RBNZ’s Breman set for debut review after choppy night on Wall St

Reserve Bank governor Anna Breman will deliver her first policy review today, with economists widely expecting the central bank will keep the official cash rate unchanged while bringing forward the track of future hikes to see off any inflationary pressures.

That comes after a choppy night on Wall Street as investors returned from their long weekend, with the reach of artificial intelligence continuing to weigh on software firms such as Salesforce, while a Bank of America survey of fund managers showed concerns of overinvestment in AI infrastructure.

Across the Atlantic, stock markets were stronger in Europe with the UK’s FTSE 100 hitting a record and Bayer leading Germany’s DAX 30 higher amid reports the conglomerate is poised to cut US$10 billion of settlements to end lawsuits over its Roundup weedkiller.

And the local earnings season resumes its heady pace today with former leading lights Spark New Zealand and Fletcher Building scheduled to report their first-half results, both of which are trying to recover their credibility among investors.

Guess who?

The Reserve Bank is expected to keep the official cash rate 2.25% at today’s policy review, with analysts turning to the forward track for insights into the monetary policy committee’s thinking on when it will start raising the benchmark rate. Wholesale interest rates have been creeping higher in recent months amid signs of inflationary pressures, although Statistics New Zealand’s January selected prices index came in softer than expected.

“There is strong consensus that the bank will hold policy steady and revise higher its interest rate projections, but there is lingering uncertainty over the tone and language that governor Breman will convey at her first policy meeting,” Bank of New Zealand senior markets strategist Jason Wong said in a note.

Bond traders have fully priced in a rate hike by the December meeting, and the kiwi dollar traded at 60.31 US cents at 7am in Auckland from 60.26 cents yesterday.

That 2pm announcement comes after a volatile night on Wall Street as US markets returned from their long weekend, with the major indices paring steeper declines earlier in the session with the Nasdaq Composite down 0.3% in late trading while the Dow Jones Industrial Average dipped 0.1%.

Salesforce was among those at the bottom of Dow’s leaderboard as investors remained nervous about the widening impact of AI. At the same time, the Magnificent 7 megacaps were mixed with the latest Bank of America survey of fund managers showed a record number of investors think firms are overinvesting in AI.

Paramount Skydance was among the day’s gainers after Warner Bros Discovery said it will reengage with its jilted suitor, giving the Ellison family-backed media group seven days to make its best and final offer. Warner Bros Discovery’s board has endorsed Netflix’s bid to buy the HBO streaming and Warner studios businesses.

The magic of the movies

Sky Network Television dipped yesterday after saying its long-running rights to HBO content will end in the middle of the year when HBO Max enters the domestic market, while Vista Group International – which benefits from a healthy global box office – surged from near a two-year low.

Across the Atlantic, European stock markets were stronger as the UK’s FTSE 100 rose 0.8% to a record after weak British jobs data stoked expectations the Bank of England will cut its key rate next month. The kiwi dollar rose to 44.52 British pence from 44.27 pence yesterday.

Bayer climbed 7.4% amid reports it’s planning US$10.5 billion of settlements to end lawsuits lingering from its Roundup weedkiller that have dogged the conglomerate since its 2018 acquisition of Monsanto. The pharmaceutical and agrichemical firm led a 0.8% gain on Germany’s DAX, while France’s CAC 40 increased 0.3%.  

Brent crude oil futures were down 2.3% at US$67.09 a barrel as the US and Iran continue talks to reach an agreement on principles for a deal on the Middle Eastern nation’s nuclear aspirations.

Meanwhile, the GDT price index rose 3.6% with an average winning price of US$4,028 a tonne at the latest Global Dairy Trade auction, with whole milk powder up 2.5% at US$3,706 a tonne.

Australian futures are pointing to a 0.2% decline for the S&P/ASX 200 index, with National Australia Bank the last of the big four banks to provide a trading update.

On this side of the Tasman, Fletcher Building and Spark New Zealand are scheduled to report their first-half earnings, with the building materials firm expected to focus on the slow cyclical recovery and the telco predicted to grow from a very soft prior period.

Local data today include Statistics New Zealand’s December quarter business prices index.

Reporting by Paul McBeth. Image from Curious News.