Here's our summary of key economic events overnight that affect New Zealand, with news the Aussies are trying to restart and open up but face an angry China. It is a delicate time for New Zealand.
But first, Wall Street opened today with a bounce after yesterday's crash. But the +2.8% gain just after opening was as good as it got and it has faded to be up +1.3% at the close. The S&P500 will lost -5.4% for the week, shedding -US$1.4 tln in market capitalisation in just seven days. That makes it the largest value loss since March 23 (and all of that decline was subsequently recovered.) For the year so far, the S&P500 has seen its capitalisation drop by -US$1.7 tln or -8% of US GDP.
The equity market bounce hasn't been matched by the bond market.
Americans’ view of the economy improved in early June as the country tried to reopen. The latest survey’s index of consumer sentiment rose to 79 in the past two weeks and above what analysts were expecting. But that level is still very low, down -20% from this time last year. Fear of income loss is very high, driven by what might lie ahead with a second wave from the pandemic. And as each day passes, that fear is becoming more realistic.
Yesterday's market fall was triggered somewhat by Fed Congressional testimony by Chairman Powell. Today, they released the Monetary Policy Report to Congress giving more details of the fragile situation American households and businesses are in. A key message is that these vulnerabilities will be persistent.
In Australia, they have decided at a national level that all states except Western Australia will open their borders by late July and the first foreign students will be allowed in from overseas. But the spat with China is a serious issue for them. There is rising alarm among universities and tourism operators in Australia that China's travel warnings for tourists and students are here to stay.
Also under threat are Australia's coal mines. Their new risk is that they won't be able to get insurance, and insurers shy away from covering risks that add to climate change exposures. Another danger is that China is signaling it may avoid buying Aussie coal. China is looking elsewhere. The growing China-Australia hostility is a tricky dynamic for New Zealand.
India’s industrial production shrank a record -55% in April with manufacturing crashing a whopping -64%. It was so bad, the Indian Government refused to release the headline IIP growth number saying it is "not appropriate to compare the IIP of April, 2020 with earlier months". They even took their official statistics website down after releasing the data earlier.
In Japan, industrial production fell a sharp -15% year-on-year in April data released overnight. This is an awful result. Business sentiment is now at an eleven year low. In response, the Japanese government has enacted +¥32 tln in extra stimulus. (+NZ$460 bln). The irony of this is that NZ$1.5 tln of previous stimulus hasn't yet been spent, "mired in a bureaucratic logjam".
In England, they have posted a -20% drop in economic activity in April. It is a fall of historic proportions - even in the Great Depression of the 1930s, GDP didn't fall more than -1% in one month.
The latest compilation of Covid-19 data is here. The global tally is now 7,573,700 which is up +141,000 in a day, and a faster rising pace. Global deaths now exceed 423,000. China is reporting small (actually tiny) isolated but important outbreaks of a second wave of infection - important because one is in Beijing.
Just on 27% of all cases globally are in the US, which is up +24,000 since this time yesterday to 2,033,000. This is also a faster rate of increase. It is becoming clear that 'reopening' is raising the infection rate. Florida and Texas are the new hotspots (both Trump heartland). US deaths now exceed 114,000.
In Australia, there have been 7290 cases (+5 since yesterday), 102 deaths (unchanged) and a recovery rate of just over 92% (unchanged). 17 people are in hospital there (-1) with 2 in ICU (unchanged). There are now 405 active cases in Australia (-17).
The UST 10yr yield is a little higher today, bouncing off yesterday's decline and up +5 bps to 0.71%. But that still means it is down -18 bps in a week. Their 2-10 curve is only marginally changed at +51 bps. Their 1-5 curve is a little steeper at +15 bps, while their 3m-10yr curve is also little-changed at +56 bps. The Aussie Govt 10yr yield is unchanged at 0.90%. The China Govt 10yr is down -2 bps at 2.78%. And the NZ Govt 10 yr yield is lower too, down -5 bps to 0.81%.
Market volatility, which reached very elevated levels in March and fell away as monetary and fiscal stimulus poured in to the global economy, has started to rise again. And the Fear & Greed index we follow is now neutral having week strongly on the Greed side last week, and strongly on the Fear side a month ago.
The gold price is little-changed today at US$1,732/oz.
Oil prices are holding at yesterday's level. They are now just over US$36/bbl in the US. The Brent price is just under US$39/bbl. But the US rig count fell yet again, and for the first time in the modern era there are now less than 200 oil rigs operating in the US. Total rigs operating are down to a new all-time record low also. Low prices have killed off the US domestic drilling industry for now. The international rig count is diving too.
And the Kiwi dollar has held too at 64.2 USc. On the cross rates we are still at 93.9 AUc. Against the euro we have are down more than -½c at 57.2 euro cents. That means our TWI-5 is now at 69.2 and -70 bps lower than this time last week.
The bitcoin price has also held its lower level, now at US$9,401 but -3.5% lower than a week ago. The bitcoin rate is charted in the exchange rate set below.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
Our currency charts are here.
74 Comments
Thanks goodness that Jacinda helped to get the virus under control here in NZ, otherwise we would have been a much worse off position. Look what's happening even in the UK; BBC Bank of England 'ready to act' as economy shrinks record 20%.
Mr Bailey, Bank of England governor said: "He was speaking after figures showed that the country's economy shrank by 20.4% in April - the largest monthly contraction on record - as the country spent its first full month in lockdown. "We are still very much in the midst of this," https://www.bbc.com/news/business-53019360
Walking on egg shells, similarly got a sort of sense of the world today as when I was very small, on the farm watching my grandparents use of the pressure cooker. Wondering when next the lid might be taken off too early and everything end up on the ceiling. That seems to be our world today, pressure at every point of the compass, in every walk of life. History tells us the great relief for pressure has usually been a war.
Jacinda did bugger all. The reason NZ has Covid19 under control (for now) is a combination of geographic isolation, small population/low population density, unitary parliamentary system (meaning fast political process) and good luck. I would wager that any NZ politician who may have been PM at the time would have presided over the same result.
Chuckle.... ;)
I would wager that any NZ politician who may have been PM at the time would have presided over the same result.
He's not yet a politician, but if Chris Luxon were PM, I doubt he would have closed the borders as swiftly, knowing what a death-knell that would be to his old haunt Air NZ.
It's also clear that if National had been in power we would have opened up sooner, with all the risks that entails, and the lockdown may not has been as harsh (for example takeaway food may still have been allowed at level 4).
Open a travel bubble with China. Got to keep the donors happy. While we are at it the South Island economy has been smashed by lack of tourism. Let’s sell Canterbury to Oravida
I am no supporter of National, Luxon, nor John Key. What i am opposed to is the "cult of personality" politics that John Key did well and Jacinda seems to do even better at. My point is that if you look at any developed country that fits my above points you find they are doing well with Covid in spite of whomever their leader is. I'm taking Ireland, Iceland, Hawaii (state yes) etc.
Here, here! The “personality” holds too much sway.I admit I voted for Muldoon, he started that aspect in our politics and politicians and it gave him at least three years too long in power. Before that I had voted for Kirk’s government & I voted for Labour twice in 1984 & 1987. Thinking about it, that is probably the last time I was able to confidently vote for a government rather than a personality choice. MMP, the entrance of a flood of graduate political MPs, and a headline fanatical media has turned NZ’s political common ground into theatre.
What year did you emigrate FG. Kirk was 1972 and I picked you as a much much later arrival
My great grandfather arrived here in 1854.
The countries with the most outrageous cults of personality have done utterly abysmally - USA, Brazil, UK and I don't really know if Sweden qualifies, though I kind of suspect it might has done badly, your argument is not terribly strong, tbh
My argument is not about the leader per se, but the aspects of NZ (see post above) that enabled us to beat (thus far) the virus. What does my head in is the Jacindaphiles who think that she's wholely responsible for our stroke of good fortune. I guess you could contrast our PM with the Aussie PM who ain't much of a showman but has the country doing relatively ok regarding Covid-19.
"Relatively ok" - except they still have new cases - unlike us. Perhaps your ideology is blinding you to the reality of where we are? Is it so difficult to say we all have done well?
Of course we have done well. However the delay in calling the lockdown so Cindy could get her photo op on March 15 was beyond disgusting. We need a Royal Commission to clear that and other mistakes up for future learnings.
We may have done well but could we have done better? We could/ should have shut borders a fortnight sooner, then the lockdown would not have needed to be as damaging as it has turned out to be.
Locking down a bit earlier would have made very little difference, as the rest of the world is STILL in the grips of the virus.
How would we have dealt with all our residents and citizens wanting to get back if we had locked down much earlier. There were logistical reasons for not doing it earlier.
Our biggest stroke of luck was ridding ourselves of the SS Petri Dish before it docked in Tauranga, that would have been our downfall.
Here is the research. This tracks all all governmental response. It debunks the claim that New Zealand went early, went hard.
Next time someone asserts New Zealand went early, went hard, ask - compared to whom?
And especially compared to which of our near neighbors.
Of course we have done well! I endeavour to be ideologically neutral and I certainly know where we are and how good we have it at the moment in regards Covid-19. However, as I said I think that the evidence is quite clear that our success is more a result of our geographic isolation, small population/low population density, relatively good government and a bit of luck. Aussie is likely only behind us due to their larger population and the lag time associated with eliminating a bigger outbreak. What would disappoint me is if NZers overlook the above factors of our success, whilst hero-worshiping our PM and consequently allow such factors to continue to be eroded. Of note our media isn't crowing about James Marape and PNG's even better success at controlling virus (PNG has most of the same advantageous factors as NZ - not so sure about good governance, but hey it worked for this one)
Some will think she is wholly responsible, the bulk of us appreciate that this was actually above her pay grade and she took the advice of experts, unlike some of the others I mentioned. She knew her job was to get the message across and get buy in, which she did, without it we would have been buggered. The buy in she got was possibly the most important aspect after having gotten some sort of plan in place.
Australia is doing fine, mainly because individual states took measures which added up to the whole, Scott Morrison was more like a possum in the headlights for quite a while and they are still dealing with a very long tail of the virus.
Talking about Australia's spat with China - Twitter has removed more than 170,000 accounts tied to a Beijing-backed influence operation that deceptively spread messages favorable to the Chinese government, including about the coronavirus https://www.reuters.com/article/us-china-twitter-disinformation/twitter…
And this one - A secretive arm of China’s Communist Party is working to influence every aspect of Aussie life, from politics to business, a shock report reveals. https://www.news.com.au/finance/economy/australian-economy/china-is-inf…
I think shock report should be in inverted commas.
There is little doubt the United Front Work Department is active all over Aotearoa and in all spheres, including government and the media. The Aussies are better at reporting this and have reported incidents in NZ, that have been ‘ignored’ by our own media.
If NZ stood in solidarity with Australia over the CCP’s bullying, it would only solidify the spirit of the Anzacs. Alas, it is a Western phenomenon where ‘appeasement’ is always the first, second and third option. If countries made a united stand first time round, guess which country would stand down first?
China is striving to split Australia away from Uncle Sam. You don’t need to be a Talleyrand to work that one out. And Australia has asked for it, indeed they have. For instance gifting China control of your most strategically important port. Hard to imagine anything dumber than that.
And water... Who'd ever thought water was a strategic asset....?
For the record, I do...
Oh dear, just look at dear old hard pressed Christchurch New Zealand. The people are made to drink chlorinated water and soon the council will start charging them to do so. At the same time billions of gallons of pure clean water is given free to a Chinese outfit to bottle and sell for great profit in their homeland.Even Monty Python couldn’t have come up with a plot like that.
Can one be sure that it only targeing Australia and not NZ or other parts of the world.
Question...unless you follow someone on Twitter how are these messages spread? I don't use Twitter at all and wonder who has the time these days to add another platform?
I have only recently joined twitter, mainly concentrating on US and Australian financial commentators. Have to say it’s the best source of news I’ve come across in a long time.
Like this article.... Westpac Australia- 23 million transactions linked to child exploitation could be 20x larger following investigations. https://www.smh.com.au/business/banking-and-finance/westpac-could-face-…
Will the $500 million set aside to pay for breaches increase x20?
Xingmowang, I'm sorry for your loss.
no worries.
New gen are hooked to 抖音 or TikTok.
The Australians are finally getting a taste of their own medicine in China squeezing their trade connections closed. For decades they (AUS) obstructed our trade even when CER was supposed to ensure smooth processes, so there is a certain shade of irony in all of this from my perspective. Do we really want a transtasman bubble knowing full well how Australians always put themselves first, usually at our expense?
Virgin Australia
https://www.youtube.com/watch?v=JmSrVjRPo7w&feature=youtu.be
What, you mean the Aussies just bought out our most profitable businesses, the banks, and have been milking us ever since? Surely, not?
We are just so easy to milk, competing amongst ourselves to pledge our lifetime earnings for a better barn. Beats any other form of farming.
What is it $5 billion a year we could save our country just by switching banks?
Surely not Kiwibank? Second worst bank ever.....
My grandfather was on a NZ battalion ammunition column on the Western Front during WW1. I can still remember him summing up in two words his opinion of the Australians who were fighting alongside: "thieving ratbags". They would steal from the NZders any materiel that they could get their hands on....ammunition,food,clothing.... He never liked the Australians at all throughout the remainder of his life.
A leopard doesn't change its spots.
In a similar vein, but with rather different characteristics, my father recounted how the Marines at Guadalcanal were the greatest thieves ever. Off their regular army contemporaries that is. Mind you they needed to be. The Marines got all the obsolescent weaponry first and foremost. The ability to steal and create stills out of thin air helped carry them through the Pacific needless to say.
Let’s not forget the servicemen’s loot brought back to Nz from all wars and the stuff stolen from the wharves during the maritime strikes.
Apologies for a bit of a tangent but two unhappy WW2 occurrences in the same vein. Firstly the the 1st Marine Division heading to Guadalcanal to stop the Japanese advancing on Australia and New Zealand had to load their own troop ships because NZ wharfies went on strike. Secondly in the UK the wharfies regularly looted the life boats of the merchant navy vessels before they sailed on their convoys. Lots of nasty stuff got to be air brushed by the historians.
War is hell......
Our very own version “kiwi Robinhood Traders” favourite stock AirNZ is underperforming ATM, hope they learned the lesson and stick onto long term investment options like reputed KiwiSaver and managed funds. Just be aware Pros always take advantage of amateur investors by bidding up downtrodden stocks.
The feeling of treading on eggshells is generally a sign you are in an abusive relationship.
Excellent analogy
Our stockmarket has seen a huge surge in new investors through platforms like Sharesies and I will be interested to see how many of them stay the course once they realise that markets can go down just as quickly as they rise. I have been involved for many decades and have seen lots of crashes. In the past I have simply shrugged them off, but this time, I feel less confident. Perhaps at 75 I am just losing my nerve, but I worry that a combination of the economic damage of this virus, eye watering global debt, increasing protectionism and rising global tensions may see a very substantial fall in global share prices. The property market will also feel the effects. I hope I am wrong.
the markets are being kept up by QE, there is massive money creation going on world wide and a good proportion of it flows into asset prices,
QE = life support.
QE = Life support = Economy.
In todays world econimy will last as long as givernment prints money and distribute.... Question is for How Long...
Make hay while the sun shine.
An example of just how crazy equities are - “As Bloomberg reports, Judge Mary Walrath ruled that Hertz can go ahead with the offering, which we reported last night, could take in as much as $1 billion according to underwriter Jefferies. And kudos to Jefferies: with the company set to receive 3% on the offering, if the bank finds enough Robinhood teenagers to sell the full billion, it will make $30 million from selling worthless garbage to idiots.”
Well it’s about 35 years since the grand scheme of junk bonds. So a fresh crop of cannon fodder is now available.
world oil markets
https://www.tehrantimes.com/news/448711/MBS-wholly-owned-subsidiary-of-…
I suspect if Australia does open to foreign students in late July it will put paid to any trans-Tasman bubble.
If you look at the profile of the graph of new cases in Australia it seems they had Covid-19 just about under control 8 weeks ago - however it is still gently bubbling away.
If sensible precautions are taken why are students a danger to Australia or NZ? For NZ I suggest finding 'sensible precautions' for arrivals seems to be impossible. Our govt should employ the mangers who have controlled Covid-19 in Taiwan, South Korea or Vietnam - they wouldn't pussyfoot and for 14 days of quarantine privacy laws would be out the window. But at least I would sleep more easily.
Yesterday's market fall was triggered somewhat by Fed Congressional testimony by Chairman Powell. Today, they released the Monetary Policy Report to Congress giving more details of the fragile situation American households and businesses are in. A key message is that these vulnerabilities will be persistent.
Buckle Up, We're Nowhere Close to Done With This
And what about inflation, speaking currently? The Bureau of Labor Statistics (BLS) reported this week on the US CPI. Widely criticized in many circles, the very idea of being able to precisely measure all consumer prices in a massive, complex market economy sounds ridiculous.
On top of that, many Economists and most central bank officials (redundant) like to strip out volatile food and energy prices from the index’s basket. Their justification for doing so rings hollow, as if consumers don’t need to eat and fill up at the pump above everything else.
Far be it for me to defend them, but there are legitimate reasons for focusing on this “core” inflation rate. For one thing, on the downside at least, it does correspond very well with the worst of times. Because of its nature, especially the seasonally-adjusted version, the CPI ex food and energy rarely ever experiences a monthly decline. And that makes sense: you wouldn’t expect anything but the more extreme situations to produce a detectable short run impact on general price behavior.
Dating back to January 1961, when the BLS refined its monthly numbers for the core measure, it had only been negative month-over-month seven times out of the 708 months before 2020. One in one hundred qualifies as rare; sufficiently rare enough that it should raise your eyebrows when it does happen.
Two of the seven were in the back-to-back months of November and December 1982 – the tail end of what had been the worst postwar economic contraction in the US before 2008. Two more negative months would show up related to the Great “Recession”, also at its end and immediate aftermath (December 2008 and January 2010).
Before those, the biggest monthly negative had been posted for July 1980 – also at the tail end of what had been a particularly nasty, if ultimately short, recession. Again, whatever the CPI’s faults, you can’t deny these compelling correlations.
Starting March 2020, three more monthly negatives have been observed including the monthly change in April which was the worst on record. Once highly rare, this consumer price deflation unrelated to separated oil and gasoline prices has suddenly become common.
In fact, May’s negative number was also a record. For the first time in more than six decades of data, three minuses in a row. That had never happened before, and only once, the last two months of 1982, had there been back-to-back minuses.
I'll say again, "If I had anything left to sell, I'd be selling it!", before whatever price available to be paid, disappears.
"At some point, the desperation for liquidity...meant...an all-out fire-sale of goods and services to the point the selling price was less than the cost needed to produce the good or service. We aren’t to that point yet, but the signs (and symptoms) of deflation, true deflation, are beginning to show up and multiply for us in 2020. ...."
Janet Yellen said this could never happen again Not in our lifetimes. Read more
Here is how Singapore are coming out of Circuit Breaker, including getting air travel up.
From cna.
https://youtu.be/Bu5A2JTYCQA
Sounds like a plan. And being upfront, life has changed.
Gives us something to compare to.
Here is Dr Baker on ABC Australia talking through the timeline when we went from border quarantine to Level 4 lockdown and the exhaustive lobbying he had to do then.
https://youtu.be/vl9NmN1O-Po
Rubbished the WHO too.
Elimination is a temporary state, it just takes one traveller... to set things off again.
Tracking & tracing system is really important.
See 31 min mark.
Dr Baker "we have to plan for failure at some point."
Winston P seems only voice, only one pressing for border release with individual Australian States?.
Does anyone have a link for the NZ plan (is it go back to normal & wait until a vaccine?), and what of getting travel up again.
How does the 3,200 room quarantine set the limit, - that's 228 in per day.
Rent 14 cruise liners. That would be about 3,000 arrivals processed per day. Moor them in middle of Manukau Harbour.
Problem is they are riddled with Covid 19
Wash with soapy water or wait 72 hours and that problem is solved.
I'd love tp see someone try to get a ginormous cruise liner over the Manukau bar
Covid19, Economic impact on Asian economies & global supply chains.
Pandemic preparedness
Political aims trumping health requirements.
Being late and plunging to lockdown.
The economic impact of hard lockdown.
Bert Hofman（郝福满）
Director at East Asian Institute. Professor in Practice, Lee Kuan Yew School National University Singapore
East Asian Institute, National University SingaporeErasmus University Rotterdam
Stuff you'll not see on Stuff.
Should the U.S. refuse to pay back its $1 trillion debt to China?
The Debt to the Penny and Who Holds It
US resumes military aid to Ukraine with payment of $250 million following Pentagon approved 'reforms'
Delusion in the extreme hardly scratches the surface of the situation:
US citizens are seeing their economy crumble along with their livelihoods meanwhile those in power are using what little capital the country has left to buy influence and interfere in foreign nations
"ECB's Enria urges banks to eat into capital and lend."
Let that be on the record for when we look back in a couple of years' time. Link
Fyi: One person who is financially benefitting from every stock market rally is Jay Powell who has tens of millions in ETF fund long holdings, including $SPY, $RUT & holdings with Blackrock the same firm he selected for doing the Fed's ETF buying
...should we possibly be a little concerned that after three months of this “dollar flood” and inflationary “money printing”, the domestic dollar market is so broken that US banks are, through their foreign subs, still bidding for the same high level of last-resort dollars in the most indirect manner available? It seems as if companies might be.
As I wrote a month ago:
The breakdown in funding appears to have been so extreme that US banks, as a liquidity measure following the worst of the dollar disruption, have been using their foreign subs to source gluten which originates from the Fed’s overseas dollar swaps. US banks, in other words, taking the most circuitous route possible to try to gain some domestic margin for error in a system gone wrong.
That’s not a substitute for a dynamic offshore marketplace; it is a complete farce. What about anyone else in the world who might need “dollars” who actually are foreign banks? Put another way, if Jay Powell’s overseas dollar swaps just end up back in the US anyway…why bother with the charade? It’s as if they don’t really know what they are doing. Link
New Zealand must stand in solidarity with Australia. First and always.
Every bully move from China shows we must move away from China.
This is not so much a seasonal economic cycle, nor even an annual cycle, nor perhaps a decade-ial economic cycle. This is a lifetime cycle & the people who remember who started it are all getting old. Such is life.
Auckland roads and shops are mental today. I can only assume many people were still worried at going out at Level 2.
So my wife and I have been pre-approved for a new build mortgage (still waiting for existing homes approval).
Do we just wait it out and try to go for an existing home? Or look into a new build now?
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