Research Team, 10 May 2019

At the time of writing, the local NZX 50 has remained relatively flat throughout the week. On Wednesday the market was driven 0.4% higher following the Reserve Bank of New Zealand’s (RBNZ) decision to cut the official cash rate (OCR) by 0.25 basis points to 1.5%. It was the first time in two and a half years that the RBNZ has cut the OCR.

The Reserve Bank of New Zealand cut its official cash rate to 1.5%. The RBNZ said slow rising inflationary pressure, mild uncertainty about the global economic outlook and an employment environment that looks near its maximum sustainable level as the reasons for lowering the OCR by 0.25%. The RBNZ said that the lower rate was consistent with achieving its objectives of keeping inflation between the 1%-3% band and supporting maximum sustainable employment. Both ANZ and Kiwibank were quick to respond, announcing cuts to both their lending and deposit rates.

Mobile app payments company Pushpay reported a maiden profit result for the 2019 year. The US based faith sector company produced a net profit after tax of US$18.8m compared to a $23.3m loss in the prior year. The highlight of the result was the company’s ability to deliver strong revenue growth while also driving cost reductions. Pushpay updated the market with its 2020 expectations, guiding for earnings to be between US$17.5-$US19.5m. The surprising announcement that coincided with the result was the resignation of Pushpay’s CEO and founder Chris Heaslip. Heaslip will step down on May 31 but will continue to serve on Pushpay’s board. Bruce Gordan, the Chairman, will take over the CEO role on a permanent basis. PPH closed down 2.8% on the day of the result.

The latest Global Dairy Trade auction saw the headline index rise 0.4%, advancing for the 11th consecutive auction. The average price achieved in the auction was US$3490 per tonne, increasing from US$3447 per tonne three weeks ago. The price of whole milk powder fell by 0.5%, anhydrous milk (+1.4%), rennet casein (+3.1%) and skim milk powder (+2.8%) saw the biggest gains in price, whilst butter milk powder (-10.3%) and lactose (-2.7%) experienced the greatest price declines.

The Reserve Bank of Australia (RBA) decided to its leave cash rate unchanged at 1.50%. On Tuesday the RBA continued to steady the ship, leaving the official cash rate unchanged and arguably refraining from changing toward a dovish sentiment. The RBA’s caution continues to remain centered around household consumption following the ongoing housing correction, and the weak inflation data print for March. Counter balancing these factors is Australia’s strong labour market, in which the RBA board will be watching closely. Stating that further improvement in the labour market will be needed in order for inflation to reach its target levels.

The US reporting season draws to a close with a couple of pleasing results. Agricultural chemical manufacturer FMC Corp reported a strong first quarter result, with revenue growth of 7.6% and net income growth of 6.7%. In addition, bulk liquid commodity transporter Kirby surprised the market, announcing first quarter net income growth for 2019 of 17%. The result was impressive for a typically slower first quarter, with high utilisation rates in its marine transportation division being a major contributor to the result.

Elsewhere, there was a few data points out of Germany this week. The German industrial output climbed 0.5% month on month in March, driven largely by a rise in construction activity as weather conditions meant increased periods of activity. In addition, Germany’s manufacturing index continued its weak start in 2019, new factory orders only grew by 0.6% in March from the previous month. On a year by year measure, orders slid 6.0% in March.