suggested that Kevin Warsh was less favoured. Both are viewed as hawkish candidates, with Taylor’s widely used “rule” suggesting that rates should be higher. This supported the USD and nudged rates higher, although movements have been modest. Overnight the US 10-year rate found the air above 2.32% thin and it has since settled just over 2.30%, a similar level to the NZ close. The USD is up on all the key crosses and up 0.25% on the TWI majors index.
We’ve seen a little bit of action in the NZD, but it has traded within a 50pip range. It rose about 25pips but met resistance around 0.72 after Q3 CPI data came in slightly higher than market expectations. Thereafter it drifted lower and fell after the RBNZ released its favoured core inflation series, which showed annual inflation static at 1.4%, going against the grain of the official core measures that nudged higher and were around the 2% mark. The overnight low of 0.7148 came soon after the latest GDT dairy auction showed an average 1% drop in prices. Without a bounce-back from the fall in the previous auction, downside risk for the $6.75 milk payout forecast for this season is now clearly evident. NZD currently sits at 0.7170, similar to the local close yesterday.
NZD crosses are flat to slightly higher. GBP has been one of the weakest performers, down 0.6% to 1.3180, which sees NZD/GBP up to 0.5440. UK annual CPI inflation data were line, hitting 3% in September for the first time since 2012. In BoE Carney’s testimony to lawmakers he reiterated that the Bank is ready to raise interest rates “over the coming months”, while new MPC member Ramsden emerged as a dove, saying he wasn’t part of the majority expecting to raise rates. Meanwhile according to unnamed officials, the EU is doing preparatory work on a UK trade deal, which sends a positive signal to the UK.
EUR remained under pressure as traders focus on Thursday’s deadline for the Catalan President to clarify his stance on independence from Spain. Spain’s economic ministry cut the country’s growth forecast for next year by 0.3pps to 2.3%, citing the impact of the political standoff with Catalonia. EUR is down 0.3% to 1.1765, which sees NZD/EUR up to 0.6090.
CAD remains under modest downward pressure with NAFTA negotiations overhanging the currency. Canada and Mexico were said to reject the hardline demands by the US. NZD/AUD is flat around 0.9140.
Stronger NZ CPI data put some upward pressure on NZ rates yesterday, with the 2-year swap rate up 3bps to 2.22% but then the RBNZ’s published flat core rate saw rates retreat, and it closed up by less than 1bp to 2.20%. Until core inflation increases, as measured by the RBNZ, the Bank is unlikely to budge. The curve still shows the first full rate hike priced by November 2018, still more than a year away. We saw a similar pattern in longer term rates. The 5-year swap rate closed the session up by less than 1bp to 2.70%, while the 10-year rate was flat at 3.20%.
There’s nothing of note on the calendar for the local trading session. NZ coalition government negotiations remain ongoing and we’re not hopeful of getting a result today. The Fed’s Dudley and Harker speak tonight and second-tier US housing market data are released and that’s about it.
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