BNZ WEEKLY OVERVIEW
Thursday 21 April 2005
The Week Gone By
There was some excitement early this week following a 2% fall in the NZ sharemarket in response to a four day 420 point fall in the Dow Jones Index amidst concerns about weak US consumer spending, slowing world growth, and tensions between Japan and China. The US growth story is nothing really new - just the same muddling along scenario in place since the end of the recession in late-2001. The Asian tensions one must assume will ease (not that we express any expertise in the area). But the slowing growth story here and overseas is real. Hence our noting earlier this year that cyclically the NZ sharemarket looks like it has had its run - and this week merely saw one manifestation of that absence of capital gain scenario rather than an early signal of major economic weakness ahead.
The media hysteria over the market fall was matched only by the clear bias some print journalists show toward sensationalising any weakness in housing data. Not that there was any this week with some strong numbers for March. But over the week we have however seen the most solid evidence of buyer resistance in the housing market for some time - see our BNZ Confidence Survey
But offsetting this we are seeing a fresh rally in wholesale fixed borrowing costs which will keep fixed housing rates at market-supporting levels for even longer than any of us have been expecting - delivering therefore increased risk of further official cash rate upward movement come June - not next week.
But the NZD got back toward 72.8 cents this week and near 94 cents against the AUD as the high interest rate story comes back in vogue and US deficit and growth worries have resurfaced.
To read the full weekly overview go to. http://www.bnz.co.nz/About_Us/1,1184,3-29-319,00.html