NEW ZEALAND: Some Moderation In Post-Easing Exuberance, Watch Price Components
While NZ ANZ business confidence and activity outlook eased in January they remain elevated, signalling some reduction in optimism following 125bp of RBNZ easing. Confidence fell almost 6 points to 54.4 and the outlook 4 points to 45.8, both still well above the historical averages. The inflation measures were higher across the board though, which will require monitoring but are highly unlikely to derail a 50bp rate cut on February 19 but may slow easing going forward as rates approach neutral.
NZ ANZ business survey
- The assessment of activity compared to a year ago remained around neutral signalling that growth remained soft at the start of 2025 but not as bad as it has been. ANZ notes that construction is the only sector still contracting.
- Inflation expectations rose slightly to 2.67% from 2.63% while pricing intentions picked up to 45.7 from 42.7 (2.7 points higher than the Q4 average). Costs also rose with cost expectations up 3.5 points to 73.6, highest since April, and wage expectations almost 4 points higher at 83.1. ANZ suggests the cost increase could be because of the weaker NZD.
NZ ANZ business survey - price/cost components
Source: MNI - Market News/Refinitiv
- Respondents expect costs to increase 2.5% over the next 3 months but with demand still soft there’s likely to be some margin squeeze as prices are predicted to rise only 1.6%.
- The labour market remains weak but appears to have turned a corner with January employment intentions at 14.4 in line with the Q4 average, which was almost 8 points higher than Q3. Employment compared to a year ago improved to -7.1 after -13.3 in December. Q4 data is released on February 5.
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JGB TECHS: (H5) Returns Lower
- RES 3: 149.55 - High Mar 22 (cont)
- RES 2: 147.74 - High Jan 15 and bull trigger (cont)
- RES 1: 144.48/146.53 - High Nov 11 / High Aug 6
- PRICE: 142.13 @ 15:59 GMT Dec 30
- SUP 1: 141.65 - Low Dec 30
- SUP 2: 141.56 - 1.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 141.05 - 2.000 proj of the Aug 6 - Sep 3 - 9 price swing
Markets slipped on the hawkish Fed and are yet to fully recover, touching 141.65 on the way lower. Medium-term trend signals on the continuation chart continue to point south. A resumption of the trend would pave the way for a move towards 141.56, a Fibonacci projection point on the continuation chart. A stronger recovery would open 144.48, the Nov 11 high. Further out, key resistance is at 146.53, the Aug 6 high (cont).
LNG: Gas Prices Rise As January Forecast To Be Cold
US gas prices rose sharply on forecasted colder weather in January. European February gas prices jumped to EUR 49.00 at the start of Monday’s trading and then eased to finish up 0.5% at EUR 48.23. They are up 0.9% this month and 23% higher than the mid-December low. There is significant uncertainty going into 2025 with the January 1 expiry of the deal allowing Russian gas to transit through Ukraine.
- US natural gas (February contract) rose over 15% on Monday to $3.92 after a high of $4.20 earlier, 24% higher than Friday’s close. It is now up 22.2% in December. The increase was driven by an expected increase in heating fuel demand as the National Weather Service is forecasting a significant probability of lower-than-average temperatures in the east and Midwest over the coming two weeks, according to Bloomberg.
- Freezing weather could also disrupt US gas production in Appalachia, believes AnalytixAI.
- Forecasters are also expecting mid- and northern-Europe’s winter to shift colder in January with possibly less wind, which will impact power generation and increase demand for gas. The cold snap could last into February, believes Maxar. Temperatures in Mediterranean Europe are forecast to be around average. Current storage levels are now below 75%.
- Bloomberg estimates that around 5% of Europe’s gas consumption would be impacted by the cessation of Russian flows through Ukraine, which now looks likely. They are expected to be replaced by supplies from Norway and LNG imports from the US.
AUSSIE 10-YEAR TECHS: (H5) Soft Close
- RES 3: 96.975 - High Mar 14
- RES 2: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- PRICE: 95.555 @ 15:55 GMT Dec 30
- SUP 1: 95.460 - Low Dec 20
- SUP 2: 95.275 - Low Nov 14
- SUP 3: 94.734 - 1.0% 10-dma envelope
Aussie 10-yr futures recovered well having slipped into the Monday close, undermining early December strength. This works against the previous short-term bull cycle. A continuation higher would refocus attention on resistance at the 96.207 level, a Fibonacci retracement. On the downside, a stronger bearish reversal would instead expose 95.275.
