NEW ZEALAND: Global Factors & Persistent Inflation Pressures Weigh On Sentiment
Q1 Westpac consumer confidence fell to 89.2 from 97.5, the weakest since Q2 2024 which is before the RBNZ began easing. The data can be volatile though and the Q4/Q1 average is pointing to some improvement in consumption growth. Q4 real retail sales rose 0.9% q/q to be up 0.3% y/y after contracting the previous eight quarters. A spending recovery is still likely to remain lacklustre and 25bp cuts are probable for the April and May meetings.
- The Q1 softness was due to both the present and expected conditions indices. Present fell almost 9 points to 80.2, still higher than Q3, while expected 8 points to 95.2, the lowest since Q1 2024.
- Expected conditions were likely impacted by the steady negative news around the trade outlook from the shift in US policy. The US is NZ’s second largest export destination, while China is the largest. The US has imposed 20% tariffs on imports from China, which could indirectly impact NZ. Westpac notes that the associated market volatility with the announcements could also have pressured consumer confidence.
- Westpac notes that people continue to cite ongoing cost-of-living pressures as a major concern and this likely weighed on sentiment despite H2 2024 inflation being at its lowest since Q1 2021. Prices of food and council rates continue to rise materially.
- Westpac says that 27% of households they spoke to said they had cut back on “activities like dining out or in bars over the past year”. The “good time to purchase a major item for the home” index also fell.
- Card transaction data show spending is recovering but at a slow rate and data will be monitored to see if greater pessimism will weigh on it.
NZ consumption vs Westpac consumer confidence
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ASIA STOCKS: Asian Equities Open Mixed, Geopolitical Tension Weigh On Market
Asian markets opened the week with cautious optimism on Monday, as investors weighed geopolitical tensions and upcoming central bank policy decisions. The MSCI Asia-Pacific index edged up 0.1%, while Japan's Nikkei is 0.20% lower, while the TOPIX is unchanged, South Korea's KOSPI is 0.50% higher, Taiwan's TAIEX is trading 1% higher
- Japan's GDP growth slowed sharply in 2024, rising just 0.1% for the year compared to 1.5% in 2023, However, Q4 growth accelerated to 0.7% QoQ, exceeding market expectations of 0.3%, driven by strong exports, improved auto production, and a rebound in inbound consumption.
- In Australia, ASX 200 fell 0.8%, primarily due to declines in the financial sector. Westpac shares dropped as much as 6% following a quarterly report that showed a slip in profit and margins.
- Hong Kong's market, which gained 7% last week driven by optimism in Chinese AI firms and a significant rise in Alibaba shares, is poised for a cautious start. Investors are monitoring potential developments, including a possible meeting between President Xi Jinping and e-commerce icon Jack Ma, which could further influence Chinese stocks.
- Geopolitical concerns are heightened as the U.S. and European Union engage in discussions over tariff plans and the ongoing conflict in Ukraine. U.S. President Donald Trump's proposed tariffs have prompted threats of retaliation from the EU, adding to market uncertainty.
- Commodity markets saw oil prices decline for the fourth consecutive day amid concerns over ample supply and potential impacts of tariffs on demand, this has weighed on Australia's market. Gold prices remained steady, trading near record highs as investors sought safe-haven assets amid the prevailing uncertainties
- The US market is closed later today for Presidents day.
CNH: USD/CNY Fixing Holds Above 7.1700, Error Term Narrows
The USD/CNY fix printed at 7.1702, versus a Bloomberg consensus of 7.2653.
- We continue to see the fixing error term narrow, now to -951pips. This time last week were -1310pips.
- The actual fixing was only down a touch versus Friday's level (7.1706).
- USD/CNH is little changed in the first part of Monday dealings, last under 7.2600. We are underperforming the firmer yen trend, with CNH/JPY back sub 21.00.
MNI: CHINA PBOC CONDUCTS CNY190.5 BLN VIA 7-DAY REVERSE REPO MON
- CHINA PBOC CONDUCTS CNY190.5 BLN VIA 7-DAY REVERSE REPO MON
