NEW ZEALAND: Business Survey Signals Stronger H2 Growth & Lower Q4 Inflation
The ANZ November business survey is consistent with RBNZ’s Hawkesby’s comment following Wednesday’s rate cut that the recovery “is happening right now through Q3 and Q4”. It is a piece of high frequency data consistent with rates staying at 2.25% for now. Businesses are their most positive since 2014. Activity compared to a year ago, a good indicator for GDP, rose to 21.3 from 4.6 with ANZ saying that only construction remains negative. Thus it appears that growth recovered further in Q4.
- ANZ notes that while the economy is coming off a low base, “something has clearly changed”.
- Q4 averages suggest that GDP growth should recover and inflation turn lower again.
- Business confidence rose to 67.1 in November from 58.1, the highest since March 2014.
- The activity outlook picked up to 53.1 from 44.6, also the highest since Q1 2014. Export and employment intentions both rose in November but investment fell almost 2 points.
- Hiring compared to a year ago rose to -2.4 from -10.0 driven by services up 6 points to +7. Another sign the labour market has turned.
NZ ANZ business activity outlook vs employment intentions
- Hawkesby was asked at yesterday’s press conference about sluggish investment and he said that businesses need to be confident in the durability of the recovery and not just see lower lending rates before investing. The improvement in business confidence and profit expectations should help drive a pickup in capex but likely with a lag. When they do invest, credit conditions won’t be a constraint with “ease of credit” at its highest since 2009.
- Inflation expectations remained steady around 2.7% but pricing intentions rose to 50.5 from 43.9 with the increase 3-mths out rising 0.3pp to 1.9%. Cost expectations were lower though and wage expectations steady.
NZ inflation outlook %
Source: MNI - Market News/LSEG
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GOLD: Gold Stabilising But Breaks Above $4000 Brief
Gold has stabilised at the start of Tuesday’s trading after falling 3.2% to $3982.21/oz on Monday driven by higher US yields and stronger risk appetite following news that a draft US-China trade deal had been reached averting an escalation of trade tensions. This also contributed to the equity rally. Gold is slightly higher at around $3983.7 in today’s session off the intraday peak of $4004.57 but the break above $4000 was brief. It is off around 9% from the 20 October record.
- Bullion trended lower through Monday reaching a trough of $3971.52 but still up 3.2% this month. It continues to trade below initial support at $4004.3, 22 October low, today opening $3944.9, 9 October low. If it remains below the 50-day EMA at $4052.6, then it could correct further towards the 50-day at $3832.4. The bull trigger is $4381.5.
- It is not finding support from the softer US dollar with the BBDXY falling 0.1% and the 2-year US yield slightly lower today. Bullion will be watching for changes in tone following Wednesday’s Fed decision. A 25bp cut is widely expected.
- Silver has continued trending down in Tuesday’s session with prices -0.2% to $46.78 close to the intraday low. It reached a trough of $46.098 on Monday below initial support at $47.55, 22 October low, and is now approaching the 50-day EMA at $45.542. The bull trigger is at $54.480.
- Equities rallied with the S&P up 1.2% and Euro stoxx +0.6% and the S&P e-mini is currently slightly higher. Oil prices fell with Brent -0.4% to $65.64/bbl. Copper rose 0.7%.
CNH: Still Eyeing Sub 7.1000 Test, Trade News Likely Priced To Some Degree
USD/CNH is holding near 7.1065 in early Tuesday dealings, slightly up from Monday lows at 7.1027. US-China trade optimism drove CNH's 0.24% gain on Monday, which outperformed broader USD index losses. Spot USD/CNY finished up at 7.1084, while the CNY CFETS basket tracker edged down slightly to 97.49. For USD/CNH focus remains on a re-test sub 7.1000. Mid Sep lows were at 7.0851. The upside may remain capped around the 20-day EMA (7.1270) and 50-day EMA (7.1375) resistance points.
- The market bias is likely to continue to focus on fading upside moves in USD/CNH and look for downside breaks. The USD/CNY fixing outcomes continues to support this viewpoint, while positive US-China trade talks from the weekend fueled optimism ahead of the two Presidents meeting in South Korea on Thursday.
- To be sure, a positive outcome from Thursday may be reflected in FX markets to a degree. If the 100% tariff risk is effective off the table (Per Bessent) this helps cap upside in USD/CNH, but for a break sub the 7.00 region we may need to see progress towards reducing existing tariff levels. Progress may be achieved on this front if agreement is reached around fentanyl export curbs (which has been tied to a 20% tariff rate).
- In the interim the local data calendar is empty (with official PMIs out on Friday).
- From late yesterday, the PBOC will resume treasury bond trading in the interbank market and continue to implement a moderately loose policy to create a favorable environment for economic recovery and stable financial markets, Governor Pan Gongsheng said on Monday at the opening of the 2025 Financial Street Forum.
MNI: UK OCT BRC SHOP PRICES -0.3% M/M, +1.0% Y/Y
- MNI: UK OCT BRC SHOP PRICES -0.3% M/M, +1.0% Y/Y
