The NZDUSD opens higher at 0.6680 this morning.
The NZD gained on the back of a weaker USD and stronger EUR.
US economic was data mixed on the eve of the US Federal Reserve interest rate decision. US labour costs increased steadily during Q1, pointing to moderate inflation pressures even as the labour market tightens, while consumer confidence exceeded forecasts. However, manufacturing data disappointed.
The EUR strengthened after Q1 economic growth figures for the euro zone beat market expectations and indicated a recovery from the slump suffered in the back half of 2018.
The US is ramping up pressure to reach a trade deal with China in the coming weeks, with the US reportedly prepared to walk away.
The US Federal Reserve has begun their 2-day interest rate meeting. During their last meeting the Fed dropped its forecasts for any rate increases, halting a 3-year tightening campaign. Despite Fed independence, President Trump tweeted the US economy would go “up like a rocket” if the Fed lowered interest rates by 1% and resumed quantitative easing.
The GBP surged higher after reports the UK Government has made substantive moves in Brexit talks with the opposition Labour party and that the tone of their discussions has improved.
NZ employment data hits the wires at 10:45am. These will be closely watched by the markets and will influence the likelihood, or not, of an RNBZ interest rate cut on 8th May.
Global equity markets were mixed on the day – Dow +0.1%, S&P 500 -0.7%, FTSE -0.3%, DAX +0.1%, CAC +0.1%, Nikkei -0.2%, Shanghai +0.5%.
Gold prices were little changed at USD$1,291 an ounce as the USD rallied. WTI Crude Oil prices are trading at US$63.89 per barrel.
Current indicative rates:
Upcoming Data releases (NZST):
- 10:45am – NZ Employment & Unemployment data
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The average value of residential properties in Auckland has declined for five months in a row and value growth is slowing in other areas, according to the latest figures from Quotable Value.
Gareth Vaughan questions whether the relatively high floating mortgage interest rates being charged by banks can be justified in an otherwise low interest rate environment, and ANZ’s latest Business Confidence Survey shows firms are mainly on the pessimistic side.
There has been a lot of economic data to digest and US earnings results, while month-end flows are also a factor. The net result is a flat US equity market and softer USD across the board, with GBP outperforming. US rates have pushed lower.
Google parent Alphabet posted weaker than expected earnings after yesterday’s close, taking its share price down 8% and dragging the Nasdaq lower. But there have been enough offsetting positive results to keep the S&P500 from falling, with the index flat at the time of writing.
There has been a lot of economic data released over the past 24 hours. During local trading hours, China PMI data came in weaker than expected, although the key manufacturing index remained above the 50 mark, albeit only just, and stronger export and import PMIs were something to cheer about. The story of a nascent economic recovery in China activity remains intact, but still remains tentative. The ANZ NZ business outlook survey showed little change in own-activity and business confidence from sub-par levels, while cost pressures remained intense. There was likely nothing in the survey that would have surprised the RBNZ. Next month’s reading might be more positive, supported by the government’s move to take a capital gains policy off the agenda.
Overnight, euro-area economic data were universally better than expected, with GDP improving to 0.4% q/q, higher than expected inflation in Germany and Spain confirming that the previous month’s dip was related to the impact of the late-Easter, and the unemployment rate continuing to trend down, reaching its lowest level since the GFC. All this might hold off any need for the ECB to add further policy stimulus.
US data were mixed, with a very weak Chicago PMI (possibly impacted by issues at Boeing) but with strong pending home sales and consumer confidence data. The employment cost index was in line at 0.7% q/q for Q1. US Treasury rates fell after the weak Chicago PMI, with the index indicating downside risk to the key US ISM manufacturing index tonight. Rates are down 2-3bps across the curve, taking the 10-year rate down to 2.51%.
The positive euro-area data helped push EUR higher, now back above 1.12 and up a modest 0.3% for the day. There was some positive spillover for GBP, while there was also talk off one last push on talks between the government and Labour Party to come to some form of agreement on Brexit. Meanwhile the UK Labour Party’s ruling council agreed that it would support a second referendum on Brexit only as a last resort, conditional on the government not adopting Labour’s plan for a customs union or if the government fails to call a general election. GBP is the best performer of the majors, up 0.8% to 1.3040.
The USD has been broadly weaker, with month-end flows seen to be one factor behind the move. NZD has nudged up a bit further, but not much, to 0.6680, making it a full cent recovery from the ANZAC Day low. On Q1 labour market data this morning, we see downside risk to the consensus unemployment rate estimate of 4.3% and downside risk to the LCI private sector wage data. Big misses in either direction could well have a bearing on whether the RBNZ cuts rates as soon as next week. Rates have drifted higher over the past few sessions, as the market loses some conviction on how much the RBNZ will cut rates this year. The 2-year swap rate rose by 2bps to 1.69%, taking its gain over the past three trading sessions to 8bps. The belly of the curve underperformed, with the 5-year rate up 4bps to 1.83%.
CAD has performed well despite Canada GDP growth unexpectedly contracting slightly in February, but this followed a strong gain in January. USD/CAD is down 0.5%, slipping below 1.34. Oil prices are up by about 1% after political unrest in Venezuela (with a coup currently underway) and the Saudi Energy Minister said OPEC and its partners remain focused on reducing oil inventories.
After today’s NZ labour market data is out of the way the focus will turn to US ISM manufacturing data tonight. Still, trading might well be quiet ahead of the FOMC announcement tomorrow morning. Expectations are for the policy statement to reflect an upgrade in the FOMC’s assessment of current economic conditions while acknowledging softness in inflation data since the March meeting, and maintaining the term ‘patient’ with regard to forward guidance.
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Here’s our summary of key events overnight that affect New Zealand, with news the signs continue of a rising business cycle that is nearing its end.
In the US, the regional data continues its trend of subdued results. The closely-watched Chicago PMI fell sharply in April, falling to 52.6 from 58.7 in March. That’s the lowest reading since January 2017. Four of its five components declined, and new orders fell for the second straight month.
Meanwhile, the giant US housing market is showing some signs of picking itself up from the canvas, although it is still one one knee. The March pending home sales data rose from February although it was still -3.2% below the same month a year ago. Still, that is better than the -5% year-on-year deficit it showed in February.
Another sign of cooling perhaps come from tech giant Google who reported lower ad revenues in Q1-2019, down -9% from Q4-2018.
Wall Street is in reverse today, especially tech stocks. And the continuing drip of negative data has the US Administration worried. They are now calling for a -1% slash of the Fed’s official interest rate. The FOMC is meeting today and will release its decision this time tomorrow. (It is unlikely to change rates or policy positions however.)
Canada’s GDP growth for February undershot expectations and actually fell from the previous month, although it is still up a meagre +1.1% year-on-year. And a separate report for Mexico they also reported a contraction in the March quarter from Q4-2018, taking annual growth down to +1.3% pa.
In China, there was a bump in the road with their official factory PMI coming in lower than expected in April and barely expanding, reversing the good (and surprising) gain in March. The official Chinese services PMI also undershot (although not significantly). The private sector Caixin PMI was also released for April and that showed a very similar weakness even if it was an improvement.
And the average salary for white-collar workers in China fell in the first quarter of 2019 despite official data, according to a report by a major Chinese job website.
In Europe,the March 2019 quarter GDP data was released overnight showing a fractional improvement from a year ago. EU growth was up +1.5% with weakish contributions from both France and Italy although both actually recorded tiny gains in real output.
Also surprising was inflation data for Germany which came in at +2.0% in April, and well above the +1.5% rate expected.
The UST 10yr yield is now at 2.50% and down -4 bps from yesterday. Their 2-10 curve is still at +24 bps and their negative 1-5 curve is at -10 bps. The Aussie Govt 10yr is at 1.80% and down -2 bps, the China Govt 10yr is little-changed at 3.42%, while the NZ Govt 10 yr is also unchanged at 1.93%.
Gold is up +US$4 from yesterday at US$1,283/oz.
US oil prices are a little higher today, now just under US$64/bbl while the Brent benchmark is just under US$73/bbl.
The Kiwi dollar will open today marginally firmer again at 66.8 USc. On the cross rates we are now at 94.7 AUc, a small rise on the day. Against the euro we are little-changed at 59.5 euro cents. That leaves the TWI-5 at 71.6.
Bitcoin is at US$5,251 and that is a +US$100 gain or +2% higher than this time yesterday. This rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
It’s probably just as well the Government decided not to introduce a capital gains tax because the latest data from Quotable Value (QV) shows property values declining in Auckland and value growth slowing in much of the rest of the country.
Which means that by the time a CGT might have been introduced there’d be a good chance there would be no capital gains to tax anyway.
According to QV the average residential property value in Auckland fell for the fifth month in a row to $1,033,583 in April, meaning the average value in the Auckland region is now 1.5% lower than it was in April last year.
And the decline is region wide, with average values down compared to a year ago in almost all major Auckland districts, with the only exceptions being Franklin on Auckland’s southern boundary where the average value in April was unchanged compared to a year ago, and Manukau north west, where the average value was up 0.7% compared to as year ago. But even there values appear to have started declining with the average value down 0.3% over the last three months.
The areas with the biggest declines were North Harbour -5.7% and Coastal North Shore -3.3%.
However although the decline in values in Auckland appears to be widespread and sustained, it is a slow but steady decline rather than a hard and fast fall.
Around the rest of the country average property values are continuing to rise in most centres, however the rate at which they are rising is slowing in many places
For example the Whangarei, the average property value was $542,715 in April, which was up 5.0% compared to 12 months ago.
But that annual growth rate was down from 5.5% in March, 6.1% in February and 10.1% in January, suggesting a cooling market even though values are still ahead of where they were a year ago.
Other centres that are still showing growth in average values, but where the the annual growth rate was down in April compared to March, suggesting a slight cooling in the market, include Hastings, Napier, New Plymouth, Wellington region, Nelson, Queenstown Lakes and Dunedin.
In Christchurch the market is almost flat, with average values up 1.3% compared to a year ago, but up just 0.1% compared to three months ago.
And average values in April were down compared three months ago in Selwyn and Ashburton and unchanged in Hurunui and Waimakariri.
“New Zealand’s annual rate of value growth dropped from 7.6% in April last year to 2.7% last month, while the key market of Auckland continues to see a reduction in value levels,” QV said in its commentary on the figures.
The table below shows the average values for all main districts throughout the country and the changes compared to three months and six months earlier.
|QV House Price Index April 2019|
|Territorial authority||Average current value $||12 month change %||3 month change %|
|Total New Zealand||686,975||2.7%||0.4%|
|Auckland – Rodney||943,272||-1.2%||-1.7%|
|Rodney – Hibiscus Coast||916,977||-1.9%||-1.7%|
|Rodney – North||969,121||-0.7%||-1.8%|
|Auckland – North Shore||1,189,915||-3.1%||-1.0%|
|North Shore – Coastal||1,363,626||-3.3%||0.0%|
|North Shore – Onewa||957,639||-0.9%||-1.1%|
|North Shore – North Harbour||1,144,335||-5.7%||-3.9%|
|Auckland – Waitakere||817,065||-0.6%||-0.3%|
|Auckland – City||1,216,153||-1.3%||-1.4%|
|Auckland City – Central||1,070,844||-1.4%||-1.1%|
|Auckland_City – East||1,534,300||-0.9%||-1.5%|
|Auckland City – South||1,075,932||-1.4%||-1.5%|
|Auckland City – Islands||1,127,396||-0.9%||-3.4%|
|Auckland – Manukau||894,560||-0.5%||-1.0%|
|Manukau – East||1,134,082||-1.6%||-1.2%|
|Manukau – Central||696,245||-0.1%||-1.3%|
|Manukau – North West||783,214||0.7%||-0.3%|
|Auckland – Papakura||695,181||-0.9%||-0.1%|
|Auckland – Franklin||671,078||0.0%||0.1%|
|Hamilton – North East||728,384||3.6%||0.6%|
|Hamilton – Central & North West||540,388||4.4%||1.4%|
|Hamilton – South East||543,134||7.3%||2.1%|
|Hamilton – South West||519,968||5.1%||1.3%|
|Central Hawkes Bay||389,529||19.9%||5.9%|
|Wellington – Central & South||828,331||8.1%||2.1%|
|Wellington – East||887,278||6.9%||1.4%|
|Wellington – North||762,309||9.3%||2.1%|
|Wellington – West||937,112||4.2%||0.3%|
|Christchurch – East||376,548||2.4%||0.0%|
|Christchurch – Hills||689,160||4.6%||2.0%|
|Christchurch – Central & North||587,683||1.7%||0.5%|
|Christchurch – Southwest||471,500||-0.8%||-0.3%|
|Christchurch – Banks Peninsula||507,330||0.1%||-3.9%|
|Dunedin – Central & North||473,988||12.5%||5.0%|
|Dunedin – Peninsular & Coastal||411,862||10.6%||3.7%|
|Dunedin – South||444,017||15.4%||7.4%|
|Dunedin – Taieri||471,967||13.0%||3.5%|
|Main Urban Areas||791,931||1.6%||0.0%|
The Government has quietly released its annual oil and gas exploration tender, ditching the previous government’s approach to market it to the public as a great investment opportunity.
New Zealand Petroleum and Minerals on Tuesday launched Block Offer 2018, inviting oil and gas companies to apply for permits to explore in designated areas in onshore Taranaki.
While it sent out a media release, Energy and Resources Minister Megan Woods didn’t. Her National Party predecessors were known to enthusiastically launch these tenders at energy conferences, attended by delegates from around the world.
The release of Block Offer 2018 was delayed by a year due to the Government deciding to no longer issue new offshore permits and restrict new exploration to onshore Taranaki for three years.
While it announced this decision in April last year – around the same time it was expected to launch Block Offer 2018 – it couldn’t apply its policy to this tender without risking legal action being taken out against it.
It therefore moved quickly to amend the Crown Minerals Act, which had previously been enacted to “promote prospecting for, exploration for, and mining of Crown owned minerals for the benefit of New Zealand”.
Woods introduced a Bill to make the changes on September 24, gave the public two weeks to make submissions on it, and then passed it with few amendments on November 7. Parliament’s Environment Select Committee received 2,249 submissions on the Bill.
Woodward Partners energy analyst John Kidd at the time accused the Government of using Block Offer 2018 as an excuse to pass an important piece of legislation without it being properly scrutinised.
He said the Government would be better off skipping Block Offer 2018, because all the uncertainty created by the law change made it so unpalatable it was effectively redundant.
Interest.co.nz suspects Woods wanted to let the belated launch slip under the radar because people who are pro and oil and gas are outraged by Block Offer 2018 excluding offshore acreage, and people who are anti oil and gas are outrage she’s still allowing onshore exploration.
The Green Party, among other, is also up in arms over Woods allowing existing permit holders, like OMV, to extent the conditions of their permits to give them more time to decide whether or not to drill.
In addition to excluding offshore acreage, the amended Crown Minerals Act requires those who receive permits under Block Offer 2018 to “engage with iwi and hapū on an ongoing basis and in a positive, fair and constructive manner”.
It places specific requirements on permit holders that want to work within 200 metres of areas significant to iwi.
The new legislation also prohibits access to conservation land, except for minimum impact activities.
Over 2,000 km² of acreage has been made available as a part of Block Offer 2018. The tender closes on August 28.
Oil and gas explorers’ interest in New Zealand dropped (with the oil price) after 2015. While the 2014 and 2015 Offers saw 15 and 9 permits issued respectively, only one was issued in 2016 and one in 2017.
In a major move, Shell in March 2018 – some weeks before the Government announced its new offshore exploration ban – agreed to sell all its New Zealand assets to OMV for US$578 million (NZ$794 million).
Here’s a map showing the acreage available in Block Offer 2018: