BNZ Research

Our research team offers expert commentary on economics, foreign exchange, fixed interest and credit, to help inform your organisation’s risk analysis and decision making. 

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Currency Research

NZD Corporate FX Update

Jason Wong -

At the beginning of the year our view was that the NZD would track within a 0.60-0.64 trading range until further notice, with the timing of the first Fed easing for the cycle a key variable in a possible topside break, while noting a bevy of headwinds for the NZD. These included macro headwinds in China, NZ’s economy remaining in a rolling recession and the possible re-election of Donald Trump in November’s US Presidential election, all of which held back our enthusiasm for NZD performance.

Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

NZD/JPY (finally) past its peak?

Jason Wong -

For some time, we have had a negative medium to long-term outlook on NZD/JPY. The BoJ’s ongoing ultra-easy policy stance has been a hindrance to the cross rate falling, but there is increased speculation that the central bank will soon end its negative interest rate policy, either at next week’s meeting or in April.

NZD/JPY is down nearly 3% from its recent nine-year high around 93.5. If the BoJ is indeed about to make a significant policy pivot, then NZD/JPY has probably peaked and our confidence in a weaker cross rate from here would increase.

Most likely, the BoJ will proceed very cautiously, even if it does begin to lift rates. Thus, there is no guarantee our view will play out, but we highlight that JPY is extraordinarily cheap. A hawkish pivot by the BoJ could easily disrupt financial markets accustomed to low Japanese rates and a very cheap yen.

Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

NZD/AUD: Medium-term forces to the downside

Jason Wong -

NZD/AUD has traded a narrow range since the beginning of last year of less than 5 cents (0.9019-0.9470). The sharp lift in NZ interest rates since the end of last month has seen the cross rate move to the top of its trading range. While the higher cross rate is understandable given the sharp lift in NZ-Australian interest rate spreads, our core view remains that the NZD/AUD ought to be weakening over time. Therefore, we see recent strength in the cross rate as only a short-term phenomenon.

Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

NZD Corporate FX Update

Jason Wong -

The NZD looks to have settled into a 0.60-0.64 trading range for now. Our projections show an eventual topside break later in the year.

Market expectations of the US Fed’s monetary policy outlook have been a key driver of FX markets over the past couple of years and our working assumption is that this relationship holds through 2024. From November 2023, increasing conviction that the Fed’s tightening cycle was over triggered a turnaround in sentiment, seeing the NZD recover back into its familiar 0.60-0.64 trading range.

Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

The NZD in 2024

Jason Wong -

The NZD has begun 2024 on a weak note, falling from above 0.63 on the first trading day of the year to a sub-0.61 level this week. We wouldn’t read too much into the move, with this year’s weakness exaggerated by the sharp 8½% rally through November-December last year. Seasonally, December is a strong month for the NZD while January is typically weak.

Full Currency Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

Economy Watch

Confidence rise stalls

Stephen Toplis -

The murmurings of our corporate customer base have had us questioning whether the recent upward trend in business confidence might have stalled. Enthusiasm for a change in government is one thing but new governments can do little to immediately impact the lagged effects of past policy measures (both fiscal and monetary), structural issues and cyclical momentum. And so it came as no surprise to us that today’s ANZ Business Survey reported a modest drop in business expectations.

Recession Clocks Up Fifth Quarter

Doug Steel -

We were braced for weakness in today’s Q4 GDP figures. In fact, we were braced for it as far back as May 2022 when we first said ‘a recession seems difficult to avoid’ and ‘growth stalls completely in 2023’. That’s essentially what happened last year.
GDP fell 0.1% in Q4, to be down 0.3% on a year earlier. Cue more talk about NZ re-entering technical recession. Technical recession or not (who knows, it could get revised away), to us the bigger picture remains the same. The economy continues to bump along the bottom. It has struggled to grow for more than a year now, real per capita incomes have dropped sharply, and the unemployment rate is rising.

Large Deficit Shrinking

Doug Steel -

NZ’s external deficit is large, but it is narrowing. For the 2023 calendar year, the annual current account deficit stood at 6.9% of GDP. This is smaller than the 7.4% (revised from 7.6%) recorded for the year to September 2023 and a decent chunk narrower than the recent 8.8% peak recorded in calendar year 2022.
The annual deficit matched our expectations although was a tick smaller than market expectations of 7.0%. We expect further deficit narrowing ahead to around 5% in 2024 and near 4% in 2025.

Path of expansion

Stephen Toplis -

New Zealand’s services sector continued its path of expansion in February, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for February was 53.0 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was up 0.8 points from January and the highest level of activity since March 2023. However, it was still just below the long-term average of 53.4 for the survey.

BusinessNZ chief executive Kirk Hope said that three of the last four months has seen the sector in expansion, with the key sub-index results for both Activity/Sales (53.1) and New Orders/Business (56.0) remaining in positive territory for the current month. In fact, the latter was at its highest level of expansion since December 2022. Employment (49.1) remained in slight contraction, although the rate of contraction continues to decline.

The proportion of negative comments from businesses stood at 57.3% in February, compared with 53.0% in January and 58.7% for December. Respondents still saw the cost of living as the key determining factor on business activity, followed by difficult overall economic conditions.

BNZ's Head of Research Stephen Toplis said that "when we combine the PMI and PSI together to get an indicator of activity, there is a strong suggestion of growth returning later this year. The turnaround occurs a little stronger and earlier than we are forecasting but, whatever the case, it is a heartening sign”.

An inflation surprise

Stephen Toplis -

February’s selected price indicators have given us a lot to think about. As always, volatile monthly numbers ask more questions than they provide answers but the questions that today’s figures provide are very interesting indeed.

In a nutshell, you could describe the release as being good news for the average punter but highly challenging for the Reserve Bank.

Same old, same old

Stephen Toplis -

It’s a case of same old, same old. Labour market conditions continue to ease, and rapidly so. While there may be some suggestion of moderation in the pace of easing, there is nothing to indicate a likely improvement in conditions any time soon. Indeed, the data remain entirely consistent with very low employment growth and an increase in the unemployment rate to over 5% from its current 4%.

Earnings season highlights economic challenges

Jason Wong -

The latest corporate earnings season for NZX-listed companies has drawn to a close. The publicly available releases contain a rich source of information. We parsed the public releases and investor presentations of 39 company earnings releases through a macro lens to gather as much information as possible on the economic backdrop in NZ. This information can be timelier than official economic releases and thereby provides an added source of data to assess economic conditions.

Businesses See Some Improvement In Year Ahead

Doug Steel -

Today’s ANZ business survey contained little to change our view of the world. The outlook for activity over the coming year is somewhat better than it has been over the past year or so. Inflation is elevated and some pointers look a bit sticky, but they continue to suggest inflation is trending lower. Employment intentions is one area that does continue to raise some questions.

RBNZ Holds

Doug Steel -

The RBNZ held the cash rate at 5.50% this afternoon. The Bank also maintained its tightening bias, albeit somewhat watered down from its November statement.

This was very close to our expectations as detailed in our MPS preview. Our broad assessment is that the labour market is easing, spare capacity is growing, and inflation, both headline and core, is falling. And established measures of inflation expectations are falling. Hence there is no need to lift rates further.

Retail Recession Deepens

Doug Steel -

Retail sales volumes collapsed 1.9% in Q4, on a seasonally adjusted basis. This was much weaker than all market expectations, including the 0.2% decline anticipated by the market. The retail recession continues and deepens.

Green shoots?

Doug Steel -

New Zealand’s services sector climbed back into expansion for the start of 2024, according to the BNZ – BusinessNZ Performance of Services Index (PSI).

The PSI for January was 52.1 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was up 3.3 points from December and the highest level of activity since May 2023. However, it was still below the long-term average of 53.4 for the survey.

BusinessNZ chief executive Kirk Hope said that the PSI had seesawed between expansion and contraction for a number of months. The key sub-index results for both Activity/Sales (53.0) and New Orders/Business (51.8) were both in positive territory, with the former at its highest level since March 2023. The uplift in activity for January also saw a lower proportion of negative comments from businesses, which stood at 53.0%, compared with 58.7% for December and 54.0% for November.

However, any talk of the sector experiencing a solid return to expansion depends on continued momentum in new business and activity over the coming months, along with further easing in matters associated with the cost of living.

BNZ Senior Economist Doug Steel said that "the combined PMI and PSI activity indicator (PCI) suggests that annual GDP growth will soon turn positive. That is great news for an economy that has been under pressure. But it still has to go a lot further before we return to growth rates that would prevent the spare capacity in the economy growing”.

Stuck in low gear

Doug Steel -

Activity in New Zealand’s manufacturing sector improved in January, but still remained in contraction, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for January was 47.3 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was up from 43.4 in December and the highest level of activity since June 2023. However, the sector has now been in contraction for eleven consecutive months.

BusinessNZ’s Director, Advocacy Catherine Beard said that the January result was a step in the right direction to get the sector out of a prolonged period of contraction, but further work remains.

“On the positive side, Employment (51.3) was in slight expansion for the first time since February 2023, while New Orders (47.7) improved to its highest level since May 2023. However, New Orders has now remained in contraction for eight consecutive months, which combined with Production (42.1) has meant a sector that is still someway off returning to expansion".

The proportion of negative comments in January stood at 63.2%, which was up from 61% in December and 58.7% in November. Seasonal factors such as holidays was noted by many, as well as a lack of demand/orders.

BNZ Senior Economist Doug Steel, stated that "across components, employment stood out like the proverbial with a poke back above 50. This is at odds with deeply negative production and demand indicators like new orders. The whiff of more employment in the PMI might reflect better access to staff, with manufacturers reporting in the latest QSBO that labour is easier to find".

More Signs Inflation Retreating

Doug Steel -

Today’s January selected prices released by Statistics NZ looked a bit softer than they might have been, on balance.
The sum of today’s indicators suggests some downward pressure to our thoughts for near term CPI. It might not be a lot, but it is important enough to more than offset some upside to our Q1 CPI priors that was creeping in following some fuel price increases over recent weeks.

Still easing

Stephen Toplis -

On a trend basis New Zealand job ads continue to decline. Indeed, excluding the COVID lockdown period the trend level is now at its lowest since March 2017. But there are signs of life. The 1.3% monthly drop is the lowest since August 2022 and, on a seasonally adjusted basis a modest 0.8% increase was reported.

Labour Market Strength Surprises

Stephen Toplis -

The labour market continues to soften. The unemployment rate is the highest it’s been since June 2021. And it looks like it’s going to go a lot higher yet. In addition, the underutilisation rate has jumped to its highest level since March 2021. The employment rate is falling, and don’t forget that employer surveys reveal it is getting much easier to find staff thanks largely to soaring net inward migration.

Too much inflation

Stephen Toplis -

For us today’s ANZ Survey of Business Opinion was all about the pricing indicators. With the RBNZ very nervous about persistent inflation it’s critical that businesses show they have reduced intent to raise prices. Alas, this survey showed nothing of the sort. As it turned out, a net 49.7% of businesses said they still intend raising selling prices. This was little changed from the 50.2% who thought likewise back in December. Moreover, the intent remains higher than the lows of last October.

RBNZ Sticks To Its Guns

Stephen Toplis -

Today’s speech by Paul Conway was long awaited for any insight it might provide into the way the RBNZ’s forecasting team is thinking about recent data and how that might impact its February 28 Monetary Policy decision. As it turned out, there was a very clear message: based on the information it currently has, the forecasting team thinks there is little reason for it to change its monetary policy stance.

Inflation plummeting

Stephen Toplis -

Today’s CPI outturn was bang on market, and our, expectations. The CPI increased 0.5% for the quarter, 4.7% for the year. This being so we see no need to change our view that the RBNZ will start lowering interest rates in the second half of this year. The economy is, for all intents and purposes in recession, inflation is falling rapidly and the labour market is easing very quickly. It all says ease.

Activity on holiday

Stephen Toplis -

New Zealand’s services sector fell back into contraction during December, according to the BNZ – BusinessNZ Performance of Services Index (PSI).
The PSI for December was 48.8 (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). This was down 2.3 points from November, and well below the long-term average of 53.4 for the survey.
BusinessNZ chief executive Kirk Hope said that like its sister survey, the PSI has struggled over 2023 with the second half of the year averaging 49.3. While New Orders/Business (51.2) remained in expansion, Activity/Sales (47.1) has remained entrenched in contraction for the last three months. Employment (47.5) recorded its lowest result since February 2022.
“The proportion of negative comments stood at 58.7% for December, which was up from 54.0% for November and 58.2% in October. Overall, negative comments centered on seasonal factors, cost of living and an overall economic slowdown”.
BNZ Head of Research Stephen Toplis said that "the softening in the PSI, alongside the weakness in the PMI, is bad news for both near term growth and employment in New Zealand. Tourism has been a key driver of the services sector and will continue to support the economy, but it can’t do all the heavy-lifting by itself”.

Tough Year

Stephen Toplis -

Activity in New Zealand’s manufacturing sector ended in further contraction, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for December was 43.1 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was down from 46.5 in November and the lowest level of activity since October. It also meant the sector has been in contraction for ten consecutive months.

BusinessNZ’s Director, Advocacy Catherine Beard said that the December result was the second lowest during 2023, highlighting how tough the second half of 2023 in particular has been for manufacturers.

“While the year started off with consecutive results in expansion, since then it has gotten progressively harder for manufacturers with July-December activity averaging only 45.0, compared with January-June averaging 49.2. Also of note that for December, the key sub-index of Production (40.5) was at its lowest point for a non-lockdown COVID month since March 2009".

The proportion of negative comments in December stood at 61%, which was up from 58.7% in November but down from 65.1% in October. Ongoing issues around a lack of demand and sales was the overriding theme mentioned by many manufacturers.

BNZ’s Head of Research, Stephen Toplis, stated that "the December PMI reaffirms our view that economic conditions remain very difficult. While we expect the economy, and the manufacturing sector, to gain some momentum by end 2024, the next few months will remain challenging especially with retail spending and construction activity being under pressure".

Inflation decline accelerating

Stephen Toplis -

Our expectations for next week’s Q4 Consumer Price Index are unchanged following the release today of December month selected price indexes by Statistics New Zealand. There were the usual unders and overs in the outcomes relative to our forecasts but, on balance, nothing to change our view of a 0.5% quarterly increase for the quarter, delivering a 4.7% annual movement.

Supply outpacing demand

Stephen Toplis -

Job ads continue to tumble. On a seasonally adjusted basis ads have now fallen in 13 of the last sixteen months to be 37% down on the peak reported back in August 2022. Another way to look at this is that ads are now at their lowest since January 2017, if you exclude the COVID lockdown aberration.

Disinflationary pulse evident

Stephen Toplis -

Today’s NZIER Quarterly Survey of Business Opinion paints a picture of an economy that is stronger than we are forecasting. Yet, at the same time it appears entirely consistent with our view that inflationary pressures are dissipating and dissipating rapidly. How can this be so?

Financial Markets Wrap

NZD flat in February

Jason Wong -

• Timing of policy easing pushed out around the world; Fed speakers united and data non-compliant with an early easing
• Global rates push higher and many equity markets reach record highs; Currency markets well-contained
• NZD/USD trades less than a 2-cents range, closes month modestly weaker; JPY underperforms

A pullback in the NZD after late-2023 exuberance

Jason Wong -

• NZD/USD fell over 3% in January, retracing some of the 8½% rally through November-December.
• Broad USD strength, retracing some late-2023 weakness; US economic resilience and some paring of Fed cut expectations
• Global equities power up to fresh record highs; global rates push higher retracing late-2023 moves.

Interest Rate Strategy

Update on syndication of May 2035 nominal NZGB

Stuart Ritson -

New Zealand Debt Management (NZDM) announced, alongside the Pre-election Economic and Fiscal Update in September, that a new 15 May 2035 nominal maturity will be syndicated this fiscal year. There was a further update in the March tender schedule that the 2035 maturity will be launched by the end of April 2024. The release of the syndicate panel banks today suggests a transaction is imminent. We expect it to launch on 2 April with pricing taking place the following day.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

Outlook for Borrowers: Post February MPS

Stuart Ritson -

The Reserve Bank of New Zealand (RBNZ) held the Official Cash Rate (OCR) steady as expected, at 5.5%, at the February Monetary Policy Statement (MPS). The Bank, although remaining hawkish, eased its rhetoric from the previous MPS in November. A mild tightening bias was retained but Monetary Policy Committee (MPC) members noted that overall, risks to the outlook for inflation were more balanced than at the time of the November 2023 Statement.

Update on syndication of May 2054 nominal NZGB

Stuart Ritson -

New Zealand Debt Management (NZDM) announced, alongside the Pre-election Economic and Fiscal Update (PREFU) in September, that a new 15 May 2054 nominal maturity will be syndicated this fiscal year. There was a further update in the monthly tender schedule, released on Wednesday, that the new 30-year bond will be launched, via syndication, in the March 2024 quarter.

Full Interest Rate Research is available to BNZ Wholesale clients upon request, please email bnz_research@bnz.co.nz to subscribe.

Markets Outlook

In Confidence

BNZ Research -

We are starting to feel that the trend increase in both business and consumer confidence is slowing. We look towards this week’s suite of indicators for evidence of this. Meanwhile, Wednesday’s Budget Policy Statement should highlight the deterioration in the nation’s fiscal accounts and, hopefully, provide insight into the government’s plans.

On the improve

Stephen Toplis -

Activity in New Zealand’s manufacturing sector continued to show improvement in February, but still remained in contraction, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).

The seasonally adjusted PMI for February was 49.3 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was up from 47.5 in January and the highest level of activity since February 2023. However, the sector has now been in contraction for 12 consecutive months.

BusinessNZ’s Director, Advocacy Catherine Beard said that the improved February result showed signs of a gradual turnaround in the sector.

“The key sub-index of Production (49.1) was at its highest level since January 2023, while Deliveries (51.4) was at its highest point since March 2023. However, New Orders (47.8) has now remained in contraction for nine consecutive months and likely needs to get much closer to the 50-point mark to edge the sector back into expansion".

The proportion of negative comments in February stood at 62%, which was down from 63.2% in January but up from 61% in December. A lack of orders (both domestic and offshore) was mentioned by many respondents, as well as the general slowdown in the economy.

BNZ’s Head of Research Stephen Toplis said that “New Zealand’s manufacturing sector is still in recession, but this month’s PMI indicates there is light at the end of the tunnel. The 49.3 reading is within a smidgen of “breakeven” and the new orders to inventory differential provides support for an increase in production. Moreover, New Zealand’s underperformance against the rest of the world is narrowing quickly”.

GDP going nowhere fast

BNZ Research -

We’ve settled on 0.1% for our Q4 GDP pick. But the data are very noisy at the moment so there is a huge margin of error around this projection. Whatever the exact number the conclusion will be the same, New Zealand economic growth has stalled and on a per capita basis it is going backwards at a rapid rate of knots.

Monitoring Growth, Or Lack Thereof

BNZ Research -

There is no top-tier data this week, but a collection of the remaining key indicators for Q4 GDP are worth watching. We are looking for them, collectively, to suggest that economic growth struggled in Q4. This morning’s data saw a substantial drop in the terms of trade – reflecting a material drop in the country’s purchasing power. A very large drop in import volumes suggests demand has slumped. But there was plenty else to ponder in today’s extremely volatile set of trade figures for Q4.

RBNZ To Aggressively Maintain Tight Conditions

BNZ Research -

RBNZ takes centre stage. It seems to us there is no need for the RBNZ to raise rates further. Monetary conditions are tight and doing the work. Whether the Reserve Bank sees things as we do is moot. Its rhetoric has certainly been extremely hawkish of late. We acknowledge there is still more of a chance the RBNZ lifts its cash rate on Wednesday than it lowers it. We expect the Bank to aggressively justify holding interest rates at current levels for an extended period.

RBNZ February MPS Preview

BNZ Research -

There’s more chance the RBNZ hikes than cuts when it delivers its February 28 Monetary Policy Statement. But we think a hike would be a policy error given the extent by which the labour market is easing, spare capacity is growing and inflation, both headline and core, is falling. So we are forecasting no change in the cash rate at the forthcoming meeting. Nonetheless, we also expect the RBNZ to be aggressive in its support for holding the cash rate at its currently contractionary level well into 2025.

Rate Hikes Ahead?

BNZ Research -

The fear that the Reserve Bank of New Zealand might resume its tightening cycle has well and truly taken hold. It wasn’t that long ago when financial markets were trying to price in a very near term easing by the Bank. Indeed, it was only a matter of days ago that four rate cuts were priced before the end of this calendar year. Now the market prices a full rate hike by May this year. We discuss this and look forward to a lot of data this week.

Labour Market Pressures Changing Rapidly

BNZ Research -

This week’s data comes in a rush on Wednesday with a suite of Q4 labour market information. We expect the main message to be that previous tightness in the labour market is abating. We think strong labour supply has enabled employment but also exceeded additional labour demand such that we will see both employment and unemployment rise. Annual wage inflation is expected to cool further. On balance, we don’t think outcomes on our expectations would alter the RBNZ’s broad view of the world.

All Ears

BNZ Research -

Tomorrow’s speech by RBNZ Chief Economist Paul Conway will grab attention tomorrow morning, with brief comments on domestic data developments signalled. We will be all ears for what the RBNZ makes of a generally softer run of data. Today’s data shows some job growth occurring, but we don’t think it will be enough to prevent a lift in the unemployment rate given very strong labour supply. Exports and imports are much lower than a year ago, reflective of prior declines in commodity prices and subdued domestic demand. Business and consumer confidence surveys this week will provide a New Year pulse check, including respondents’ views on pricing and inflation.

Inflation To Fall

BNZ Research -

Tomorrow’s Q4 CPI takes centre stage this week. Our forecast remains at 0.5% q/q and 4.7% y/y, which is where the market consensus has gravitated too. This view is lower than the RBNZ’s respective 0.8% and 5.0% forecasts included in its November MPS. But even if headline inflation were to print under the central bank’s forecasts, it need not necessarily invoke a material dovish tilt. The CPI details will matter. The Bank has recently focused on non-tradeables inflation which we think will print a touch above RBNZ projections. Meanwhile, this morning’s PSI data for December is the latest indicator to suggest growth struggles remain.

A tough start to 2024

BNZ Research -

We are cautiously optimistic that the economy will be finding its feet by the end of 2024. In the interim, however, it’s going to be a hard slog for the next few months. In the week ahead, the PMI and PSI will give us a good handle on where we are now while the Quarterly Survey of Business Opinion, released tomorrow, will shed better light on where we are headed.

Markets Today

BNZ Markets Today

Stuart Ritson -

Global equity markets are generally higher, in the absence of economic data or fresh catalysts, with investors looking ahead to a speech by influential Federal Reserve Governor Christopher Waller. The S&P is marginally higher in early afternoon trade with earlier gains having faded. Equity indices in Hong Kong and mainland China fell, and have now erased gains for March, as optimism around the policy-driven rally fades. US treasuries moved lower in yield while yen volatility was the focus in currency markets.

BNZ Markets Today

Jason Wong -

Market price action has been limited by a lack of newsflow. Currency movements has been remarkably well contained, with the NZD steady just over the 0.60 mark. Global equity markets show small gains while global rates also show only small movements.

BNZ Markets Today

Jason Wong -

It has been a typically quiet start to the week without any catalysts to drive markets. Global equity markets show only small changes, global rates have pushed higher, and currency movements have been modest. The NZD has spent the day hovering around 0.60, some support gleaned from the PBoC supporting the yuan after its surprising neglect on Friday.

BNZ Markets Today

Stuart Ritson -

Global equity markets were mixed with the S&P ending little changed on the day but 2.3% higher over the course of last week, which was the largest advance in 3 months. In the absence of first tier economic data, US treasuries yields declined, and the US dollar advanced. The Chinese yuan reached the lowest level against the US dollar in 4 months weighing on Australasian currencies.

BNZ Markets Today

Jason Wong -

Last night a surprise rate cut by the Swiss National Bank got the market’s attention but spillover to the key markets has been limited. European yields have pushed lower against little change in US Treasury yields. USD weakness after the Fed’s policy update yesterday has completely reversed. After a brief look above 0.61, the NZD is trading down to 0.6045. NZD/AUD has fallen below 0.92.

BNZ Markets Today

Jason Wong -

Market reaction to the Fed’s latest policy update has been well contained so far, with some relief that the Fed still projects three rate cuts this year, albeit sees less scope for lower rates further out. The US Treasuries curve is steeper on the day, driven by lower rates at the short end. The NZD hit a fresh low for the year of 0.6025 last night but is closer to 0.6070 as we go to print.

BNZ Markets Today

Stuart Ritson -

Global asset markets were generally subdued as investors looked ahead to the US Federal Reserve rate decision which will help frame the outlook for policy easing this year. The S&P recovered from an earlier dip to be marginally higher in afternoon trade with similar small moves across other major global indices. The Nikkei registered a 0.7% gain after yesterday's widely anticipated Bank of Japan meeting. Treasury yields drifted lower and the US dollar advanced.

BNZ Markets Today

Jason Wong -

It has been a typically quiet start to the week, with investors keeping their powder dry ahead of a busy week. Currency markets barely have a pulse, with tiny net movements, while US rates have pushed up to flirt with fresh highs for the year. US equities are up 0.8%.

BNZ Markets Today

Stuart Ritson -

Global equity markets struggled to gain traction as investors look ahead to key central bank meetings this week. The S&P fell 0.7% while major European indices were little changed. In Asia, the Hang Seng fell nearly 1.5% following weak house price data from China and the PBOC’s decision to leave rates on hold and withdraw liquidity. US treasuries ended modestly higher in yield and the US dollar was stable.

BNZ Markets Today

Jason Wong -

It hasn’t been a very good day for asset markets, with US data showing a stagflationary bias – higher inflation and weaker consumer spending – driving a sell-off of US Treasuries and equities. The 10-year rate is up 10bps on the day after PPI inflation came in strong, while the S&P500 is down 0.5%. Higher US rates have driven broad gains in the USD. Unusually, the yen has been least affected as speculation of a rate hike by the BoJ next week increases. The NZD has fallen to 0.6130 and oil prices are higher on a change in outlook from the International Energy Agency.

BNZ Markets Today

Stuart Ritson -

Global asset markets were confined to narrow ranges in the absence of first-tier economic data or other catalysts. The S&P was little changed in early afternoon trade and is consolidating near record highs. European stocks edged higher to a new all-time peak while the Hang Seng managed to build upon the 3% rally from the previous session, indicating an improved sentiment towards Chinese equities. US treasury yields moved higher ahead of 30-year supply while currency markets were broadly subdued. Oil prices rose after Ukraine carried out drone strikes on refineries in Russia.

BNZ Markets Today

Jason Wong -

US rates and the USD are modestly higher after the US CPI report was a touch stronger than consensus, providing no fuel for those looking for an imminent Fed rate cut. Treasury rates are up 5-6bps across the curve. The NZD has slightly underperformed, falling to 0.6150 and down modestly on most crosses.

BNZ Markets Today

Jason Wong -

It has been a typically quiet start to the trading week, more so with focus on the US CPI report due tonight. Heavy supply is weighing on US Treasuries, seeing yields modestly higher, US equities are down slightly, and currency movements are well contained. The NZD is down slightly to 0.6165.

BNZ Markets Today

Stuart Ritson -

Global equities retreated into the end of last week. The S&P briefly spiked to a fresh all-time high, just below 5,200 after the US labour market data was released, but subsequently faded to close 0.7% lower. US treasuries settled marginally lower in yield following a volatile period around the data while the US dollar index ended little changed. Bitcoin briefly passed $70,000, to set a new peak, before rapidly retracing. Gold extended its rally and reached a fresh all-time high of $2,195 per ounce.

BNZ Markets Today

Jason Wong -

US and European equities rose to fresh record highs, with the prospect of rate cuts supporting investor confidence in the market, although global rates only show small movements. The ECB left rates on hold and President Lagarde hinted at a June rate cut. The USD is broadly weaker again, with the NZD lifting to 0.6170, although JPY has outperformed as the BoJ edges closer to a rate hike.

BNZ Markets Today

Jason Wong -

US Treasury yields are lower, the USD is weaker and US equities have recovered some of yesterday's losses. Chair Powell reiterated the Fed’s view of easier policy later this year in front of lawmakers, while US labour market data were line. The NZD has recovered to 0.6135 and, alongside the AUD has slightly outperformed, seeing most crosses modestly higher.

BNZ Markets Today

Jason Wong -

A risk-off vibe overhangs the market, with weaker IT stocks a drag on US equity market performance. That has helped support the bond market, with a weaker US ISM services report chiming in, seeing US Treasury yields down 4-6bps for the day. Currency moves have been modest. China’s optimistic 5% growth target did nothing to support commodity currencies, and the NZD is languishing just under the 0.61 mark.

BNZ Markets Today

Stuart Ritson -

US equity indices are little changed with investors looking ahead to key economic indicators and comments from Fed officials, including Chair Powell’s testimony before the House Financial Services Committee, later in the week. In Japan, the Nikkei 225 increased 0.5% and traded above the psychological 40,000 level for the first time. The Nikkei is the best performing major stock index in 2024, having gained 20% in local currency terms, and 13% in US dollar terms. This compares with an 8% rise in the S&P.

BNZ Markets Today

Stuart Ritson -

Positive risk sentiment propelled global equity indices to fresh record closes at the end of last week. The S&P traded above 5,100 and the Eurostoxx 50, looked past stronger than expected inflation data, to eke out a new all-time high. Treasury yields and the US dollar fell following weak manufacturing data and WTI crude prices rose above US$80 per barrel.

BNZ Markets Today

Jason Wong -

There has been plenty of news to digest over the past 24 hours. In-line US PCE deflator data came as a relief and triggered a rally in the bond market, seeing US Treasury yields lower across the curve. US equities are flat. The NZD is little changed from this time yesterday, at 0.6080, while a hawkish speech by a BoJ board member has seen a sustained lift in the yen.

BNZ Markets Today

Stuart Ritson -

Global assets markets are little changed overnight in the absence of first tier economic data. Investors are looking ahead to key inflation data in the US and big European economies which could influence the expected path for interest rates. The S&P is marginally lower in early afternoon trade continuing the sideways price action from recent sessions. Global bond markets are stable while the US dollar advanced. Bitcoin surged above $60,000 for the first time since November 2021 extending gains to over 40% in 2024.

BNZ Markets Today

Jason Wong -

It has been another uneventful trading session, with flat US equities, small changes in US Treasury yields and currency markets well contained. Focus today will be on the RBNZ’s MPS where there is strong consensus for no change in rates, but nervousness that impatience by the MPC could trigger another rate hike.

BNZ Markets Today

Jason Wong -

It has been a quiet start to a busy week, with little newsflow. The NZD and AUD have kicked off the week on a softer note, the former sustaining the modest fall seen during NZ trading hours, as traders pared long positions ahead of the RBNZ’s MPS. Global rates are higher, led by Europe, seeing the US 10-year rate up 6bps overnight versus the NZ close. US equities are flat.

BNZ Markets Today

Stuart Ritson -

US equity indices ended little changed on Friday after a week where major global indices in Japan, Europe and North America reach record highs. There was limited economic data or other catalysts to provide direction with the S&P confined to a narrow range. Global bond yields moved lower, and currency markets were little changed.

BNZ Markets Today

Jason Wong -

Equity markets have been breaking records over the past 24 hours across Japan, the euro area and US. Nvidia’s surge has helped the S&P500 power up 1.8% for the session so far. US Treasury yields have ticked up to fresh highs for the year as the market continues to pare back expected Fed easing this year. Net currency movements have been small. The NZD rose up through 0.62 and currently sits just below the figure. On the crosses, the NZD has pushed up to fresh highs against AUD and JPY.

BNZ Markets Today

Stuart Ritson -

There were limited catalysts for global asset markets overnight in the absence of first-tier economic data or fresh guidance from policy makers. The S&P is marginally lower in early afternoon trade as investors look ahead to Nvidia results due after market close. The company is at the vanguard of AI given its chips are used in the hardware for artificial intelligence. Treasury yields are marginally higher, and the US dollar is little changed.

BNZ Markets Today

Jason Wong -

US equities are weaker, Treasury yields are lower and the USD is broadly weaker. There aren’t any obvious factors at play other than all these represent a retreat from the recent trend. Despite lower risk appetite, the NZD has outperformed, pushing up to 0.6175 and it is stronger on the crosses, particularly against the CAD, following much weaker than expected Canadian CPI data.

BNZ Markets Today

Jason Wong -

It has been a very quiet start to the week with the US public holiday and with little newsflow. Future markets for Treasuries and equities show small changes. Currency movements have been modest, with the NZD’s 0.3% gain to 0.6145 from last week’s close making it the top performer.

BNZ Markets Today

Stuart Ritson -

US producer price inflation data surprised to the topside which led to reduced expectations for easing by the US Federal Reserve. US treasury yields reached the highest level for this year. The higher yield backdrop provided a headwind for equities with the S&P falling 0.5% during the session to end the week little changed. The Nikkei continued its stellar run. It is up 15% year to date and is just 1% below its all-time high reached in December 1989. Credit spreads were stable near the tightest levels in 2-years and the US dollar ended little changed on the major crosses.

BNZ Markets Today

Jason Wong -

Overnight, US Treasury yields declined after much weaker than expected US retail sales data for January, but the move was fully retracted and the 10-year rate is now back at 4.23%, little changed from the NZ close. The USD shows a broadly based fall for the day, helping the NZD push back over 0.61. GBP and JPY have showed smaller gains against the USD, not helped by weaker than expected GDP data which put the UK and Japan’s economy both in technical recession for 2H23.

BNZ Markets Today

Stuart Ritson -

Global equity and bond markets rebounded from the losses triggered by the surprisingly strong US inflation data. The S&P gained 0.4% after falling more than 1% in the previous session. Treasury yields retraced from the highest level this year and the US dollar was softer against major currencies. Oil prices fell after US crude inventories increased by the most since November.

BNZ Markets Today

Jason Wong -

Higher than expected US CPI data rocked the market, pushing out the timing of any likely Fed rate cuts. The data drove weaker equity markets, an 11-14bps lift in US Treasury yields out to 10-years, and broadly based USD strength. The NZD is down 1.3% from this time yesterday to 0.6060 and weaker on most crosses, with a fall in 2-year inflation expectations adding to the weakness, as the market pared back the chance of another RBNZ rate hike.

BNZ Markets Today

Jason Wong -

It has been a quiet start to the week, with a large number of Asian markets closed for Lunar New Year holidays and little newsflow. US equity markets have edged higher, extending the record-breaking run, US Treasury yields have traded in a tight range and in currency markets the NZD has lost a little air after last week’s outperformance.

BNZ Markets Today

Stuart Ritson -

The S&P closed at a record high above the psychological 5,000 level on Friday. The index has made 5 consecutive weeks of gains and is close to 5% higher since the start of the year. In Japan, the Nikkei traded above 37,000 for the first time in 34 years. This is 5% below the all-time high reached back in December 1989. Foreign investors have been increasing exposure to Japanese stocks and have added US$19 billion since the start of the year continuing a trend from the past 18 months. US treasury yields ended higher with a brief period of volatility around the release of CPI revisions. The US dollar was broadly stable against major currencies though both the NZD and AUD moved higher.

BNZ Markets Today

Jason Wong -

In an uneventful overnight session, global rates have pushed higher, ahead of a chunky 30-year Treasury auction and some nerves regarding US CPI revisions due tonight. US equities are flat, with the S&P500 still unable to break the 5000 mark after getting within a fraction of a point yesterday. The USD is broadly stronger, dragging the NZD back below 0.61, the yen has underperformed and NZD/AUD is getting close to 0.94.

BNZ Markets Today

Stuart Ritson -

US equities remained well underpinned in the absence of first tier economic data. The S&P reached another record intraday high and is closing in on the psychological 5,000 level. Markets continue to watch for any potential fallout from the US regional banking sector as shares in NYCB resumed losses. Meanwhile optimism towards China equities faded in the absence of additional details from policy makers about a support program for onshore markets. The Hang Seng China Enterprises Index (HSCEI) reversed an earlier 1.5% gain to close 1% lower.

BNZ Markets Today

Jason Wong -

Overnight, there has been little news but the US 10-year year Treasury yield has fallen modestly after the hefty two-day sell-off that followed the blockbuster payrolls report on Friday. US equities are flat. The NZD and AUD have found some support, helped by a slightly stronger yuan on speculation of more policy support for the beleaguered Chinese sharemarket. The NZD is trading around 0.6075, off yesterday’s fresh year-to-date low.

BNZ Markets Today

Stuart Ritson -

A large upside surprise to US payrolls pushed back the prospect of rate cuts by the Federal Reserve until later in the year and contributed to higher global bonds yields and a stronger US dollar. Equities managed to look past the rise in interest rates, with the S&P reaching another all-time high, as optimism about the economy outweighed the prospect of rates remaining at restrictive levels for longer. Economic activity appears robust in the first quarter. The Atlanta Fed GDPNow forecast stood at 4.2% on an annualised basis before the data release.

BNZ Markets Today

Jason Wong -

In the wake of the Fed’s policy update yesterday and the regional banking “scare”, US Treasury yields have pushed down further to fresh lows for the year. Benign US economic data supported Treasuries, and drove a downturn in the USD, helping the NZD recover from overnight lows. The Bank of England removed its tightening bias but didn’t rock the market.

BNZ Markets Today

Stuart Ritson -

Weaker technology stocks contributed to a fall in US equities as the market looks ahead to the FOMC this morning (NZT). The Federal Reserve is expected to transition away from a tightening bias and prepare the way for easier policy in coming meetings. A plunge in the shares of New York Community Bank, which bought the failed Signature Bank last year, reignited concerns about US regional banks and impacted market sentiment. Global bond yields moved lower underpinned by softer than expected US data and signs of easing inflation in Europe.

BNZ Markets Today

Stuart Ritson -

The S&P 500 fluctuated near its all-time high as investors looked ahead to results from major technology companies, Microsoft and Alphabet in addition to the Federal Reserve’s first interest rate decision of the year tomorrow morning (NZT). Higher than expected job openings from the JOLTs survey underpinned US treasury yields and the US dollar was little changed.

BNZ Markets Today

Jason Wong -

Markets are in a holding pattern ahead of an eventful week that includes policy meetings from the US Fed and BoE, key global economic releases, earnings reports from some of the US market’s magnificent seven, and the US Treasury’s quarterly refunding announcement. On paper, the calendar doesn’t come any more eventful than this.

BNZ Markets Today

Jason Wong -

Friday ended on a muted note with an insignificant fall in US equities, a small lift in US Treasury yields and only modest currency moves. That wrapped up a week with only small net moves overall for bonds and currency markets, while there was a bit more action in equity markets, with the S&P500 putting on a third consecutive week of 1+% gains. The NZD finished the week just below 0.61. The week ahead looks more exciting with plenty of event risk to digest.

BNZ Markets Today

Jason Wong -

Overnight, there was only a modest market reaction to stronger than expected US GDP figures and the ECB policy update. President Lagarde didn’t significantly push back on market pricing for an early rate cut, seeing European rates and the EUR lower, but not materially so. US Treasury rates are slightly lower, with signs of inflation well under control despite the resilient economic backdrop. The NZD is tracking just over 0.61, little changed from the NZ close.

BNZ Markets Today

Jason Wong -

Risk appetite improved overnight, supported by a surprise easing of policy in China, the message from global PMIs, and the Bank of Canada removing its tightening bias. Equity markets are stronger, bond markets are well contained, the USD is broadly weaker and Brent crude has pushed up above USD80 per barrel. The NZD is up 1% from this time yesterday to 0.6130.

BNZ Markets Today

Stuart Ritson -

There was subdued activity across global markets in the absence of first tier economic releases. The S&P 500 was little changed in mid-afternoon trade as investors digest mixed corporate results and look ahead for further information on the outlook for interest rates. Stocks in Hong Kong surged amid signs that policy makers would step up support. The US dollar made broad based gains and global bond yields moved higher.

BNZ Markets Today

Jason Wong -

It has been a typically quiet start to the week, with little news flow. But that hasn’t stopped the record-breaking run of US equities to continue. Global bond rates have pushed lower, and currency markets only show small movements, the NZD seeing some support just under 0.61.

BNZ Markets Today

Stuart Ritson -

US equities ended last week on a positive note with the S&P advancing 1.2% to 4840, a new record high close. The move higher was underpinned by gains in technology companies. The index has now fully unwound the ~25% drawdown which began in January 2022 and reached a trough in October the same year. US treasury yields are mixed and the US dollar is little changed.

BNZ Markets Today

Jason Wong -

The US-year rate has pushed up to a fresh high for the year of 4.15% following a surprising fall in jobless claims data. Equity markets are up despite the higher rates backdrop. Currency movements have been modest, with the NZD languishing around the 0.61 mark and down on most crosses.

BNZ Markets Today

Stuart Ritson -

Global equites fell and bond yields moved higher as investors trimmed expectations for rate cuts by major central banks. Policy makers have continued to push back against near term easing and US economic data was stronger than expected. The soft tone in equity markets began in Asia yesterday amid concerns about the challenges facing the Chinese economy and expanded overnight as government bond yields moved higher. The US Dollar advanced.

BNZ Markets Today

Jason Wong -

US Treasury yields are much higher on the day, with the lift during Asia extended and sustained overnight following comments from Fed Governor Waller, who pushed back against market expectations, arguing for a “careful” rather than rapid easing in policy. The USD is broadly stronger, seeing NZD extend recent losses to below 0.6140. Equity markets are modestly weaker.

BNZ Markets Today

Jason Wong -

US markets are closed for a public holiday, seeing light trading conditions. S&P500 futures are down slightly and US Treasury futures are consistent with a 3bps lift in the 10-year rate from last week’s close to 3.97%. In currency markets, the USD is broadly stronger and JPY, AUD and the NZD have all underperformed, seeing the NZD trade sub 0.62 overnight.

BNZ Markets Today

Stuart Ritson -

US equities closed little changed at the end of last week. After a brief dip at the start of January, risk sensitive assets have remained well supported with the S&P closing on Friday just below its record reached back in January 2022 while investment grade credit spreads are trading at the tightest level in close to 2 years. Softer than expected US producer prices contributed to lower treasury yields on Friday night and currency markets were stable.

NZ At A Glance

New Zealand at a Glance

Stephen Toplis -

The New Zealand economy is struggling. It has contracted in three of the last four quarters. We expect more of the same until the second half of this year. All this despite rapid population growth and a resurgence in tourism. With labour supply expanding rapidly and demand growth moderating, the labour market is easing quickly. All this means inflationary pressures are abating, but the RBNZ is not convinced the reduction in inflation is fast enough nor necessarily sustainable. Accordingly, it remains reluctant to provide any suggestion the cash rate might fall any time soon.

Rural Research

Farmers Cut Spending

Doug Steel -

Farmers have cut expenditure over the past year. Generally low commodity prices, elevated costs, and high interest rates have pressured primary sector finances. And, on top of this, the weather has had significant influence too, albeit more for some than others.