Good morning, wherever you are. Here's our summary of key economic events overnight that affect New Zealand, with news everyone is struggling to understand how the China virus impacts will play out.
Wall Street is sharply lower today as investors come to grips with both the economic fallout from the China virus, but also their realisation that they have been too optimistic on the prospects of the US economy. The recent momentum shift lower isn't passing and the China situation will only add to the speed of the decline.
The S&P500 down a sharp -1.4% so far and heading for a -2% loss on the week.
While US personal spending is holding, personal income growth is slipping. For the full year disposable personal incomes were up +4.4%, but only up +3.2% in Q4-2020 as taxes rose +5.2% pa. The US "tax cut" program is biting now for most, as the benefits all went to the wealthy. Meanwhile consumers are spending as before, ignoring the rising tax take. Personal saving, which had been strong earlier, turned negative in Q4, and unusual American situation.
This blindness to the turning incomes and saving is reflected in another consumer sentiment survey which has it still near its cyclical peak.
Things are a bit more realistic in the latest Chicago Purchasing Manager's survey, where sentiment in this factory heartland fell sharply. It is now at its lowest level in more than four years and that benchmark four years ago was a brief outlier. The current depressing trend has been building for all of 2019 however. Worse, it is being led by sharp drops in new orders.
North of the border, Canada reported its Q4 GDP growth at +1.5% in November, a small rise from October.
China's isolation by increasing numbers of countries is gathering momentum. And that isolation is in all sorts of ways: India has banned exports of masks and protective clothing.
China's official survey of its factory sector (a 3000 firm sample) reported its January factory PMI turning lower to be neither expanding nor contracting. It's larger 4000 sample survey of its services sector shows business expanding faster at 54.1 and above the 2019 average. But both survey were carried out in early weeks of January before the Wuhan emergency started to grip.
China's financial markets may re-open on Monday (but that is still uncertain). But their industry probable won't as firms stay shuttered after the week-long Spring Festival that has been upended by the virus emergency. And that will have a huge knock-on impact, to not only China's economy, but just about everywhere else.
The impact on the New Zealand economy is getting some attention from economic analysts, and generally they see a mild -0.1% or -0.2% dent to our economic growth. All use 2003 SARSs as a benchmark, and all cover their estimates with caveats. But given China's central place in the world economy, much will hinge on what happens this coming week and whether some semblance of normality returns there after China's holiday. At this stage, the biggest local industry to be impacted earliest, will be tourism.
Britain's exit from the EU has now happened - sort of. The implications will become clearer now. One thing is certain - whatever happens, it will have virtually no impact on the New Zealand economy.
Overnight European equity markets fell -1.2%. In Asia, Tokyo was up +1.0% yesterday taking its weekly loss to -2.6%, while Hong Kong slipped -0.5% yesterday to end the week down -5.9%. Who knows what the Shanghai market will do when it opens next week. Across the Tasman, the ASX ended unchanged on the day to end down -1.0% for the week, while the NZX50 rose +0.4% yesterday but was down -1.4% for the week..
The UST 10yr yield is lower today at just under 1.53% and that means over the past week it has declined -17 bps and that is on top or the prior week's -16 bps drop. It has fallen -39 bps over all of January. Their 2-10 curve is little-changed at +19 bps. But their 1-5 curve is now negative -11 bps, a sharp switch from positive +7 bps last week. And their 3m-10yr curve has also turned negative, now -3 bps in a sharp turn because it was a positive +20 bps this time last week. The Aussie Govt 10yr was up +2 bps bps overnight to 0.97%, but a -19 bps fall in a week. The China Govt 10yr is holding at 3.03% and markets are due to open again on Monday. And the NZ Govt 10 yr is unchanged overnight at 1.31% and that is a -15 bps weekly drop.
Gold is higher today, up +US$2 from yesterday, now at US$1,583/oz but little-changed from this time last week. Data from the World Gold Council shows that for a second quarter in a row, supply far exceeded demand as both India and China turn away from the yellow metal. Speculation is now gold's game.
The Fear & Greed index we follow has moved to the 'fear' side of neutral after a long stint hard over on the 'extreme greed' side. Volatility has jumped, with the VIX now at just under 19 with a rise for the week. The average for the past year has been 15. Both represent a risk-aversion change for the week.
US oil prices are still falling, down -US$1 on the day and now at US$51/bbl and that is a -US$3.50 drop in a week. Sinking global economic demand is behind the sharp drop. Since the start of 2020, that is more than a -US$10.bbl dive, or -17% and very close to a bear market in crude oil. The Brent benchmark is down too at just under US$58/bbl. The US rig count fell again this week, and to levels near a three year low. There is little reason for them to rise at these prices.
The Kiwi dollar has fallen -2.3% this week and ended at 64.6 64.3 USc as China-exposed currencies take a knock. On the cross rates we are holding at 96.6 AUc. Against the euro we are also much lower for the week at 58.3 euro cents. The net of these shifts reduces our TWI-5 to 69.9 and that is the first time below 70 this year.
Bitcoin is unchanged from where we left it yesterday at US$9,237 but that is a very strong weekly gain of +9.4%. 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 ».
71 Comments
Chris Martenson latest on Corona Virus
https://www.youtube.com/watch?v=Nmrm0mk5928
I hope no one flogged a few lab animals to the food market as a side hustle.
“Xiangguo Qiu — who was escorted out of the Winnipeg lab in July amid an RCMP investigation into what's being described by Public Health Agency of Canada as a possible "policy breach" — was invited to go to the Wuhan National Biosafety Laboratory of the Chinese Academy of Sciences twice a year for two years, for up to two weeks each time.”
“Several sources, who have asked to remain anonymous because they fear for their jobs, say the pathogens may have been shipped to the Chinese Academy of Sciences in a way that circumvented the lab's operating procedures, and without a document protecting Canada's intellectual property rights.”
https://www.cbc.ca/news/canada/manitoba/national-microbiology-lab-scien…
https://www.cbc.ca/news/canada/manitoba/ebola-henipah-china-1.5232674
https://www.nature.com/news/inside-the-chinese-lab-poised-to-study-worl…
“I am not able to arrange any divestment at short notice,” he wrote. “But I can arrange for the gas central heating in college to be switched off with immediate effect. Please let me know if you support this proposal.”
https://www.thetimes.co.uk/article/professor-at-st-johns-college-oxford…
Things are a bit more realistic in the latest Chicago Purchasing Manager's survey, where sentiment in this factory heartland fell sharply.
Underneath the headline, not all that far into the details is a growing mess. To begin with, the major contributor to Q4 “growth” was the unusually large decline in imports (GDP accounting subtracts spending on anything coming from overseas). While exports were marginally higher (1.4%), the BEA figures that the total dollar value of imported goods and services, adjusted for inflation, fell by an annual rate of near 9%.
That was the largest such decline since the second quarter of 2009 – the last of the Great “Recession.” So much for US demand. Along with what has been flat exports going all the way back to early 2018, together they “contributed” 1.48 points to the latest measure of overall GDP that was barely 2%. Link
We are just hours away from Britain's " Brexit "... 47 years after signing onto the EU manifesto ....
Robert Toombs at the FT , " the damn fools got it right on Brexit " .. .
... the time is ripe for Britain to regain her democracy .. and to mend fences , fix bridges with her commonwealth of nations ....
.. there is so much fear and loathing of Boris ... and of Trumpy too ... yet , they are getting stuff done , plus stomping on a few toes ...
.
Whereas our own Taxcinda .. and the Tugger before her .... so popular.... so beloved by their peeps .... and yet , utterly useless at actually doing anything .... all talk , tug / hug , and no shovel ready ...
GBH,
I spent most of my life in the UK-58 years of it in Scotland before retiring to NZ 17 years ago.
I am sad today and I find your reference to 'her Commonwealth of nations quite bizarre. You appear to be living in the time of Raj, or certainly harking back to some golden age when Britain bestrode the world. I think Britain is going to find the new world a much colder and more hostile place than the Brexiteers would have you believe. I think the US will play hardball on trade negotiations, as will Europe.
I am glad to be out of it.
It's interesting to me that no government sought to contain the spread of the disease, indeed airlines voluntarily pulling flights have likely done more to slow the spread. That seems quite a brave strategy given early data on the gestation period and transmission rate that could easily backfire.
USA to turn away suspected infected.
The United States has declared a public health emergency because of the version of coronavirus that hit China and has spread to other nations.
American Health and Human Services Secretary Alex Azar also announced that US President Donald Trump will temporarily bar entry to the US of foreign nationals believed to be a risk of transmitting the virus.
https://i.stuff.co.nz/world/119203892/coronavirus-reaches-russia-and-sw…
https://www.google.com/amp/s/amp.cnn.com/cnn/asia/live-news/coronavirus…
US has banned all foreign nationals entry if they have been in China (anywhere) in the last 14 days.
... and Air NZ still has daily flights to Shanghai, scaling back on the 18th Feb, only because of lack of demand. Is it because we dont want to upset Beijing or are we just thick?
When the coronavirus hits NZ you can forget about getting a mask to protect yourself. Check this out, apparently it was in New Zealand. 53.17 min https://www.youtube.com/watch?v=rwXPeIwV_q4
... I'm sitting back in the Gummy rocker ... quietly giggling to myself , mildly amused at watching the world turn itself into knots , inside out upside down back to front in a hysterical lather over a slightly more than mild bug , the Wu Flu ...
Pass the face masks hon ... they're only good for straining curds from whey ... homemade cheesing ....
Gummy rocks....
& ourGreta's a work of art, body of work.
https://youtu.be/YFXbq3gPTqo
When I was travelling in China I noticed that spitting was epidemic. All the time you heard people clearing their throats and spitting in public. People spat on the floor in restaurants. I saw a waiter spit on the floor. People spat on the floor on the bus. Everywhere you could see gross little puddles of phlegm on the footpath. Men and women did this. A woman taxi driver in Beijing spat out her window and it hit her mirror which I had to look at for the next thirty minutes. I was coming down with a campylobacter infection at the time which didn't help my mood. It really got me down after a while and I was glad to leave.
Oh that's nothing, I recently saw a Chinese lady allowing her toddler to defecate right on the public residential street pavement in Auckland. The young child had on one of those traditional open bottomed long pants with nothing else, I guess it cuts down on childcare costs, though I was very surprised that this seems to be allowed here.
Throwing cats and dogs out of apartments now, as an animal lover this is just more disgusting behaviour:
https://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=12305…
When was that?
There was a national public education campaign prior to the 2008 Beijing Olympics. I was there in 2017 and saw very little of it. (And I am sure I would have noticed becaused I was solo and wandered many neighborhoods in Beijing and Shanghai and villages in the surrounding areas.)
If you were there prior to 2008, they clearly had an issue. I am sure it is not all gone, but it is far less a problem now, I am sure.
And I think you need to compare China's social development now (vast numbers of people moving from the countryside to the cities) with that of the USA when the same thing occurred (from their own rural areas and much of Europe's rural areas). Life in the new American cities at that time was pretty raw and unhygenic too. Deadly epidemics happened there too, and frequently. But the new people in the US cities grew up in a generation or two. I reckon you will find similar social maturitiy comes to Chinese cities also, and probably faster.
(And, by the way, New Zealand cities in the 1920's to 1940's when our rural-to-city shift happened were't the most hygenic places either. It's not a race thing, its a social mobility thing. It is just too easy to 'blame' the victims of these fast urbanisations.)
TV1 news this evening.
Chinese Dr saying it is not your standard run of the mill flu, when it puts healthy Dr's in intensive care. Far from a handful of old Chinese with existing health concerns that would have tipped over anyway.
Another fact we need to take into consideration is the recovery stats. Yeah, infections and a lowish death rate but it looks like a slow recovery time. This thing sits you on your behind for a fair amount of time. People aren't going to hospital for the fun of it when they could knock back a hot lemon juice with a dram of whiskey and sweat it out.
Calculate this out to a good portion of the world of the world requiring some serious health care.
New info (if it is legitimate but seams so) showing a increased pass on infection rate of trasfer of 4 which would be inline with the upto 14 days of not showing signs of infection.
As this is a $'a site, the big factor is if
this is not contained the fallout from a good portion of the workforce in hospital care. How do these people pay the bills while in hospital? Then the negitive GDP's is just the start of the gwarno hitting the fan.
Hopefully it is effectivally contained, we will know more in a week or two.
Yes this is a financial website, and outside of China I don't think a large proportion of the workforce will be affected. But know one knows for sure.
What I am sure of is this will have a very significant economic impact, probably multiple times more significant than its health impact.
Probably 2% off Chinese GDP this year, and likely at least 0.5% off NZ GDP.
I expect ocr cuts this year, especially as construction will slow regardless of the virus.
The States stocks just took a hit and then closed for the weekend. There will be people sitting on the edge of their chair with their fingers on the sell button on the markets opening on Monday. To complicate matters China is coming back online as well.......
Tick tock tick tock nervous fingers on a trigger could start a blood bath.
It's interesting to me that no government sought to contain the spread of the disease, indeed airlines voluntarily pulling flights have likely done more to slow the spread. That seems quite a brave strategy given early data on the gestation period and transmission rate.
Worth a read
https://www.bbc.com/news/blogs-trending-51327671
Wall Street is sharply lower today as investors come to grips with both the economic fallout from the China virus, but also their realisation that they have been too optimistic on the prospects of the US economy.
At the market open of Friday, January 24, our estimate of likely 12-year nominal total returns for a conventional passive investment portfolio (60% S&P 500, 30% Treasury bonds, 10% Treasury bills) fell to just 0.04% annually, below even the previous record of 0.34% set in August 1929. This extreme reflects the combination of record equity market valuations and depressed interest rates. That’s not an “equilibrium” situation. It’s a combination that joins insult with injury, creating weak prospects for the future returns of passive, diversified buy-and-hold strategies, across the board.
Understand this. The more glorious this bubble becomes in hindsight, the more dismal future investment returns become in foresight. The higher the price investors pay for a set of future cash flows, the lower the return they will enjoy over time. Whatever they’re doing, it’s not “investment.” Link
Audaxes,
Well, it's about time for the ever louder hiss of escaping air. I hope I'm ready. I have gradually been both increasing my cash-now 17% of the portfolio-and reducing the overall multiple. I am nervous but not fearful, being old enough to have lived through a good many market crashes.
They can keep their Wu Flu, although there's now a fat chance of that happening. Don't forget to factor in the msm media bullshit percentage which varies, I know, but is substantial none-the-less. Not a great time to travel perhaps, with our tourism (read national carrier) industry the likely courier to this part of the planet.
Time to bunk down for a bit.
.. saw an Asian lady at Northlands Mall today wearing a light blue face mask .... guffawed out loud , couldn't halt myself .... OMG , how hilarious ... watching normally intelligent people have brain fades , mental meltdowns , because of a complete media beat up ....
Wu Flu has killed some elderly Chinese people ... folks with weak immune systems .... people who probably would have succumbed to any common a garden virus that was in the neighbourhood ...
. . it's time we detoxed ourselves from the rubbish being peddled by the mass media ...
I very much doubt that NZ will follow this example: BBC article; Coronavirus: US and Australia close borders to Chinese arrivals
"Countries around the world have closed their borders to arrivals from China, as officials work to control the rapid spread of the coronavirus".
https://www.bbc.com/news/world-51338899
.. I fully expect the media to have moved onto summit else to sensationalise by July ... perhaps 2 or 3 other armageddon end of the world as we know it scenarios . ... yawns , whatever ...
One of the benefits of getting older , Mr F ... you've successfully lived through so many episodes of seemingly utter annihilation , that you start to get a little blaise about it all .... and just hope for the best , hope not too many folks are actually harmed ...
Harvard trained epidemiologist (Dr Eric Feigl-Ding) is quoted as saying that nCoV is "thermonuclear pandemic level bad". He said that before the really scary data from Germany on incubation period, and new R0 from China came out. However it fills me with a great sense of ease and tranquility that you guys are so relaxed comparing this to a common flu.
Just go to the home page of the New England Journal of Medicine https://www.nejm.org/ or Lancet https://www.thelancet.com/
How much evidence do you need to convince you that this is a nightmare of a virus. The dead bodies will start piling up in NZ pretty soon.
This letter to the editor shows that a 33 year old German man (patient 1) became infected, and within 24-48 hours he himself was infectious to other people (patient 3), despite showing no symptoms himself. This lancet article show that quite a proportion (32%) of patients who end up in hospital require intensive care. You could speculate that hospitalisations are predominantly immunocompromised or elderly, but still, there's a lot of people in that category. I'm not that worried about myself. I'm 41 and will probably be fine if I get it, which I think I probably will. I'm just saying that this is nothing like the seasonal flu.
uff Dragon
@PuffDragon11
Just read the
@zerohedge
piece on the coronavirus. My PhD is in Mol. Bio. No doubt this is an engineered bioweapon and not natural. Statistically improbably to have 4 segments that map to a completely different virus (HIV) with 100% conservation.And the fact that it maps to binding ability. It was engineered to be highly infectious. Serious stuff.
Puff Dragon
@PuffDragon11
·
58m
2/ Those 4 total 27 amino acids, coded by 81 DNA bases. Coincidentally, the 4 segments match to HIV and specifically to two proteins involved in recognition and binding to a host cell. 3D mapping potentially targets to the part of the protein for binding.
Puff Dragon
@PuffDragon11
·
53m
3/ So by random chance, the corona virus mutated 81 times (81!) with the correct choice out of 4 bases, to correctly code these 27 amino acids (out of 20 possibilities) that possibly match the specific portion of 2 proteins involved in finding and attaching to a cell to infect.
Puff Dragon
@PuffDragon11
·
51m
4/ Im not a Vegas bookie but I am pretty sure the odds of that happening are not natural by any means. That was engineered.
Puff Dragon
@PuffDragon11
·
48m
5/ I thought China was just being China but combine that with whole city lockdowns and coincidentally a research facility at point of origin? Maybe not a full fledged bioweapon but even if experimental and minor, it escaped.
Puff Dragon
@PuffDragon11
·
45m
6/ something with low mortality but highly infectious still has the ability to spread fast and kill many, especially when it has up to 14 days of incubation and non-detection. The extreme measures make sense now. They are trying to prevent the spread.
Puff Dragon
@PuffDragon11
·
42m
7/ I hope I am wrong but at this point, too much adds up against incredible odds. And why is everyone in a panic ( city lockdowns, flights canceled, etc) when at this stage flu kills WAY more annually. Just stinks that something is not right.
https://twitter.com/PuffDragon11/status/1223442369753698306
Replying to @DrEricDing
It did seem like strange circumstantial evidence since the guy who ran the Wuhan facility wrote a paper on pseudotyping the S protein of bat SARS with HIV.
Australia issues China travel ban
Speaking at a press conference, Australian prime minister Scott Morrison announced that no-one travelling from mainland China would be allowed into Australia unless they are Australian citizens or residents. Entry will be denied to anyone who has left or transited through mainland China from 1 February
https://www.theguardian.com/world/live/2020/feb/01/coronavirus-latest-u…
Nothing yet:
https://www.beehive.govt.nz/releases
SoMo on Sky TV.
Mentions NZ, foreshadows NZ making the same decision.
Question is, is it news cycle or organisation structure that is delaying an announcement.
Difficult to see how NZ would not be a "like minded country".
Another SARS, MERS alike, bat then camel now this nCov19 - snake. Chinese liked to consume something rare & exotic thus potentially allowing certain unknown animal virus to be adaptable on the human protein receptor level, for their survival, but alas survival for them means rapid replication, first the natural respiratory to be inflamed, very quick to put the whole respiratory into the Acute state. The key is to manage the patient immediately, administer effective drugs to stabilise the lung inflammation & hope their antibody start to fight, as effective vaccine against it still months away. It can be from bio weapon but at this stage highly unlikely biological weapon as the known safety mechanism against it doesn't exist yet. Patient need to be in ICU isolation; in low tide vol pressure ventilator, put them in comatose/paralysis condition & bed positioning for now and hope for recovery. Isolation & containment are our best defense to avoid spreading, but very difficult. Be aware then prepare folks! - Fun though to read their RNAs fast/next level of sequencing.. China been tested, after the SARS - 31Dec detected, 7Jan already notify WHO & share with the world on how to ID them & hope to modify the previous work/research of SARS, MERS into the antidote for this nCov19 - make one, tested, approval process & mass production.. could be at least 12mths away. Hmn - usual we all need a timely reminder that.... your Health is the most important asset to safe guard as oppose to just talk about RE and Wealth effect from it.
Zachary recently asked for examples of uncivil behaviour. I suggested NZ driving.
I have just been on a 25 minute drive, in the space of 25 mins I saw three blatant examples of bad driving and associated ultra aggressive road rage.
Driving here is a shocker and getting worse.
Fritz,
"examples of uncivil behaviour". With almost one fatality a day last year, our driving certainly qualifies.I have just warned friends who will be here shortly for the first time to be ultra cautious. However, I can think of other examples of 'uncivil' behaviour. How about our apparently unlimited capacity to build crap? This proud No. 8 wire country builds thousands of sub-standard houses, schools and hospitals. How come? How about our youth suicide rate, or our domestic violence rate? Our childhood obesity rate? Our prison population on a per capita basis?
I find some 'optimism'-if that's the right word- in the Chicago Purchasing Managers' Survey. It gives the lie to Trump's boast of bringing back American jobs. I hope the trend continues,though I acknowledge that it will directly and negatively affect ordinary decent working families. BUT, if this can persuade enough of them to desert him and see him thrown out, then it will be worthwhile.
Right now, thanks to the stupidity and arrogance of the Democrats in bringing an impeachment case which they could never win, coupled with the extreme moral cowardice of Republicans, we, not just the US, have an untouchable monster in the White House. That scares me.
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