Shane Solly: Harbour Asset Management expert on what the markets are projecting ahead of RBNZ announcement

The Reserve Bank is set to make an announcement this week, and experts are expecting at least one more cut to the OCR.

Markets are projecting the OCR will be cut down to 2.25, and they've priced it in accordingly.

Harbour Asset Management's Shane Solly explained further.

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Episode Transcript

Speaker 1 (00:00):
Shane Soli Harbor Asset Managements with us Allo Shane that
so what are the markets expecting from the Reserve Bank
in a couple of days.

Speaker 2 (00:07):
Yeah, so, look, the market's fully fact in a zero
point two five percent cut in rates, so it take
us to two twenty five is official cash rate. In fact,
it's priced in a zero point two seven to two
twenty three of them. It's just the market's getting a
little bit ahead themselves. Maybe the main focus here will
be on how much the Reserve Bank of New Zealand
signals the possibility of further cuts. Does it come out

(00:29):
is just another round of cuts given inflations stable, but
unemployment growth is still modest, or does it actually indicate
that using cycle is over or close to over? I
should say, and let the cuts do the job of
really picking up the economy after quite a chunky series
of cuts of the last year or so. One thing
here that we need to keep watching for is this

(00:49):
the New Zealand doll It's pretty weak when you're a
five year old fifty six cents roughly against the US dollar.
Let's doing a lot of the work for the Reserve Bank.
So yeah, when we look forward, markets actually pricing and
official care straight head a low of two point one
percent in May twenty twenty six, So market thinks there's
going to be more rate cuts. That'll be the interesting
part of the discussion.

Speaker 1 (01:09):
Now we're about halfway through the current company reporting season
here in New Zealand. Is the tone getting a little
bit more upbeat? Do you think?

Speaker 2 (01:15):
Yeah? Yeah, we are halfway through. It's for the September period,
and so far we've observed more profit beats against consensus
market expectations and messes. That's pretty good. The last three
years we've actually been seeing more misses than beats, so
it feels like there's a little bit of a trend
change something interesting.

Speaker 1 (01:32):
Now.

Speaker 2 (01:32):
Obviously, up to September, the economy is pretty challenging and
some companies have been calling that out. So there's been
the odd little disappointment in terms of timing versus markets
investors getting hid themselves. But you know, really the underlying
results are looking okay. We're seeing some companies really delivering
on their own self help and those are the companies
that you know, when you look at it, they'll do

(01:53):
okay with the economy recovers in a hurry or not.
And that's where I think investors are starting to focus on.
Most companies are talking about. Since September, we've seen a
notable pickup in activity, so we are seeing an improven activity.
So maybe that trend continues.

Speaker 1 (02:07):
Yeah, brilliant stuff. Now listen to the US markets. We've
got a bit weird last week. Where did things get
to over the weekend? Yeah?

Speaker 2 (02:13):
Yeah, like so yeah? Good? Good points of the US
S and P five hundred, that's the main index we
all talk about. It was down about one point nine
percent last week. Manage you the technology stocks falling, some
risks around the US Federal Reserve not cutting rates in
weak consumer confidence. In comparison to zon market, she markers
on down zero point three. So we did our job
of protecting. But the US markets on Friday they bounced.

(02:37):
There was a couple of the US feed Reserve speakers
came out and suggested actually the central bank headroom to
ease cut rates, particularly given cool and labor markets, and
that actually saw the US market have a bit of
a flip and the needed stronger. So we've seen a
bit of a pricing and of a December rate cut
back to seventy percent. So the expectations seventy percent of
the markets expecting the US feed to cut in this

(03:00):
that's quite a big increase, assuming we're seeing a bit
of a bounce. US futures is showing that the US
market may be up zero point four percent tonight. Our
market here in his own was up zero point six
so a little bit of a better time coming.

Speaker 1 (03:14):
At the end of the last week. Happy to hear that, Shane.
Thanks very much, Shane, Sally Harbor Asset Management.

Speaker 2 (03:18):
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