Summary: Tech stocks fell as much as 2% in late US trade this morning on fears about what the Fed might do to withdraw stimulus in its monetary policy decision due tomorrow at 8am NZT. Hotter than expected US producer price inflation figures overnight darkened the mood. Elsewhere, Aucklanders left the city in droves this morning to the north, south and into the air on the first day they can travel across borders without exemptions. There were queues. And a new report talks up NZ's agriculture sector.

Cracking $50 billion A new report predicts NZ’s food and fibre export revenues will hit a record $50.8b in the year to June 2022.

Despite Fonterra warning its farmers about flat or declining milk production, the Situation and Outlook for Primary Industries (SOPI) found high demand for NZ dairy products combined with strong export prices are expected to deliver an estimated 10% increase in dairy export revenue to $20.9b for the year to June 2022.

Agriculture minister Damien O’Connor said the sector was meeting strong demand as consumers around the world looked to healthier food and natural fibres with strong environmental credentials.

The outlook found: 

  • Meat export revenue is forecast to increase by 6 percent to $11.1b.
  • Forestry exports are expected to reach $6.7b.
  • An expected increase in export revenue of 5% to $6.9b for fruit and wine exports.
  • Seafood export revenue is forecast to rise 4% to $1.9b. (All figures for the year to June 2022)

Double digit inflation The Nasdaq was down as much as 2% around 8am NZT and the S&P 500 was down about 1.0% after US producer price index inflation rose 13.3% from a year ago. That was faster than expected and bolstered expectations the US Federal Reserve will speed up its reduction of money printing and bond buying and hike the Fed funds rate earlier than previously forecast next year.

Not as effective A South African study published overnight found the Pfizer vaccine helped 70% of omicron cases avoid hospitalisation, down from 93% in the previous delta wave of infections. However, Pfizer also reported final trial results of its anti-viral pill Paxlovid cuts the risk of hospitalisation or death by up to 89% in high-risk patients;

Omicron in China China reported its second case of omicron overnight as multiple factories shut down in the east coast manufacturing province of Zhejiang bordering Shanghai. The province includes Ningbo, Shaoxing and Hangzhou and last night reported a rapid spread of 217 locally transmitted cases.

Floor removal Just as our Reserve Bank is considering imposing a mortgage interest rate affordability floor, the Bank of England said overnight it planned to remove its rule that borrowers be able to handle a rate 3% higher than their existing rate, which would allow an extra 85,000 borrowers to afford a mortgage.

Three waters A delegation of mayors will meet local government minister Nanaia Mahuta this morning to press their concerns about the government's 'three waters' reforms. Draft legislation was to have been introduced to Parliament this week, but is understood to have been insufficiently well-developed to proceed and will now not appear until next year.

Fresh on BusinessDesk this morning

Nikitin Sallee interviews Public Service Commissioner Peter Hughes about CEO pay.

Oliver Lewis reports on CEO pay for 2021, showing just 2.1% and 1.0% gains for private and public sector CEOs, but with a rise expected next year for private CEOs that is expected to further widen the gap with state sector leaders.

David Chaplin writes in his weekly column about the FMA’s toughening culture against wrongdoing, as indicated by its cancellation this week of the license of financial adviser Paul Loo.

This article has been updated to correct Fonterra expects flat or declining production, not revenue