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RESEARCH
Markets Today
28 April 2022
Events Round-Up of corporates have beaten headline earnings expectations
this reporting season, the market has often been
AU: CPI (q/q%), Q1: 2.1 vs. 1.7 exp. underwhelmed by forecast earnings guidance ahead of
what is expected to be a more challenging macro
AU: Trimmed mean CPI (q/q%), Q1: 1.4 vs. 1.2 exp.
environment over the remainder of the year. Meta
AU: CPI (y/y%), Q1: 5.1 vs. 4.6 exp. (formerly Facebook) reports after the bell this morning
AU: Trimmed mean CPI (y/y%), Q1: 3.7 vs. 3.4 exp. while Amazon and Apple report earnings later this week.
AU: Weighted median CPI (y/y%), Q1: 3.2 vs. 3.3 exp.
US rates have rebounded overnight, in sympathy with the
GE: GfK consumer confidence, May: -26.5 vs. -16 exp. recovery in equities. The US 10-year rate is 10bps higher
US: Trade balance ($b), Mar: -125 vs. -105 exp. on the session, at 2.82%. In contrast, European rates were
flat to slightly lower as the market modestly pared back its
US: Pending home sales (m/m%), Mar: -1.2 vs. -1 exp.
ECB rate hike expectations amidst mounting tensions with
Russia. Notably, the Italy-Germany 10-year spread
Good Morning increased to its highest level since mid-2020, at 178bps, as
There has been some recovery in risk appetite overnight, the market braces for less ECB bond buying support ahead.
with equities rebounding from yesterday’s heavy falls and
the US 10-year rate bouncing back to 2.82%. However, the Some slightly more positive headlines have emerged
USD remains firmly on the front foot, with the DXY index around China’s Covid situation, although investors remain
briefly surpassing its early-2020 highs and hitting its wary. Shanghai said it would allow some limited
highest level in five years. USD strength partly reflects movement for those in areas where there is no community
weakness in the EUR, which remains under pressure transmission of the virus. New daily Covid cases in Beijing
amidst an intensifying energy crisis on the continent, as remain below 50, although the market remains concerned
Russia cuts off gas supplies to Poland and Bulgaria. The that the city could be put into a growth-damaging
NZD printed a year-to-date low overnight, although, like lockdown in the coming weeks. The global experience has
the AUD, it has held up relatively well amidst some signs of been that Omicron is exceptionally difficult to snuff out,
stability in the CNH. The AUD was also supported by a big even with lockdowns.
upside surprise to Australian CPI, cementing expectations
the RBA will kick off its tightening cycle next week. NZ Yesterday morning, Bulgaria confirmed it was the second
short-term rates continue to relentless push higher. country, after Poland, that Russia had stopped supplying
with gas after it refused to make payment in rubles.
Equity markets have had a better session overnight, albeit European natural gas futures exploded almost 30% higher
with no clear catalyst for the turnaround in sentiment. The overnight before eventually settling 10% higher. Despite
S&P500 has increased just over 1%, recovering some of its the 16% increase over the past two days, gas futures
2.8% fall from the previous night. The NASDAQ is also up remain almost 70% below their peak early last month.
by 1%, but it remains in bear market territory, down more
than 20% from its peak late last year. Despite the rebound The question now is what happens with other European
overnight, there remains a long list of headwinds facing countries, including Germany which still relies on Russia for
equity markets including the prospect of aggressive 40% of its gas needs. Despite the European Commission
monetary policy tightening, lockdowns in China, and the urging countries not to cave into Russian demands,
threat of spiralling energy prices due to the Ukraine war. Bloomberg reported that four European gas companies
Equities are not out of the woods by any means. have already made payment in rubles while another ten
have set up accounts to do so. The issue is likely to come
After the US market close yesterday morning, Google’s to a head again in the second half of May, when payments
parent Alphabet reported revenue marginally under for most other countries come due (Bulgaria and Poland
market expectations and warned Q2 could also be were reportedly the first countries due to make payment).
challenging, prompting an initial 5% fall in its share price (it Meanwhile, Bloomberg reported that Germany was set to
has since recovered somewhat to be down 3%). In agree to a plan to ban Russian oil imports, provided there
contrast, Microsoft’s share price rose almost 8% after is a transition period that smooths the adjustment.
posting stronger revenue and earnings. While around 80% Germany has been one of the countries resistant to a
www.bnz.co.nz/research Page 128 April 2022
Markets Today
Russian oil embargo. Major questions remain about how
long the transition period might last. The RBNZ said it would move forward with designing debt-
to-income restrictions, with the framework expected to be
The EUR remains under downward pressure amidst broad- finalised later this year, inferring the measures could be
based USD strength and an intensifying energy crisis on the introduced – if required – by the middle of next year. In
continent. The EUR fell as low as 1.0515 overnight, its any case, the RBNZ is sounding less committed to
lowest level in more than five years, although it has since implementing DTIs than it has previously, perhaps
recovered slightly to around 1.0570. The counterpart to conscious that the housing market is already under
EUR weakness has been continued USD strength, with the downward pressure amidst a host of headwinds. For more
DXY index rising another 0.6% overnight and briefly hitting on the RBNZ’s macro-prudential thoughts, note Deputy
a five-year high. Expectations of aggressive Fed tightening Governor Hawkesby is speaking on the topic this morning.
and fragile risk sentiment remain supportive drivers of the
USD. The economic calendar is full over the next 24 hours. The
BoJ meeting, which takes place tonight, will attract more
Ahead of tonight’s BoJ meeting, the JPY has given back interest than usual after the steep fall in the JPY over
some of its gains from the past few days following the recent months. The BoJ is expected to upgrade its inflation
rebound in US Treasury rates. After briefly probing below forecasts for this year, mainly due to the increase in oil
127 yesterday morning, USD/JPY is back above 128. prices, but it is expected to keep its ultra-easy policy
Meanwhile, USD/CNH has consolidated below the 6.60 settings unchanged, including its 10-year yield curve target
mark for the third day in a row, taking a breather after its at 0%. However, given the sharp weakening in the JPY,
sharp 2% increase last week. The stabilisation in the CNH there is a chance that the BoJ could amend its forward
has helped support the AUD and NZD, although both are guidance or hint at future changes to its Yield Curve
still down over the past 24 hours, by around 0.1% and 0.3% Control policy. Elsewhere, Germany releases preliminary
respectively, on the back of broad-based USD strength. inflation data for April, a month after inflation surged to a
The NZD briefly touched a year-to-date overnight before post-reunification high.
rebounding to around 0.6540 in the past few hours.
US Q1 GDP is also reported tonight, with the median
Also lending support to the AUD over the past 24 hours has among economists surveyed by Bloomberg looking for
been a big upside surprise to Australian CPI inflation. growth to slow to a 1% annualised rate in Q1, dragged
Headline CPI came in much stronger than expected, at down by inventories and net trade. Last night’s US Trade
5.1% y/y (4.6% exp.) while the all-important trimmed deficit was much bigger than expected, coming in at a
mean core inflation measure was 1.4% higher on the whopping $125b in March as imports surged 11.5% on the
quarter (3.7% y/y), miles above the RBA’s most recent month (another sign of an overheated US economy).
0.8% forecast. With the RBA’s preferred core inflation Some economists have marked down their estimates for
measure now well above the top of its 2-3% inflation Q1 GDP tonight on the back of the trade data, with Citi and
target range, the market has swiftly moved to bring Pantheon Macroeconomics looking for -1% annualised
forward RBA tightening expectations, with 22bps now quarterly growth. Consumption and investment are
priced in for the May meeting (implying a certain chance of expected to remain strong.
a 15bps move and a ~30% chance of a 40bps hike). The
prevailing consensus among economists had been that the Locally, the ANZ business survey is released this afternoon.
RBA would want survey upcoming wage data and steer Last month’s survey saw a modest rebound in the activity
clear of the Federal election next month, instead waiting outlook, albeit to still below-average levels, and sky-high
until June to kick off its tightening cycle, but the big upside cost and pricing intentions.
surprise to inflation has seen many, including our
colleagues at NAB, bring forward the expected timing of nick.smyth@bnz.co.nz
the first move to May.
Coming Up
The increase in RBA rate hike expectations and Australian
shorter-term rates spilled over to the New Zealand market,
driving a further 5.5bps increase in the 2-year swap rate to
a new cycle high of 3.81%. The upward pressure on short-
term NZ rates remains relentless against a backdrop where
global rate expectations continue to trend higher, banks
have ongoing mortgage hedging requirements, and
investor appetite to receive remains limited. The short
end of the market remains very one-sided and illiquid at
present.
www.bnz.co.nz/research Page 228 April 2022
Markets Today
Period Cons. Prev. NZT
NZ RBNZ's Hawkesby speaks on macroprudential policy 09:00
NZ Trade Balance (NZ$m) Mar -385 10:45
NZ ANZ Activity Outlook Apr 3.3 13:00
NZ ANZ Business Confidence Apr -41.9 13:00
SW Riksbank Interest Rate (%) Apr 0 0 19:30
EC Economic Confidence Apr 108 108.5 21:00
JN BOJ 10-Yr Yield Target (%) Apr 0 0
GE CPI (EU Harmonized, m/m%) Apr P 0.4 2.5 00:00
GE CPI (EU Harmonized, y/y%) Apr P 7.6 7.6 00:00
US GDP (q/q%, ann'lsd) 1Q A 1.0 6.9 00:30
US Core PCE (q/q%, ann'lsd) 1Q A 5.5 5 00:30
US Initial Jobless Claims (k) 23-Apr 180 184 00:30
Source: Bloomberg, BNZ
Foreign Exchange Equities Commodities**
Indicative overnight ranges (*) Other FX Major Indices Price
Last % Day Low High Last % Day Last % Day % Year Last Net Day
NZD 0.6557 -0.3 0.6528 0.6587 CHF 0.9680 +0.6 S&P 500 4,230 +1.2 1.0 Oil (Brent) 104.55 +0.2
AUD 0.7140 +0.0 0.7101 0.7171 SEK 9.828 -0.2 Dow 33,573 +0.6 -1.2 Oil (WTI) 101.12 +0.2
EUR 1.0566 -0.7 1.0515 1.0629 NOK 9.325 +0.8 Nasdaq 12,619 +0.4 -10.4 Gold 1882.4 -1.0
GBP 1.2564 -0.2 1.2503 1.2602 HKD 7.846 +0.0 Stoxx 50 3,735 +0.4 -6.9 HRC steel 1370.0 -0.6
JPY 128.24 +0.8 127.73 128.59 CNY 6.561 +0.1 FTSE 7,426 +0.5 6.9 CRB 302.7 +1.4
CAD 1.2816 +0.0 SGD 1.380 +0.1 DAX 13,794 +0.3 -9.5 Wheat Chic. 1094.8 -0.3
NZD/AUD 0.9183 -0.3 IDR 14,413 +0.0 CAC 40 6,445 +0.5 2.7 Sugar 19.01 +0.1
NZD/EUR 0.6206 +0.4 THB 34.37 +0.2 Nikkei 26,387 -1.2 -9.2 Cotton 142.97 +0.3
NZD/GBP 0.5219 -0.1 KRW 1,266 +1.2 Shanghai 2,958 +2.5 -14.4 Coffee 215.3 -2.5
NZD/JPY 84.09 +0.5 TWD 29.41 +0.4 ASX 200 7,261 -0.8 2.8 WM powder 4045 -0.1
NZD/CAD 0.8403 -0.3 PHP 52.12 -0.3 NZX 50 11,726 -0.7 -7.3 Australian Futures
NZ TWI 72.66 +0.1 3 year bond 97.165 -0.08
Interest Rates 10 year bond 96.88 -0.05
Rates Swap Yields Benchmark 10 Yr Bonds NZ Government Bonds NZ Swap Yields
Cash 3Mth 2 Yr 10 Yr Last Net Day Last Last
USD 0.50 1.24 2.81 2.87 USD 2.80 0.07 NZGB 5 1/2 04/15/23 2.80 0.05 1 year 3.34 0.06
AUD 0.10 0.53 2.74 3.44 AUD 3.06 -0.05 NZGB 0 1/2 05/15/26 3.53 0.05 2 year 3.81 0.06
NZD 1.50 1.97 3.79 3.88 NZD 3.62 0.02 NZGB 0 1/4 05/15/28 3.57 0.03 5 year 3.92 0.05
EUR 0.00 0.06 0.80 1.57 GER 0.80 -0.01 NZGB 1 1/2 05/15/31 3.61 0.02 7 year 3.91 0.04
GBP 0.75 1.21 2.14 1.83 GBP 1.81 0.02 NZGB 2 05/15/32 3.62 0.02 10 year 3.90 0.03
JPY -0.03 -0.02 0.11 0.44 JPY 0.25 0.00 NZGB 1 3/4 05/15/41 3.76 0.01 15 year 3.87 0.03
CAD 1.00 1.73 2.97 3.23 CAD 2.79 0.08 NZGB 2 3/4 05/15/51 3.82 0.00
* These are indicative ranges from 5pm NZT; please confirm rates with your BNZ dealer
** All near futures contracts, except CRB. Metals prices are CME.
Rates are as of: NZT 06:57
Source: Bloomberg
www.bnz.co.nz/research Page 328 April 2022
Markets Today
NZD exchange rates
28/04/2022 6:57 a.m. Prev. NY close 0.69 NZD/USD - Last 7 days
USD 0.6557 0.6563 0.68
GBP 0.5219 0.5220
AUD 0.9183 0.9214 0.67
EUR 0.6206 0.6169 0.66
JPY 84.09 83.50 0.65
CAD 0.8403 0.8418
0.64
CHF 0.6347 0.6317
DKK 4.6186 4.5906 0.63
FJD 1.4104 1.4129 21-Apr 22-Apr 23-Apr 26-Apr 27-Apr 28-Apr
HKD 5.1446 5.1489
INR 50.18 50.26 NZD/AUD - Last 7 days
0.93
NOK 6.1141 6.0714
PKR 121.54 121.82
PHP 34.18 34.30 0.92
PGK 2.3088 2.3109
SEK 6.4440 6.4609
SGD 0.9045 0.9051 0.91
CNY 4.3018 4.3031
THB 22.50 22.46
0.90
TOP 1.5022 1.4663
VUV 74.95 74.69 21-Apr 22-Apr 23-Apr 26-Apr 27-Apr 28-Apr
WST 1.6954 1.7056
XPF 72.90 72.71 NZD/USD - Last 12 months
ZAR 10.4456 10.4016 0.74
0.72
0.70
0.68
NZD/USD Forward Points 0.66
BNZ buys NZD BNZ sells NZD
0.64
1 Month -1.94 -1.45
0.62
3 Months -9.00 -8.22
6 Months -23.22 -21.64 0.60
Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22
9 Months -37.48 -35.48
1 Year -50.35 -47.85
NZD/AUD - Last 12 months
0.98
NZD/AUD Forward points
BNZ buys NZD BNZ Sells NZD
0.96
1 Month -7.13 -6.12
3 Months -24.07 -22.14
0.94
6 Months -51.29 -47.77
9 Months -70.86 -65.48
1 Year -84.06 -77.59 0.92
0.90
Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22
www.bnz.co.nz/research Page 428 April 2022 Markets Today Contact Details BNZ Research Stephen Toplis Craig Ebert Doug Steel Jason Wong Nick Smyth Head of Research Senior Economist Senior Economist Senior Markets Strategist Senior Interest Rates Strategist +64 4 474 6905 +64 4 474 6799 +64 4 474 6923 +64 4 924 7652 +64 4 924 7653 Main Offices Wellington Auckland Christchurch Level 4, Spark Central 80 Queen Street 111 Cashel Street 42-52 Willis Street Private Bag 92208 Christchurch 8011 Private Bag 39806 Auckland 1142 New Zealand Wellington Mail Centre New Zealand Toll Free: 0800 854 854 Lower Hutt 5045 Toll Free: 0800 283 269 New Zealand Toll Free: 0800 283 269 National Australia Bank Limited Ivan Colhoun Alan Oster Ray Attrill Skye Masters Global Head of Research Group Chief Economist Head of FX Strategy Head of Markets Strategy +61 2 9237 1836 +61 3 8634 2927 +61 2 9237 1848 +61 2 9295 1196 Wellington New York Foreign Exchange +800 642 222 Foreign Exchange +1 212 916 9631 Fixed Income/Derivatives +800 283 269 Fixed Income/Derivatives +1 212 916 9677 Sydney Hong Kong Foreign Exchange +61 2 9295 1100 Foreign Exchange +85 2 2526 5891 Fixed Income/Derivatives +61 2 9295 1166 Fixed Income/Derivatives +85 2 2526 5891 London Foreign Exchange +44 20 7796 3091 Fixed Income/Derivatives +44 20 7796 4761 This document has been produced by Bank of New Zealand (BNZ). BNZ is a registered bank in New Zealand and is only authorised to offer products and services to customers in New Zealand. Analyst Disclaimer: The Information accurately reflects the personal views of the author(s) about the securities, issuers and other subject matters discussed, and is based upon sources reasonably believed to be reliable and accurate. The views of the author(s) do not necessarily reflect the views of the NAB Group. No part of the compensation of the author(s) was, is, or will be, directly or indirectly, related to any specific recommendations or views expressed. Research analysts responsible for this report receive compensation based upon, among other factors, the overall profitability of the Global Markets Division of NAB. NAB maintains an effective information barrier between the research analysts and its private side operations. Private side functions are physically segregated from the research analysts and have no control over their remuneration or budget. The research functions do not report directly or indirectly to any private side function. The Research analyst might have received help from the issuer subject in the research report. New Zealand: This publication has been provided for general information only. Although every effort has been made to ensure this publication is accurate the contents should not be relied upon or used as a basis for entering into any products described in this publication. To the extent that any information or recommendations in this publication constitute financial advice, they do not take into account any person’s particular financial situation or goals. Bank of New Zealand strongly recommends readers seek independent legal/financial advice prior to acting in relation to any of the matters discussed in this publication. Neither Bank of New Zealand nor any person involved in this publication accepts any liability for any loss or damage whatsoever may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in this publication. National Australia Bank Limited is not a registered bank in New Zealand. USA: If this document is distributed in the United States, such distribution is by nabSecurities, LLC. This document is not intended as an offer or solicitation for the purchase or sale of any securities, financial instrument or product or to provide financial services. It is not the intention of nabSecurities to create legal relations on the basis of information provided herein. www.bnz.co.nz/research Page 5
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