The New Zealand dollar rose to a two-month high against the pound after a report showed Britain had no inflation last month, stoking speculation the Bank of England won’t raise interest rates any time soon.
The kiwi hit 51.54 British pence and was trading at 51.50 pence at 8am in Wellington, from 51.10 pence at 5pm yesterday. The local currency advanced to 76.46 US cents from 76.28 cents yesterday.
The pound weakened after data showed British annual inflation hit zero for the first time on record in February, from a 0.3 percent pace in January, raising speculation it could dip below zero next month. The longer inflation stays below the Bank of England’s 2 percent target, the less likely it is that the bank will raise interest rates any time soon.
“The news suggests that price pressures in UK remain non existent for the time being, leaving BoE on hold for the foreseeable future,” Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York, said in a note. The pound “tumbled…in the aftermath of the release as traders pared any expectation of rate hikes to 2016.”
In New Zealand today, traders will be eyeing the release of Fonterra Cooperative Group’s first-half earnings for an update on the dairy exporter’s forecast payout to farmers. Separately, trade data for February is also scheduled for release.
The New Zealand dollar was little changed at 97.18 Australian cents from 97.22 cents yesterday ahead of the release of the Reserve Bank of Australia’s financial stability report today.
The kiwi advanced to 70.02 euro cents from 69.93 cents yesterday and gained to 91.50 yen from 91.38 yen yesterday. The trade-weighted index increased to 79.63 from 79.53 yesterday.
Wall Street moved lower as an unexpected gain in new home sales as well as solid data on inflation and manufacturing bolstered the case for the Federal Reserve to begin raising interest rates soon.
In afternoon trading on Wall Street, the Dow Jones Industrial Average fell 0.32 percent, while the Standard & Poor’s 500 Index retreated 0.35 percent, and the Nasdaq Composite Index slipped 0.11 percent.
Declines in shares of Pfizer and those of Cisco, recently 1.3 percent and 1.2 percent weaker respectively, dragged the Dow lower. Bucking the trend were shares of United Technologies and Home Depot, last up 0.8 percent and 0.6 percent respectively.
Shares of Google gained, last up 2.2 percent, after the company said it hired Morgan Stanley’s chief financial officer, Ruth Porat, as its new CFO.
US new home sales jumped 7.8 percent to a 539,000 annualised pace in February, the highest in seven years, and up from an upwardly revised 500,000 in January, according to Commerce Department data. Economists had predicted a decline, with 76 estimates in a Bloomberg survey ranging from 400,000 to 490,000.
Separately, a Labor Department showed the consumer-price index rose 0.2 percent. Core costs, excluding food and energy, also gained 0.2 percent.
Markit’s US manufacturing purchasing managers’ index rose to 55.3 in March, the highest level in five months, up from 55.1 in February.
“You have central banks lowering rates around the world, while we are talking about raising rates,” Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey, told Reuters. “Our dollar is naturally going to get stronger.”
While the euro gained against the greenback earlier in the session, the US dollar moved higher later in the day.
“Any positive surprises from the euro area are further adding to this euro/dollar rally; however we think this is temporary,” Nikolaos Sgouropoulos, foreign exchange strategist at Barclays in London, told Bloomberg. “We still believe in the dollar strength trend going into the second half of the year.”
Markit’s euro-zone composite flash PMI rallied 54.1 in March, the highest level in almost four years, up from February’s 53.3.
“The eurozone’s economic recovery gained further momentum in March,” Chris Williamson, chief economist at Markit, said in a statement. “The improvement provides welcome news to a region awaiting signs that the ECB’s quantitative easing is stimulating the real economy.”
Europe’s Stoxx 600 Index ended the session with a 0.3 percent advance from the previous close. France’s CAC 40 Index rose 0.7 percent, while Germany’s DAX gained 0.9 percent.
Markit’s flash Germany composite output index rose to 55.3 in March, the highest level in eight months, and up from 53.8 in February.
“It’s important that Germany, the export engine of Europe, is managing to maintain momentum for the European recovery,” Witold Bahrke, an asset-allocation strategist at Nomura International in London, told Bloomberg. “It’s quite astonishing in the light of the global weakness we’ve seen that Europe has so far been doing so well.”
The UK’s FTSE 100 Index declined 0.3 percent from the previous day’s record-high close.
Meanwhile, China’s flash HSBC/Markit PMI dropped to 49.2 in March, the lowest level in 11 months.
“The deteriorating PMI confirmed that downside risks to China’s 2015 growth have started to materialise,” Jian Chang at Barclays told Reuters. “We expect an accelerated monetary easing cycle and somewhat loosening of the fiscal stance.”
Hamish Bohannan has resigned from Bathurst Resources after five years leading a coal miner whose expansion has been put on hold pending a recovery in coal prices.
Bohannan joined Bathurst in 2008 and played a key role establishing the company as a coal producer and driving the heavily contested consenting process for its Escarpment project on the Denniston Plateau. The company has since restructured its operations, cut staff, trimmed the size of its board and put the Escarpment mine on hold and Bohannan “has now decided to seek a fresh challenge,” the company said in a statement.
He will be replaced by chief operating officer Richard Tacon, a 30-year industry veteran who joined Bathurst in 2012.
Tacon “has played an integral role in reviewing productivity and efficiencies across the operations to more closely align the company’s capabilities with current market conditions and to ensure Bathurst is well positioned for a recovery when global coal prices improve,” chairman Malcolm Macpherson said.
“His key role will be to grow the domestic business whilst preserving shareholder value in the Buller coking coal project during this period of low commodity pricing,” Macpherson said.
Shares of Bathurst last traded at 3.6 cents, valuing the company at $34 million, and have slumped 81 percent in the past two years.
The company maintains small-scale thermal coal operations in the South Island for domestic consumption but its major opportunity was extracting high grade coking coal, used in steel-making, for export. The sustained downturn in global coking coal prices, which also underlies state-owned coal miner Solid Energy’s current financial difficulties, has delayed further development of the Denniston Plateau mine at Escarpment.
Wall Street mostly moved higher, as the US dollar fell, amid expectations the Federal Reserve will lift interest rates more gradually than initially thought.
While Fed Vice Chairman Stanley Fischer told the Economic Club of New York that the central bank will likely raise rates this year, he also stressed it’s unlikely to “ smooth path upward.”
“An increase in the target federal funds range likely will be warranted before the end of the year,” Fischer said. “Liftoff should occur when the expected return from raising the interest rate outweighs the expected costs of doing so.”
“But a smooth path upward in the federal funds rate will almost certainly not be realised, because, inevitably, the economy will encounter shocks–shocks like the unexpected decline in the price of oil, or geopolitical developments that may have major budgetary and confidence implications, or a burst of greater productivity growth, as the Fed dealt with in the mid-1990s,” according to Fischer.
In afternoon trading on Wall Street, the Dow Jones Industrial Average gained 0.24 percent, while the Standard & Poor’s 500 Index rose 0.14 percent. The Nasdaq Composite Index slipped 0.06 percent. The US dollar weakened.
“The market has been in a back-and-forth motion for the last couple of weeks, caught between the potential for rising interest rates and its impact on the dollar and the feeling by investors that the economy is gaining some strength,” Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey, told Reuters.
Gains in shares of Pfizer and those of Apple, recently up 3 percent and 1.4 percent respectively, led the Dow higher. Bucking the trend were shares of Boeing and Chevron, each last down 0.8 percent.
Oil rose, benefitting from the greenback’s weakness.
“The dollar is under pressure, and we saw buyers coming into the market as a result,” Tradition Energy senior analyst Gene McGillian told Reuters.
Meanwhile a report on the housing market fell short of expectations, showing the industry’s recovery remains sluggish.
Purchases of existing homes increase 1.2 percent in February to a 4.88 million annual rate, up 4.82 million in January, which was the lowest in nine months, according to data from the National Association of Realtors.
In Europe, the Stoxx 600 Index finished the day with a 0.7 percent decline from the previous close, as did France’s CAC 40 Index. Germany’s DAX fell 1.2 percent.
The UK’s FTSE 100 Index rose 0.2 percent.
European Central Bank President Mario Draghi told a European parliament committee in Brussels that the bank’s quantitative easing program, implemented earlier this month, was on track, rejecting concerns there will be a lack of bonds for the central bank to buy.
“The pace of purchases so far puts the overall program on track to reach a total of 60 billion euros in March,” Draghi said. ‘‘We see no signs that there will not be enough bonds for us to purchase. Feedback from market participants so far suggests that implementation has been very smooth and that market liquidity remains ample.’’
New Zealand lamb wool prices fell from a four-year high at auction last week as a rising local currency made the fibre more expensive for overseas buyers.
The price for clean lamb wool slipped 2.3 percent to $6.50 per kilogram from the previous week’s auction, which was the highest since February 2011, according to AgriHQ. The average price for clean 35-micron wool, a benchmark for crossbred wool used for carpets and accounting for the majority of New Zealand’s production, was unchanged at $5.25/kg.
Movements in wool prices at the latest auctions in the North and South islands were driven by the rapid rise in the New Zealand dollar against the US dollar, according to AgriHQ agriculture analyst Ivan Luketina. The New Zealand dollar jumped against the greenback last week as traders pared back their expectations for when the US Federal Reserve may start to hike interest rates. The weaker US dollar means the cost for buyers paying for local wool in that currency are higher.
“Lambswool, while losing a little bit of ground, remains very strong, having gained 6 percent since the start of the year and holding 32 percent above price levels from this time last year,” said Rabobank commodity analyst Georgia Twomey. “The clear strong demand for this type which is feeding into the woollen supply chain for knitwear, overcoats and bulkier woven fabrics is being mirrored in Australia where the 24-32 micron types and merino cardings have also been performing strongly this year.
“The positive news for the outlook lies in the strength of the demand, while cautiously optimistic for some continued strength, given prices such as the 28 micron combined indicator in Australia has reached 12 year highs, how long this will be sustained with competition for similar types available from alternative suppliers is the question.”
Wool is New Zealand’s 14th largest commodity export.
2Degrees, New Zealand’s third-largest mobile telecommunications provider, is to acquire Christchurch-based internet service provider, Snap, to allow it to compete more effectively for business customers by offering a full range of mobile, broadband and fixed-line voice telephony using the internet.
The purchase, for an undisclosed sum, formally links the two companies, which have been in a selling partnership arrangement for the past two years, 2degrees chief executive Stewart Sherriff said in a statement ahead of a media briefing in Auckland this morning.
“Snap provides the perfect complement to our mobile offering and will allow us to deliver the total package that our customers – and theirs – have been asking for,” he said.
Snap chief executive Mark Petrie will join the 2degrees senior leadership team, heading the merged firms’ fixed services division.
Snap describes itself as “one of New Zealand’s fastest growing telecommunications providers”, concentrated in providing services to businesses and institutions, an area where 2degrees has struggled to grow since establishing its mobile services in 2009, initially targeting pre-paid and consumer markets.
Companies Office records list Petrie and Toby Ross Giles as the directors of Snap Trustees, the shareholding entity for Snap, while Snap’s directors are Petrie, Christchurch professional director Bruce Matheson and Katherine Meads, a former director of various Ngai Tahu entitities.
“One thing we’ve learnt in the last couple of years … is that there is a limited window of opportunity to win business as the ultra-fast broadband networks are rolled out,” said Petrie in the same statement. “A fixed-mobile offer allows us to put our best foot forward and 2degrees is the best company to drive that growth.”
The combined businesses will have some 900 staff, including Snap’s 120, and the two companies will share office space.
Existing customers of both companies would see no immediate change while back office system integration would occur over time, said Sherriff.
New Zealand consumer confidence rose in the first three months of the year, as Kiwis enjoyed cheaper fuel prices and lower fixed home-loan rates, and became more upbeat about the near-term outlook for the economy.
The Westpac McDermott Miller Consumer Confidence Index rose to 117.4 in the latest survey from 114.8 three months earlier. The present conditions index gained 1.8 points to 113.2 and the expected conditions index rose 3 points to 120.1.
The survey comes after figures this month showed a 1.2 percent jump in New Zealanders’ spending on debit and credit cards last month, faster than some economists had expected, indicating they are becoming more comfortable with their spending power. The biggest gain in the Westpac survey was in perceptions of an improvement in the one-year outlook for the economy, which rose 7.3 points to a net 23.8 percent.
“Petrol prices and fixed mortgage rates have continued to fall since the previous survey, while share prices and house prices have continued to rise,” said Felix Delbruck, senior economist at Westpac Banking Corp. “Rising consumer confidence is also in keeping with the very strong electronic card spending data we saw over January and February.”
Delbruck said a regional breakdown in the survey surprised in showing that rural consumers were less gloomy than expected in the face of a low dairy payout and drought conditions in some parts of the country, which might reflect the improvement in prices in recent GlobalDairyTrade auctions. Confidence in urban centres was “healthy, rather than exuberant.”
Consumers became mildly less gloomy about their own finances, with a net 1.4 percent saying they were worse off than a year ago, from a net 3.1 percent who said their situation had deteriorated three months ago. At the same time, a net 9.8 percent felt they would be better off in the year ahead, up from a net 7.9 percent in the December quarter.
The outlook for the economy over the next five years deteriorated slightly, with a net 26.8 percent seeing an improvement, down from 27.2 percent.
Those deeming it a good time to buy a major household item rose to a net 27.8 percent from 25.8 percent.
The survey interviews were conducted from March 1-11 with a sample size of 1,561.
By Tina Morrison
March 23 (BusinessDesk) – The New Zealand dollar set new records against the euro and the Australian dollar as investors sold the greenback on concern the US may hike interest rates later than previously expected.
Over the weekend, the kiwi touched a post-float record 97.46 Australian cents, beating its previous high of 97.22 cents from earlier this month. The local currency also marked a new record against the euro of 70.14 cents, edging past the 70.13 cent high from the week earlier. The New Zealand dollar touched a two-week high of 75.91 US cents over the weekend, and was trading at 75.52 cents at 8am in Wellington, from 75.65 cents at the New York close and 74.31 cents at 5pm in Wellington on Friday.
Last week the US dollar fell from its highest in more than a decade as traders pared back their expectations for when the US Federal Reserve may start to hike interest rates. That followed the US central bank meeting on Thursday, at which it removed a reference to being ‘patient’ from its statement as expected, paving the way for interest rate hikes at future meetings. However, at the same time, it lowered its outlook for growth, inflation and interest rates, and emphasised it wasn’t ‘impatient’.
“The US dollar was buffeted late last week,” ANZ Bank New Zealand senior economist Philip Borkin and senior FX strategist Sam Tuck said in a note. “With the US dollar swinging wildly it was notable that the New Zealand dollar squeezed higher when markets were selling the US dollar, and was much more resistant to US dollar buying than the Australian dollar. This created a new post-float high in this cross” and “a new marginal post-float high” in the euro.
The New Zealand dollar was trading at 97.19 Australian cents at 8am in Wellington, from 96.80 cents at 5pm on Friday, and at 69.69 euro cents, from 69.55 cents on Friday.
ANZ expects the kiwi to trade between 97.10 Australian cents and 97.80 cents today, and between 69.10 euro cents and 70.40 cents.
In New Zealand today, Westpac Bank releases its first quarter consumer confidence survey at 10am.
The kiwi touched a two-month high of 91.13 yen over the weekend, and was trading at 90.59 yen at 8am from 89.71 yen on Friday. It advanced to 50.54 British pence from 50.31 pence on Friday. The trade-weighted index rose to 79.12 from 78.21 on Friday.
March 23 (BusinessDesk) – Pumpkin Patch, whose shares soared on Friday after the children’s clothing retailer announced it was seeking proposals to acquire or refinance the company, said today that it was too soon to predict an outcome or what value any proposal would put on the company.
The shares jumped 33 percent to a four-month high 28 cents on Friday after the retailer said it was seeking formal proposals after “certain third parties have proactively indicated their interest in Pumpkin Patch”. The company, which was at risk of breaching banking covenants, last year hired Goldman Sachs to advise on a capital review, announced at the annual meeting in November
The board “notes that there has been significant upwards movement in the share price” since the announcement on Friday, it said in a statement to the NZX. “The process of seeking formal proposals in respect of either an acquisition of the company or recapitalisation has only just commenced and no conclusions should be drawn at this stage concerning whether any transaction would result or whether the value of any transaction would be more or less than the market price prior to the release of Friday’s announcement.”
Pumpkin Patch shares had shed about two third of their value in the past year. Friday’s announcement came with the release of first-half results which showed an improvement in earnings to $749,000 from $106,000, as sales rose 2.2 percent to $121.9 million.
Earnings in the six months ended Jan. 31 included restructuring costs of $743,000 after the company embarked on a strategic review in a bid to lift its performance, focusing on its store footprint, stock levels, and an IT system upgrade. A reorganisation of its stores, mostly in Australia, will see it shuttering nine outlets in the second half of this year, it said.
A flurry of US economic data including on housing, manufacturing, inflation and GDP will help determine bets on the timing of a Federal Reserve interest rate increase.
Wall Street rallied last week after the Fed signalled interest rates might increase more gradually than policy makers initially expected. While the Fed’s open market committee dropped a reference to being “patient” when it came to lifting rates, Fed Chair Janet Yellen stressed that it did not mean the central bank had become “impatient” to do so.
Still, the outlook for more muted rate hikes knocked the US dollar from its highest level in more than a decade.
“Most of the meat of the dollar bull-run is done,” David Bloom, global head of currency strategy at HSBC Holdings in London, told Bloomberg. “I think the Fed rate hike is in the price. The big motivation behind the dollar bull market has dried up.”
But equities remain appealing, even at levels close to record highs. Last week, the Dow Jones Industrial Average rose 2.1 percent, the Standard & Poor’s 500 Index rallied 2.7 percent and the Nasdaq Composite Index climbed 3.2 percent to its highest close in 15 years.
“The Federal Reserve’s created a situation where there’s very little alternative to equities, so the path of least resistance for stocks will be up for a period of time,” Robert Lutts, president, chief investment officer at Cabot Money Management in Salem, Massachusetts, told Reuters.
In Europe, the Stoxx 600 Index climbed 1.9 percent last week, moving closer to its record high and bringing its advance for 2015 to 18 percent. Germany’s DAX has risen 22.8 percent so far this year, while the UK’s FTSE 100 Index has added 8.1 percent. The FTSE 100 on Friday topped 7,000 points for the first time.
Tim Courtney, chief investment officer of Exencial Wealth Advisors, agrees that stocks are the place to be.
“US equities and especially international equities, of all the alternatives, still look like the healthiest alternative,” Courtney told Bloomberg. “Until another viable alternative comes about –that doesn’t look like it’s going to happen until rates start to rise — stocks should do well
Investors will eye the state of the US housing industry from reports on existing home sales due today, and the FHFA house price index, and new home sales, due Tuesday.
The consumer-price index, due Tuesday, probably rose in February for the first time in four months, according to a Bloomberg survey, as the cost of gasoline increased.
Other reports scheduled for release this week include the Chicago Fed national activity index, due today; PMI manufacturing index, and Richmond Fed manufacturing index, due Tuesday; durable goods orders, due Wednesday; PMI services, weekly jobless claims, and Kansas City Fed manufacturing index; and GDP, as well as consumer sentiment, due Friday.
“Any piece of economic data that speaks to the pace of job creation or inflation will be watched very closely,” Art Hogan, chief market strategist at Wunderlich Securities in New York, told Reuters.
Several Fed officials might offer fresh clues too. Today, Cleveland Fed President Loretta Mester will speak in Paris, while Fed Vice Chair Stanley Fischer will talk in New York. St Louis Fed President James Bullard is on a panel in London, on Tuesday, while Chicago Fed President Charles Evans will also speak, in London, on Wednesday.
Bullard will talk in Frankfurt, Germany, on Thursday, while Atlanta Fed President Dennis Lockhart will speak in Detroit, and on Friday Fischer will address a Bundesbank conference in Frankfurt.
The weaker US dollar helped oil post gains for the week, with Brent’s front-month May contract adding 1.2 percent while US crude for April advanced 2 percent.
In Europe, fresh data scheduled for release include euro-zone consumer confidence, due today; euro-zone manufacturing and services PMI indices, due Tuesday; Germany’s IFO business climate, due Wednesday; and Germany’s GfK consumer sentiment, due Thursday.
Talks between Greece and its international lenders will also be closely watched as the clock towards a much-needed agreement on further financial support before it runs out of funds keeps ticking away.