IMF records growth declines but no rebound; Moody's trims Hong Kong credit rating; China coronavirus spreading; Japan output slumps; coal and iron ore prices rise; UST 10yr yield under 1.83%; oil and gold firm; NZ$1 = 66 USc; TWI-5 = 71.3

IMF records growth declines but no rebound; Moody's trims Hong Kong credit rating; China coronavirus spreading; Japan output slumps; coal and iron ore prices rise; UST 10yr yield under 1.83%; oil and gold firm; NZ$1 = 66 USc; TWI-5 = 71.3

Here's our summary of key economic events overnight that affect New Zealand, with news the prospects for a rebound in global growth aren't obvious to a global analyst.

But first, today is an American public holiday, Martin Luther King Jr Day, and markets are closed there.

The IMF said that the fall in global growth appears to have bottomed out but there is no rebound in sight. They cite risks ranging from trade tensions to climate shocks that they say makes the outlook uncertain. They are recording that American GDP growth dropped -0.6% in 2019, and China's fell -0.5% all due to the trade wars. Of course the dollar fall was much larger for the US given it is a much larger economy. They see the American growth rate falling another -0.5% until 2021 and China's slipping another -0.3%. The only big improvers from here seem to be emerging market economies, and especially Mexico after a very weak 2019. Globally, 2020 won't see any significant 'rebound'. Neither New Zealand nor Australia rate a mention in this review.

Overnight, European equity markets were all lower by about -0.3%, with the exception being Frankfurt which managed a +0.2% gain.

Yesterday, Shanghai equities rose +0.7%, Tokyo rose +0.2% but Hong Kong tumbled by almost -0.9%. Moody's cut Hong Kong's credit rating from Aa2 to Aa3, citing their inability to resolve the protest issues.

China has confirmed that its new and untreatable SARS-like coronavirus is being transmitted human-to-human and while the number of deaths is still low. The number of infected people is rising quickly, with 130 new cases over the weekend. Now health workers fighting the virus are being infected. And international travel is seeing it spread. Much worse, China is about to embark on its huge annual migration for its Spring Festival / New Year holiday and that raises the stakes immeasurably.

In Japan, industrial production is still on the skids, down -8.2% in November from the same month a year ago. But at least its decline rate has stopped falling.

In Australia, iron ore prices are heading back up again, now close to US$100/tonne, up more than +15% in the past three months. And coking coal prices are on the move back up as well on the steel demand, up +8% since November.

Yesterday, the NZX50 fell a sharp -0.5% while the ASX200 rose +0.2%.

The UST 10yr yield is unchanged due to the US holiday at just under 1.83%. Their 2-10 curve is still at +26 bps. Their 1-5 curve is unchanged at +6 bps. And their 3m-10yr curve is also still at +29 bps. The Aussie Govt 10yr is at 1.17% and down just -1 bps overnight. The China Govt 10yr is unchanged at 3.13%. And the NZ Govt 10 yr is also down -1 bp at 1.54%.

Gold is now at US$1,561/oz and up +US$3 from this time yesterday.

US oil prices are a little firmer, now just on US$58.80/bbl and the Brent benchmark is just on US$65.30/bbl.

The Kiwi dollar is now at just on 66 USc and while this represents only minor softness in the past 24 hours, it does mean it is at its lowest point in more than a month. On the cross rates we are unchanged at 96.1 AUc. Against the euro we are also unchanged at 59.6 euro cents. That puts our TWI-5 at 71.3.

Bitcoin is little-changed from this time yesterday at US$8,651. The bitcoin rate is charted in the exchange rate set below.

And here are the 2015 and 2017 maps for easy reference:

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Our exchange rate chart is here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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36 Comments

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Growth dropping. Maybe not such a bad thing.

... lest reports of the new coronavirus cause anyone to lose sleep ... or feel that their childhood had been stolen .... its descended from a big family of viruses which ( amongst rhinovirus too ) cause the common cold ....

Coronaviruses can lead directly and indirectly to bronchitis , or to pneumonia as well ...

... viruses strains within the coronavirus family affect a wide range of bird and mammalian species , both wild , and domesticated...

So glad you're not a scientist Gummy - the only reason SARS disappeared was because it was a weak virus - Cononvirus?
HONG KONG -- New research provides the strongest evidence to date that the SARS virus spread from wild animals to humans, underscoring the peril of China's recent decision to remove a ban on the sale and consumption of exotic species.

The animal research, scheduled to be published Friday in the journal Science, is an in-depth version of findings first announced in May by scientists at the University of Hong Kong and the Shenzhen Center for Disease Control and Prevention.

The paper includes previously undisclosed genetic data that strengthens the argument that animals are the source of severe acute respiratory syndrome -- a notion that many Chinese government officials continue to resist.

The other problem is that it sounds like China has been under reporting its disease numbers again, as with SARS.

What doesn’t come out of China? They even have left arm bowlers who produce an off break. Grew up in a world
where China, apart from their stand in Korea, massive in area and population, was secretive and fairly quiet. Had the pleasure of briefly meeting the late great Rewi Alley. He of course was fascinated with and loved the country. Then he was our only export one might suppose. Man but since the demise of Chairman Mao change and development has been strapped to a rocket. These viral outbreaks, air pollution and suchlike would indicate growth has outstripped control of the basic essentials.

You are in luck with China.
Because you can see the what could have been.
Look at Taiwan.
Does your China proposition stand for Taiwan?

Would you consider it was Mao thinking & organising that drove the joint back to the stone age. Mao's thinking & organising rather than resources.

Imagine if Taiwan was the mainland and Mao had ended up on the island.

Not quite sure , but from what I think your point is, the comparison between North & South Korea today, would illustrate it too?

Funnily enough, in 2017 it looks like Northland got a bit of weather over the 21st/22nd of Janaury which substantially alleviated pressure on soils. There's very little chance of rain for the next week or so and temperatures are settling higher than they have so far this summer. Looks like this could continue for a while yet.

So growth is slowing world wide and the Fed is pumping billions a day into the repo markets resulting in the stock market reaching ever new highs.... any analysis of this phenomenon from Interest?

At what point will the Fed stop? Damned if they do, damned if they dont

Yesterday Gyles Beckford on morning report puts the US market growth down to the trade deal. Meanwhile ignores all evidence that it is due to the the actions of the Fed and it's growing balance sheet. In fairness he's not the only msm pretending this is not a 'fake'and Fed manipulated market.

As long as the Fed keeps back shoveling with liquidity things will continue on as they are.

ha ha...until they don't! And that time must come.

ANZ , change call, see no change to OCR until 2021.
January PSI falls to lowest level in 8 years, PMI in contraction

January PSI falls to lowest level in 8 years,

Explains why my car has been handling strangely.

Had that problem too Rick. Some years ago. Thought all the tyres had gone flat at once. Turns out it was only an earthquake.

Shane Jones has blasted comments by James Shaw that we can mitigate climate change by eating less red meat ... Jonesy compares Shaws attitude to torturers of medieval Europe , putting people on the rack for not agreeing with the absolutist view ...

One senses the warmth , the love and consensus within this COL is starting to unravel , the closer we get to the next election ...

Jonesy compares Shaws attitude to torturers of medieval Europe

Well, Jones sounds reasonable and balanced.

After all it is election year, but still early though for NZF to come out of hibernation in search of headlines. Still for all his huff and puff, I don’t see that as discrediting him and personally I prefer one that runs the ball rather than kicking for touch.

That in NZF speak is getting your name out there in the media. NZF future leader trying to be Winston but a fail.

Superficially Winnie at least sounds a little intelligent and knowing about what he is talking about, Jones hasn't even mastered that skill yet!

Superficially Winnie at least sounds a little intelligent and knowing about what he is talking about, Jones hasn't even mastered that skill yet!

Murray, Understand your comments about Jones.

What's your thinking on restricting children's diet because if climate change.

Do you agree with the nutritionist?

James Shaw & Co. have brought this all on themselves. Hopeless governance.
As a management consultant he is showing to be hopeless regarding change management. He makes consultants look bad (talent indeed).

https://www.odt.co.nz/star-news/star-national/jones-takes-aim-eco-bible-...

https://i.stuff.co.nz/business/farming/118905679/preteens-too-young-to-m...

https://amp.theguardian.com/world/2019/nov/08/we-are-a-role-model-how-ja...

On whether global heating can be curbed, he says: “I think the chances are slim.” But there’s no reason for not trying, he adds. “In fact, that’s all the more reason to try.”

https://www.newshub.co.nz/home/politics/2020/01/james-shaw-clashes-with-...

https://i.stuff.co.nz/southland-times/southland-top-stories/118855668/fe...

Jones is a shining example of eating lots of meat and dairy - a true medieval knight with 2 chins.

Frazz how many kids you got?
(Look at link above).

That was "hugely concerning" for registered dietitian Sylvia North, who said there were no circumstances in which she would recommend a vegetarian or vegan diet to children that age.

- fat shaming probably another conversation too.

dp.

British trained nutritionist Claire Turnbull was on Radio Live this morning , and said the same : children need proteins and minerals from a wide variety of plant and animal sources .... sauces ...

.. vegetarianism is unsuitable for kids ... potentially dangerous to growing young bodies & brains ...

Watched one of those in the wild programs. Bloke lived up in Canada about as north as possible. He growled something about like to see one of those veggie folk survive a winter out here. There it is.

Thought experiment:
Assume James Shaw is right.
It's just a thought experiment.

Here is the thing, the climate alarmists, climate activists are doing themselves a great disservice by acting like swindlers, con artists and tricksters.
By their actions they are now being labelled eco-bible bashers. People describe them as being in the Climate Cult.

Example: Going opposite a basic home economics truth about diet is terrible. They want people to believe something no one knows about and to demonstrate trust they are declaring a known truth as wrong and harmful (a little cult 101).
Telling people science is settled. Allowing no debate. Polarizing as alarmists or deniers (no middle ground). Not renouncing population control. Etc.... it doesn't feel like the actions of honest people.

This is terrible, they are doing their message a tremendous disservice, irrespective of the inherent nature of the message.

Unless that inherent nature of the message explains their actions & messaging.

This is a useful way of thinking:
https://www.amazon.com/Prioritizing-Development-Benefit-Analysis-Sustain...

The school materials recommends that students could take action by cutting down on meat and eating more fruit and veges instead e.g. trying a meatless Monday each week.

Nothing about becoming hardcore vegans and likely some good health benefits

What are the health benefits you are thinking of, health benefits for young children?

You realize your link, your link compares vegetables to pot noddles!
The rest of us are addressing the question of why restrict children's diets by restricting meat & dairy?
Meat & dairy are not pot noddles.

New Zealand is a world leader in the production of diverse nutrients and foods yet poverty and other environmental barriers mean only one in two children eats three-or-more servings of vegetables a day. Price and availability are limiting factors

Is this the best you got, if so it's not filling us conference in you case. You making a misunderstanding like this.