Research Team, 17 May 2019

It has been a mixed week for investors with trade once again dominating global headlines. The NZX 50 closed at fresh records while global markets gained after US President Donald Trump said he plans to delay imposing the auto tariffs by up to six months in order to allow negotiations to continue. Back home house prices continued to rise and migration remained at strong levels.

Within the benchmark index, Trustpower closed at a record $7.20 on Monday after declaring a special dividend of 15 cents per share. The company reported net profit after tax of $93m, down 19% on the prior year and operating earnings of $222m, down 9%. The result was in line with market expectations. Dairy conglomerate Fonterra confirmed the sale of Tip Top to global ice cream company Froneri for $380m. Froneri is the third largest ice cream manufacturer in the world, selling ice cream brands in 20 countries.

Population growth from migration remains at extremely high levels. Stats NZ estimated there was a net gain of 56,000 people in the 12 months to March, up 10.9% on March 2018. However the migration estimates continue to show significant volatility and are subject to substantial revisions. Stats NZ has revised its estimated net gain for the 12 months to February down to 55,100, from 61,600 reported in the previous month. However even with the revisions, the figures show net migration gains continue to run at very high levels. The biggest source country for long-term arrivals was China with a net gain of 10,060 in the 12 months to March. This was up 31.6% compared to the previous 12 months. There was also a net gain of 545 people from Hong Kong.

House prices across New Zealand have continued to rise with 13 out of 16 regions experiencing annual price increases. Record median prices were recorded in Southland, Manawatu/Wanganui and Northland. Median house prices across New Zealand increased by 6.4% in April to a record equal $585,000, up from $550,000 in April 2018. Median price increases for New Zealand excluding Auckland were even stronger, increasing by 7.6% to a record $495,000 up from $460,000 in April last year. While median house prices in Auckland remained exactly the same as they did in April 2018 at $850,000. Surprisingly, Nelson and Otago both saw falls in the annual median price, down 0.9% and 0.4% respectively.

Australian election a highlight this weekend. The Australian Federal Election takes place this Saturday on May 18. Polling booths close at 6:00pm (local time), so we should know the results later that evening. The vote will put current Prime Minister Scott Morrison’s centre-right Liberal-National coalition against the left-leaning Australian Labor Party (ALP), which is led by Bill Shorten. The ALP has been ahead in the polls for more than two years, by a large margin for the most part, although the race has tightened a little recently. Policy differences are quite large between the two parties, with the ALP more focused on redistribution, changes to taxation and stronger action on climate change.

US President Donald Trump is expected to delay a decision on tariffs on imported cars and parts by up to six months. The US dollar has benefitted from safe haven status even as the United States and China remain locked in a trade war. Trump threatened higher tariffs on billions of dollars of Chinese imports last week, and Beijing responded with planned tariff hikes of its own on Monday.

In Europe, data showed Germany’s economy returned to growth in the March quarter as households spent more and as construction activity picked up. Safe haven currencies including the Japanese yen and US dollar were also boosted after weak economic data in China raised new concerns about growth there. China reported surprisingly weaker growth in retail sales and industrial output for April, adding pressure on Beijing to roll out more monetary stimulus as the trade war with the US escalates.