Here's our summary of key economic events over the weekend that affect New Zealand, with news everyone is struggling to understand how the China virus impacts will play out.
China's financial markets may re-open later today. 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.
A financial market re-opening may bring a sharp sell-off, although Beijing will be pulling SOE strings hard to mitigate or prevent that. However, the cost of any Beijing put will be very high.
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. But Fonterra is reportedly stockpiling product. And meat works are turning away livestock for processing. The cost of some foods might drop sharply locally as some short shelf-life product is quit.
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. And China has also now reported cases of the deadly bird flu virus, also in Hubei province. But no humans are affected by that so far.
Other than its full mobilisation to fight the virus, their financial authorities also announced an unspecified but massive program of state support to steady the economy and help firms that will be under immediate stress. It includes a NZ$270 bln of liquidity support for financial markets, but only NZ$33 bln on a net extra basis.
And another current indicator is generating a warning. The Baltic Dry Index is now at well under 500 after being at 1500 in mid December. And it fell even lower in some specialised markets for ore carriers.
Wall Street fell sharply at the end of their Friday session as investors came to grips with both the economic fallout from the China virus, and 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 was down a sharp -1.8% and more than a -2% loss for 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. Boeing's woes aren't helping.
North of the border, Canada reported its Q4 GDP growth at +1.5% in November, a small rise from October.
In Europe, the 28 countries of the EU had economic growth at a six year low in 2019, up just +1.1% in the year.
In Australia, their Government has abandoned their operating surplus target, after having [falsely] claimed they were already were in surplus. Support for climate remediation and disaster support, and the China virus fallout, now means their economy will take a "significant hit".
The UST 10yr yield will start today at just under 1.51% and that means over the past week it has declined -19 bps and that is on top or the prior week's -16 bps drop. It fell -41 bps over all of January. Their 2-10 curve is little-changed at +18 bps. But their 1-5 curve is now more negative -13 bps, a sharp switch from positive +7 bps at the start of last week. And their 3m-10yr curve has also turned negative, now -4 bps in a sharp turn because it was a positive +20 bps this time last week. The Aussie Govt 10yr was down -6 bps bps in final trade last week to 0.91%, and a -25 bps fall in a week. The China Govt 10yr is supposed to start trading again today and recall it ended just before their holiday break at 3.03%. And the NZ Govt 10 yr will open at 1.31% and that was a -15 bps drop last week.
Gold is up to US$1,589/oz as risk perceptions rise. And this is despite data from the World Gold Council that 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.
US oil prices are still falling, down to US$51.50/bbl and that is a -US$3 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 even more to just under US$56.50/bbl.
The Kiwi dollar fell -2.3% last week and will start this week at 64.6 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 a little higher from where we left it on Saturday, up +2% at US$9,428. 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 ».
72 Comments
It will be interesting to see what the death toll from the virus is for Feb 02. Notably one fewer on Feb 01 compared to Jan 31.
It's disappointing to see that China has only "temporarily" banned the selling of live animals at food markets. This should be immediately and permanently banned. We wouldn't allow the selling of animals like hedgehogs and possums for human consumption in any of our markets would we?
It is illegal to sell game meat unless it has been inspected.
The process of getting ot inspected is difficult. GPS the location, time it was shot, temptures taken, the head needs to stay attached, heart / liver / kidneys etc need to remain attached, cooled in an approved certified chiller, delivered to a location so it can be inspected and paid for.
The extra weight makes it difficult to carry out unless you can drive to it. Licenced chillers that allow game meat are hard to find, you need to have all the bells and whistles GPS, thermometer, access to a meat inspector.
Yes there are reasons for public health concerns, TB but mostly 1080 and other poisons. Also as Farm Corp is the largest producer of farmed venison easy and cheap wild venison could cut into their profits.
This paper on HIV1 inserts was rushed and subsequently withdrawn (https://doi.org/10.1101/2020.01.30.927871) but nevertheless a Harvard PhD feels confident enough to risk his reputation, discuss the paper, and confidently claim nCoV was engineered. https://www.youtube.com/watch?v=zgR18GtO_1Y I'm sure that in the fullness of time we'll have consensus from the scientific community. That being said - the paper was withdrawn and that dude is just some random youtuber - could be a mail man for all I know.
It is not, for any Biological engineered germs for the purpose you've mentioned? - there's always safety mechanism to stop the trigger, this one doesn't have it yet - And it's not for the Chinese best interest to have it spread.. locally. It's a clear RNA mutated virus from live/rare exotic animals (which sadly Chinese society still buy into the old traditional assumption believe here).. the tiny germs from those exotic animals, when entered a unique/different humans receptor protein, it immediately have limited live options.. die or mutate to survive..in case of SARS the animal carrier is the Bat, MERS the animal carrier is the Camel, now this fella nCov19.. not proven yet, but the clear genome code tracing narrow it down to the snake. The thing is as compare to the Hokitika wild food festival, have you travel around China? you'll be amaze as how hocus pocus believe to be eaten, in what state.. the wilder the better. Any Chinese will tell you the different of medicinal prices for a bear bile extract, or Tiger penis (usually the creature won't survive without it).. with the one coming from harvested farm alike breeding process, for sure they'll slam the door (with nice spit to you).. ouch that sputum wait till it's dried & blown by summer winds - if you opened your mouth mentioned about using blue pills instead.
... in the absence of scientific explanations , a concerted programme of misinformation and xenophobia are the best options .... and , when you breathe ( if you still choose to do so ) , inhale only when facing away from China ... but you can exhale in any direction ...
Nothing to see here, move on.... it's just the flu.
https://youtu.be/ni0GhVA0F_4
Two weeks ago some Queenstown and TeAnau hotels were adding a $100 per night surcharge to all bookings for the period from just before to just after the Chinese NY. We booked at a motel down the road instead, as a 30% price hike seemed a bit steep. I have very little sympathy for tourism operators who think they can get away with that kind of behaviour and this week cry poverty.
What have you seen in Queenstown?.
I have been told first hand of people applying for jobs in Auckland and also being asked for $8,000.
Also told first hand of working and being underpaid in Christchurch.
Room rates, what would you do. Airbnb has many people backs down there, a layer of fat overhead. Also the other booking apps. The 20% fee is too much.
The hotels/motels run multiple rates depending on the channel. What most of us do is go to places/people we know, and take cash to reduce their overhead costs.
adjective
1.
(of a window or building) having closed shutters.
"visitors are met with rows of shuttered shops and boarded-up restaurants"
2.
(of a window) fitted with shutters.
"each house is a work of art, with elegant balconies and railings, ornate shuttered windows, and complex tiled roofs"
Mmmm. I'm not sure.
Returning students may have that flexibility, but I'm unsure about new students...
I'm 100% sure the travel restrictions will be lifted within 2 weeks either on good information, or bad. For an "anti-business government", they sure do enjoy pandering to the interests of private enterprise..
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.
I think using Sars as model is not very accurate we have already surpassed Sars/cut all flights in the space of 2 weeks not 8 months.
I would predict more like 1-2 percent minimum if it keeps going into March we are in uncharted territory.
While I think there is a lot of alarmism over the virus/'contagion', I think comparisons to influenza are at the other end of the spectrum.
Influenza is a virus we understand well; it's spread, incubation period, personal risk factors. There are also vaccines. Furthermore, healthcare institutions are well suited to treating the virus.
This is a stark contrast to the coronavirus. From an empirical epidemiological perspective, essentially nothing is known about it.
Also, large proportions of the population have resistance to various strains of flu because of previous infections - for instance immunity from catching "Russian flu" in the outbreak of 1977 meant that some older people had immunity to the similar H1N1 swine flu epidemic.
AFAIK, no one has immunity to this Coronavirus.
CRF for seasonal flu is nominally .01%, current estimates for this virus are around 2. This is likely to drop but is substantially (200x) higher with similar transmission rates. Additionally, hospitalisation rates are running at around 10-20%.
Some estimates put the actual infection rates at around 100k due to non detection in asymptomatic/low impact cases - if that is true then we're still looking at around 20x worse. Finally the average time from symptoms arising and death is 14 days if you look back 14 days at the infection rates (or even just a week) it's clear that the worst is ahead.
Is this the zombie apocalypse? Clearly not, but it's hardly a trivial matter. You don't build 2400 beds worth of emergency hospital in two weeks because some granny's caught a cold.
There are some papers coming out regarding last week. The R number is still moving round.
https://youtu.be/z05ZrMfKUDc
And
https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda759…
I think the economic impact from nCoV will be far far greater than SARS or H1N1. The 2002-2004 SARS scare came at the end of a significant market decline following the dot com bubble. The 2009 H1N1 swine flu scare came at the end of the GFC. In both cases markets were undervalued. Markets have now had a decade of gains and are now overvalued. The current nCoV hasn't even started yet outside China.
I was watching CNN last night and they had some "experts" saying that a ban on people traveling from selected areas in a health crisis like this doesnt work and I thought to myself, that is the most absurd thing I have heard!
We should be banning any passengers that have been in china over the last month from entering until this crisis has run its course. If it gets entrenched here it will devastate our economy, just like it will be doing to China. Especially tourism!
Cant imagine anyone wanting to holiday in China right now.
Excuses, excuses by the Fed.
https://youtu.be/2tr_n8AwTqM
Macrovoices.
Here is presentation style explanation, visual.
From Bloomberg (!) on Thursday:
With the coronavirus outbreak threatening to disrupt the Chinese economy, concerns about the business cycle are undoubtedly a factor. But more important still are emerging doubts over the ability and commitment of policy makers to shore up growth and spur inflation. Link
A real taste of the connected world without China, I guess. Actually I think it is not necessarily a bad thing. It can give everyone a chance to pause and reflect on the mutual reliance built during past decades. It depends on how big and how long the disruption to the global supply chain is going to be, people may have to start looking for alternatives, which can be a very bad news for China...
Was working in Pusan S Korea early 2000s when the local English news paper reported that the local disease research facility had sold its dead test animals to one of the local "restaurants". I went cegetatarian for the rest of my swing.
S Korea then is probably where Chinese standards are now.
Cars not in use, ships not running.
Not sure on the total lock down numbers at the moment but it was 60 million not going out of their house using oil, plus whatever percentage of a billion peoplw not traveling overseas.
A vlconservative estimate could be a half liter of petrol per day less use over a population of a Billion. 500,000,000 less liters per day.
In a surprising move the Greens are without a leader.
Di Natale always came across well. His voice will be missed.
https://www.google.com/amp/s/amp.smh.com.au/politics/federal/greens-lea…
Party wise he got the one member one vote going. But there doesn't seem to be any succession planning.
Too late for NZ, even as this one recover later? - We only believe to put our whole stakes of eggs in one basket, to produce, to export, to import, to consume etc. - NZ already liked a developing fetus inside mommy's womb.
Can be aborted, can inherit FASD, DS, SB, MS, Cancer and any others - Mum could have any issues, new NZ born seems to be normal (alas JK said, albeit still with that Union Jack).. yip, 'seems to be normal' those are key words. Later stage is for another time..
For light reading, when the economic news bored you:
Beijing team disclose three infected patients, study their lungs liquid (Bronchoalveolar Lavage).
Divided the liquid into two;
First one for potential isolation of Pneumonia causing particle.
Second part is to isolate the genetic material .
To prove something that causes damage to the lungs; they took lung cancer cell from recent surgery case to test the regrowth of lung cell, in controlled environment, mixed with the lung liquid from the above patients then push it into filtration towards the sample lung cell & other body tissue cells. Then monitor the Cytopathic effect (the damaged lung cells but not on any other tissue cells). Bingo! something caused 'things/inflammation' to the lungs. But what is the form of this 'things'?
They check the genetic material using NGS technique (multiply the available genetic samples) to do the comparative sequencing against database of germs (bacterial, viruses & fungii), what do they found? the material which close resemble to RNA type, coronavirus that caused SARS (2003) & MERS (2012) both originated from Bat coronavirus, but this one experiencing the genetical recombination (at this stage you may call it as 'mutated'). It's similar BUT not identical. One thing for sure, they're carrying the same back bone of molecular structure, Bat_SARS-like_coronavirus|bat-SL-CoVZC45. Genome of coronavirus wuhan 2019-NCov is not idential to coronavirus SARS & MERS.
This is where the case get interesting. Coronavirus got two important genes; Firstly, RDRP gene (RNA dependent RNA polymerase). This gene is functioning to multiply the RNA virus for the virus itself. When you check, the structure still the same. But there's a distinctive differential in one gene that play important role for the infection, we called gene S (spike). Corona virus naming is based on multiply horns which resemble crown. These multiple horns or Spikes is the actual coronavirus protein which functioned to attach itself to the target cell.
The original Bat coronavirus unable to infect human as their S gene structure protein coding is unable to pair up with the surface of human cell protein.
The base of coronavirus wuhan 2019-NCov contains S gene structure that has key to unlock protein that able to target human cell. That is the critical differential sequence for those clever scientist to study & develop an effective Vaccine or Inhibitor that able to block the infection process.
In the case of SARS coronavirus, the gene S structure code able to tie up to human receptor protein ACE2(Angiotensin Convertase Enzyme), We prove the correlation by re-engineered the Mice which no longer has ACE2 protein on their cell surface, and it's protected from SARS coronavirus infection. Cell that don't have ACE2 protein reception has avoided SARS (Severe Acute respiratory syndrome).
For the case of MERS coronavirus, the gene S tied up to human receptor protein DPP4(Dipeptidyl Peptidase 4).
As well as HIV/AIDS virus, it tied up to infected Human T cell via combination of specific receptors which are: CCR5/CXCR4 (CC chemokine receptor).
The scientist hold the spread of HIV cell infection in human AIDS patient by variant of cell transplant within the gene structure of CCR5 code.
This coronavirus wuhan (now named 2019-NCov) only resemble of 68% match to the other coronavirus Bat variant (including SARS & MERS), which means? there are around about 30% structural gene S differential that able to target the host protein. Why differ?
RNA virus such as coronavirus usually have the level of 'typo error' on their level of replication process/enhance their genetic numbers, as compare to the normal DNA virus, which knowingly has a proof reading enzyme. That 'typo error' is the answer as to why they are prone to mutation.
From deduction of isolation process, it is 'estimated' that if SARS came from Bat, MERS came from Camel, then this NCov-19 closer probability is came from Snake.
Now, don't ask me as why Japanese loves whale, Chinese loves everything wild, or other nations on this planet liked to preserve their unique diet. We're going into long study of Anthropology etc. etc - Now you know even the animals sometimes have odd diet, carnivore species.. specially avoided certain species to be eaten etc. Personally, I don't eat those that has odd number of fingers, those that has fangs etc. - If I said those to the Chinese? they'll most likely said back.. 'wak yu' to me. Let's just stick to what we love in this beloved interest.co.nz - Rock on Ponzi!, who cares about anything else in this lives. Buy properties more - guaranteed you from any terminal illness/any other health issue for sure.
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