8/9/2019 Westpack AUG 11 Mornng Report

1/1

Morning Report

Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 11 August 2010. All customers please note that this information has been prepared without taking account of yourobjectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpacsfinancial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission,Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change withoutnotice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is registered in England as a branch (branch number BR000106) andis authorised and regulated by The Financial Services Authority. Westpac Europe Limited is a company registered in England (number 05660023) and is authorised and regulated by The Financial Services Authority. 2010 Westpac BankingCorporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts arebased are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.

Wednesday 11 August 2010

NZ Domestic Market (Previous days closing rates)

Govt Stock

Nov-11 3.66%

Apr-13 4.16%

Apr-15 4.63%

Dec-17 5.07%

May-21 5.38%

Cash Curve

Cash 3.00%

30 Days 3.11%

60 Days 3.19%

90 Days 3.28%

180 Days 3.43%

1 Year 3.61%

Swap Rates (Qtrly)

1 Year 3.67%

2 Years 3.98%

3 Years 4.21%4 Years 4.39%

5 Years 4.55%

7 Years 4.85%

10 Years 5.16%

World Bourses and Indices

USD

Fed Funds

3 Mth Libor

10 Year Notes

30 Year Bonds

CRB

Gold

Copper Fut.

Oil (WTI)

NZ TWI

AUD

Cash

90 Day

3 Year Bond

10 Year Bond

NZX 50

S&P/ASX200

Nikkei

FT100

S&P500

4.50% 0.00

4.78% +0.01

4.66% -0.01

5.10% -0.01

3045.1 -9.4

4540.7 -54.2

9551.1 -21.4

5376.4 -34.1

1123.6 -4.2

0.00-0.25%

0.40% 0.00

2.77% -0.05

4.01% -0.00

272.3 -2.3

1203.5 +2.7

330.85 -6.05

80.24 -1.22

66.76 -0.35

Foreign Exchange Market

Previous Range Todays Open Expected

Asia Overnight 8.00am NZD cross Range Today

NZD 0.7224-0.7293 0.7166-0.7268 0.7241 0.7200-0.7270

AUD 0.9110-0.9170 0.9058-0.9165 0.9135 0.7927 0.9080-0.9180

JPY 85.68-86.06 85.17-86.2585.40 61.84 84.80-85.80

EUR 1.3135-1.3236 1.3074-1.3228 1.3184 0.5492 1.3130-1.3230

GBP 1.5773-1.5912 1.5710-1.5910 1.5859 0.4566 1.5800-1.5900

News and views

The US central bank put a floor under the earlier decline in risk markets by announcingit would maintain stimulative policy by reinvesting proceeds from maturing securities

into 2yr-to-10yr-maturity US treasuries. The economic outlook was unsurprisinglydowngraded, and its pledge to keep rate low for an extended period was maintained.Markets interpreted the Fed support positively, with the prospect of further QE still on thetable. Us equities pared earlier losses, but are still 0.6% down on the day. Commoditiesseemed unfazed by the event and are 0.8% lower, oil -1.7% and copper -1.0%. US interestrates fell across the curve, apart from the isolated 30yr, the 10yr benefiting by 7bp to2.75%. The 3yr auction saw a record low yield of 0.844%. US 3mth Libor continued togrind lower, shedding 0.7bp to 0.40%.

The US dollars 1% fall after the Feds announcement was appropriate. EUR benefited afterearlier falling to 1.3080, rising to 1.3220. USD/JPY fell from its intraday peak of 0.8620to 0.8520.

AUD was under the weather before the Fed meeting, weakening to 0.9060, the eventreviving it to 0.9160.

NZD made a 0.7170 low before responding to 0.7260. AUD/NZD ranged sidewaysbetween 1.2580 and 1.2640.

US Fed to keep its balance sheet holdings constant. In the statement the Fednoted the pace of recovery in output and employment has slowed in recent months.It maintained the extended period commitment to low rates (kept at 0-0.25% today)and also said it would keep constant the Federal Reserves holdings of securities at theircurrent level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.

US NFIB small business optimism slipped for the second month running, from93.2 in May to 89.0 in June and 88.1 in July. But one bright spot was that the intention tohire net balance rose to 2%, its highest for several years, further evidence that the smallbusiness sector (the largest employer group in the US) may no longer be a drag on the USlabour market.

US IBD-TIPP economic optimism fell from 44.7 to 43.6 in August, its third consecutive

decline. This month the fall was mostly driven by respondents assessment of Federalpolicies, although over the past three months, the economic outlook and personal financescomponents have been sharply weaker too.

US productivity fell 0.9% annualised in Q2, given that output growth was a bit slowerthan hours worked. Consequently unit labour costs rose 0.2%. There is no real newinformation in this report, which is derived from previously published data. Also, wholesaleinventories rose just 0.1% in June, their equal softest growth rate for the year, and a cluethat the stock-building contribution to Q2 GDP growth may need to be revised lower.

BoJ decision, policy unchanged as expected. There was also no change in the outlook,with the BoJ seeing the recovery as being broadly on track.

UK house price update. The RICS house price net balance dipped to -8% in July, the firsttime a majority of surveyors have assessed prices as falling since July last year. Also theDCLG government house price measure decelerated from 10.6% yr to 9.9% yr in June.In other news, the BRC reported weaker July retail sales, the same store measure slowing

from 1.2% yr to 0.5% yr. That may be a post World Cup spending slump effect.

UK visible trade balance narrows 600mn to 7.4bn in June. Export growth outpacedimports.

Canadian housing starts fell 1.6% in July but the core urban single family componentfell 11.4%, its fourth straight decline. Also new house prices rose just 0.1% in June.

Outlook

AUD/USD and NZD/USD outlook next 24 hours: Possible further digestion of the Fedevent during the Asian and European sessions today should keep a floor under the AUD at0.9060 and the NZD at 0.7170, although weak equity and commodity markets will casta bearish pall.

Imre Speizer, Senior Market Strategist, NZ, Ph: (04) 470 8266

With contributions from Westpac Economics

Upcoming Events

Date Country Release Last Forecast

11 Aug Aus Aug Westpac-MI Cons Sentiment 113.1

US Jun Trade Balance $bn 42.3 42.0

Jul Mthly Budget Statement $bn 180.7 169

Jpn Jun Machinery Orders %yr 9.1% 5.4%

Jul Corporate Goods Prices %yr 0.5% 0.0%UK Jul Jobless Claims Change 21k 30k

Jul Nationwide Consumer Confidence 63 61

BoE Quarterly Inflation Report

Can Jun International Merch. Trade C$bn 0.5 0.4

12 Aug NZ Jul Food Prices 1.3% 0.7%

Aus Aug WBC-MI Unemploy Expects 6.9%

Aug MI Inflation Expectations 3.3%

Jul Employment chg 45.9k 10k

Jul Unemployment Rate 5.1% 5.1%

US Jul Import Price Index 1.3% 0.6%

Initial Jobless Claims w/e 14/8 479k 465k

Jpn Jun Capacity Utilisation 0.8%

Jul Consumer Confidence 43.6 43.9

Eur Jun Industrial Production 1.0% 1.0%

13 Aug NZ Jul REINZ House Prices %yr 4.2%