Global supply chain at risk from China stall; US PMIs dive; Fed says prepare for recession; most data soft; China car and property sales collapse; UST 10yr yield at 1.47%; oil lower and gold jumps; NZ$1 = 63.5 USc; TWI-5 = 69.6

Global supply chain at risk from China stall; US PMIs dive; Fed says prepare for recession; most data soft; China car and property sales collapse; UST 10yr yield at 1.47%; oil lower and gold jumps; NZ$1 = 63.5 USc; TWI-5 = 69.6
Wainui Beach, Gisborne

Here's our summary of key economic events overnight that affect New Zealand, with news markets are hoping for a strong bounce-back in China, but risk asset prices jump just in case.

Coronavirus deaths now seem to be topping out at 2248 and infections at 76,800. A week ago these levels were 1491 and 64,400. But are official tallies believable? And the same data shows the number of cases is now starting to rise outside of China. Economically, supply-chain risk is the next big concern.

In fact, the latest PMI data for the US reinforces these risks. Their factory PMI has stalled and their sevices PMI is now contracting in a sharp move lower. In this survey, new orders fell for the first time since this metric began in 2009.

In fact, a Fed Governor has called on Congress to plan for a recession.

And equity markets are back in fear mode. The S&P500 is down more than -1.1% so far today. European markets were lower by -0.6% earlier. And they followed key Asian markets that fell -1.1% in Hong Kong yesterday, Tokyo fell -0.4% (although Shanghai did manage a +0.3% gain on the day).

American home sales fell in -1.3% January from December amid a short supply of houses for sale although they are up almost +10% year-on-year. But the supply squeeze is likely to be short term as building permits and the number of homes under construction are at levels last seen 13 years ago.

Canadian retail sales were flat in December from November and up less than +2% in all of 2019. And Canad's economy is currently hostage to a major shutdown of a key rail network as indigineous political issues come to a head.

And there is more data showing Japan is suffering from a sharp contraction.

The Eurozone has bucked the negative trend however with its latest PMI's now at six month highs, and led by manufacturing.

And inflation is rising in the EU, up +1.7% year-on-year in January, a little less for the Eurozone.

Back in China, car sales have ground to a virtual halt, nationwide. Dealerships are closed and in the first week of February less than 1000 cars were sold nationwide. In 2019 this was a car market larger than the USA.

And China's property market has also ground to a halt. It is a nervous time for public policy officials who continue to reassure that the downturn will be temporary and there will be a strong bounce-back when the crisis passes. It is that 'hope' that is keeping commodity prices from collapsing.

In Hong Kong, updated data shows that almost -30,000 people left the City permanently last year, a sharp reversal from the +20,000 immigration gain in 2018.

In Australia, recent cases have highlighted growing 'wage theft' allegations where employees have been consistently underpaid. The Aussie payroll system involves huge complexity around laws and a myriad of union agreements. But a new survey also shows that overpayment is an even larger issue as most employers seem to err on the side of caution when things get complicated. The overpayments seem to be far larger than the underpayments. Employers almost never clawback such payments when they are discovered.

The UST 10yr yield is now just on 1.47% and lower by -4 bps since this time yesterday - and down by a sharp -11 bps for the week. Their 2-10 curve is less positive at +13 bps. And their 1-5 curve is much more negative at -13 bps. and their 3m-10yr curve has also shifted sharply more negative at -13 bps. The Aussie Govt 10yr is down -3 bps overnight at 0.94% and also lower by -11 bps for the week. The China Govt 10yr now at 2.93% and unchanged overnight. The NZ Govt 10 yr is unchanged overnight at 1.26% but that is a -12 bps weekly drop.

Gold has also made another sharp risk-off move, up +US$24 overnight to US$1,646 and that is accumulated to a +$62 rise for the week, a remarkable +3.9% advance on top of last week's +1% rise.

The Fear & Greed index we follow is now on the 'fear' side of neutral. The VIX volatility index is up to just over 17.

US oil prices are lower overnight at just under US$53.50/bbl. The Brent benchmark is also lower at just under US$58.50/bbl. But both represent a rise for the week. The US rig count is stable at its new low level.

The Kiwi dollar will start today at just under 63.5 USc and a -1c fall for the week. On the cross rates we have held 95.8 AUc. Against the euro we are also down -1c for the week at 58.5 euro cents. That means our TWI-5 is now at 69.6 and its lowest since November.

Bitcoin is now at US$9,740 which is a +US$100 rise overnight but locks in a -5.3% fall for the week. 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 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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In fact, a Fed Governor has called on Congress to plan for a recession.
More of the same failed nonsense:

Forward guidance that commits to refrain from lifting the policy rate from its lower bound until full employment and 2 percent inflation are achieved is vital to ensure achievement of our dual-mandate goals with compressed conventional policy space.7 To strengthen the credibility of the forward guidance, interest rate caps could be implemented in tandem as a commitment mechanism.

The Fed's Not Pegging Bond Yields, the Yields Have the Fed Pegged
LOL- the bond market has already capped 10 year Treasuries at recent record low yields.

...We just need to change the ratio of credit creation for productive purposes to credit creation for asset purchases, the rise of the latter over the past 40 years being the key driver of inequality. Link

The Fed is continuously selling treasuries to the banks at an undisclosed discount. The banks then immediately unload the treasuries into the market either directly or through some questionable derivatives. There's a lot of demand for treasuries despite the trillions dollars worth being pumped out in addition to the roll over.

Some might point out that the Fed is buying a lot of treasuries and holding them on the balance sheet but they aren't the entire market. If that changed the consequences would be uncontrollable.

Recently I've been wondering about all the old school trading desks being shut down and traders losing their jobs by the tens of thousands. They have been replaced by trading companies driven by algorithms. What happens when the algorithms take on a negative sentiment? How many of them are leveraged to multiples of LTCM? Are they behind the September bailout?

Bonds today are indeed very confident – that the next move the Fed makes will be a rate cut more and more likely as the beginning of at least another series of them.

From eurodollar curves to inflation expectations; look at those real yields on TIPS falling to the lowest since 2016.

Every piece of the bond market has turned against the prevailing view that the US or global economy is getting better. Long before the coronavirus, the actual evidence is piling up for the opposite case. Just like in 2018. Link

Take a look at the US Treasury curve or eurodollar futures; both are pricing for more Fed rate cuts to come. Not only is that, by the textbook, supposed to be dollar negative it is once more dead set against what Jay Powell (and Richard Clarida) thinks. If a recession “scare” had caused him three rate cuts he didn’t foresee nor want, what’s going on in the global economy that pulls some more out of the reluctant Chairman over the months ahead?

He might want to avoid looking at Europe and Japan. And that’s all before the coronavirus.

The dollar is rising sharply and causing all sorts of immediately negative consequences - as we can easily see via Brazil again. The disinflationary pressures are being expressed all over the place. The economic headwinds already intensified.

The main dollar exchange index, DXY, this week very nearly touched 100 for the first time in almost three years.

When Guido Mantega had originally complained about Ben Bernanke’s sinister dollar devaluation plan, the Fed’s second round of money printing, the index was 79.5 and by the time Banco had conducted the first reverse swaps it was 77.5. When the world was googling about currency wars in February 2013, though, DXY was 80 despite two more QE’s (and a Twist) in between.

It hasn’t been a straight line by any means, but there’s a reason DXY’s lowest point came on March 17, 2008 – the day Bear Stearns’ fate was announced to the world. For the dollar, and for the globalized economy, no matter how many monetary policy adjustments and QE’s, or whatever trillions in bank reserves they create, it just hasn’t been the same since.

It’s not currency wars; this is the currency war. Link

Yes, once a few sell points are triggeted it can all happen automaticly and at pace. No chance of the closing the barn door or slowing down the run away.

China seems to be Xi battling science with pyshology.

WHO, are less cherry discussing other countries - non funding countries.

Asked on Friday if the new cases put the crisis at a tipping point, the World Health Organization director general, Tedros Adhanom Ghebreyesus, said the “window of opportunity is narrowing, so we need to act quickly before it closes completely”.

https://www.theguardian.com/world/2020/feb/21/coronavirus-window-of-cont...

Question. If you were from Huhei, working holiday in NZ, and visa finishes next month. Would you go to Hubei?

15
up

No - I would be signing up for a 2hr a week English course at one of the ""high" end education facilities we have in Akl like everyone else does to get a job at the petrol stations.

Just overstay and get a slap over the wrist.

Tensions are clearly growing higher over the Coronavirus outbreak. I'm glad that Jacinda stood firm to the Chinese Ambassador about keeping to our current health restrictions in place and not relaxing them when they put her under pressure. Though what just happened in the Ukraine is shameful: BBC article: Coronavirus: Ukraine protesters attack buses carrying China evacuees. "Dozens of protesters in a Ukrainian town have attacked buses carrying evacuees from coronavirus-hit China". https://www.bbc.com/news/world-europe-51581805

Haven't we got a right to take care of our own people first? Why kow-tow to another country & allow their interests to overrule ours? If it had been National & under previous PM, then perhaps yes. Good that Jacinda stayed firm in her decision to prioritise the well-being of NZ.

Institutionalised actions, beat the travel ban.

https://amp.theaustralian.com.au/higher-education/western-sydney-univers...

Chinese travel agents have opened up a backdoor.
https://youtu.be/aQI5_DfnWJc

Imagine if the shoe was on the other foot.

NZD back to .49cents this year for a short period and NZX back to 8000 points to as markets come back to long term values.

15
up

So why hasn’t the Rock Star economy kept on rockin? What exactly has changed down under here, punching above its weight, at the far end of everywhere. Or were the rock stars, Fonterra, Fletchers et al, just a set of Gary Glitters? Amazing what the MSM can contrive and concoct in order to sell some headlines isn’t it.

Garry Glitters! That's a bit harsh.

OK concede a bit on that, but it was hard to resist the parallel thought that “all that glitters is not gold” which does ring true enough for those two former sacred cows one would have to admit.

I wonder if we might approach 40c this time. Last time the shit hit the fan we were protected by Chinas growth but this time they are at the core of the storm.

Australia are even more exposed to China than us and Japan is the next cab off the rank Corona wise - together that's 3 of our top five export markets (nominally 46% of total trade).

I think market fear/panic will get us to 50c but if you factor in actual trade/economic damage this time round I think we'll go lower.

Hmmm:
The researchers found that on a typical day, the suspected bots produced 25pc of all posts about climate change in the sample of tweets analysed.
Some climate change-related topics saw as many as 38pc of tweets written by bots, the researchers said.
The draft study carried out by researchers at Brown University in the US analysed 6.5 million tweets...
https://www.telegraph.co.uk/technology/2020/02/21/quarter-tweets-climate...

True or false? Elite propaganda or is the research itself part of a smear campaign? If true (and the source does look sound), it is a worry.

Yesterday I had a messaging conversation with a "bot", and I got what I wanted. It was about a new internet connection. It was scheduled for next week. I gave it two choices, yesterday or hold off for two weeks. It worked it out and I got what I got the connection done yesterday. AI is getting pretty good.

The start of the Draft Hilary campaign?

US politics is just painful to watch. They have destroyed the middle gound and are now just out to destroy each other. I read that Hilary outspent Trump 10 to 1, ordinary americans must really despise her.

I guess Trump was the only candidate who was independent from the EverWar Democrats and EverWar Republicans. I was astonished when he stood down the Iran strike when the bombers were in mid- flight.

Yes Trump was certainly something else again, still is. But it is that word independent that resonates, and in more ways than one. The Republicans were as desperate to regain power as they were terrified of Trump running as an independent if he did not get their nomination, thus splitting their support. It all sailed on from there in the most unlikely juggernaut that still today seems unimaginable.

I take it you didn't read the study? I can't imagine an esteemed institution like the Telegraph would post half truths would they?

"Posts in support of action to protect the environment were far less likely to come from bots. Researchers found only 5% of tweets advocating such action came from this type of software."

Seems like Iran may have a huge Coronvirus issue.

Also Cases in South Korea doubled in a day

It is Crucial for the world that they both contain the virus for the sake of the rest of the world. I have faith that South Korea can do it but I cant say the same for Iran...

https://edition.cnn.com/asia/live-news/coronavirus-outbreak-02-21-20-int...

Iran says coronavirus has spread to several cities
From CNN's Fred Pleitgen in Tehran

The novel coronavirus has spread to several Iranian cities, Minnou Mohraz, a member of the National Committee for Infectious Diseases at the Ministry of Health said today.

“The spread of the coronavirus started in Qom and has reached other cities in the country like Tehran, Babol, Arak, Isfahan, Rasht and other cities due to people traveling. There is a possibility that it exists in all cities across the country,” Mohraz said.

Yes the true nature and replication rates will now become evident by "real" test counting outside of China, you will see exponential case numbers rising, this is actually what is still happening inside China, but CCP is in control of the numbers to avoid panic, its TOO LATE......

Reports that the US is holding back and avbig back log of samples to process.

Don’t suppose any similar stats out of North Korea. Bit of quandary really those nations that fall out with the USA, Syria, Iran to name two, find the economic and political support of China rather handy which creates the requisite interchange and travel, dignitaries, military, engineers, builders, bankers, workers on and on.Then along came a virus

MoH

Current status
There are no confirmed cases of COVID-19 in New Zealand to date. The likelihood of an imported case in New Zealand is high, however the likelihood of a widespread outbreak is low-moderate.

The Ministry of Health is closely monitoring the situation and following guidance from the World Health Organization. If any public health measures are needed for this virus, we will advise.

For COVID-19 health advice and information, contact the Healthline team (for free) on 0800 358 5453 or +64 9 358 5453 for international SIMS.

Peak prosperity
https://youtu.be/rnJ2iLZd7HY

That's next level info onbthe video. No chance to contain it or the global economy now.

Government doing a good job Henry...

If other countries have not reported coronavirus cases, it does not necessarily mean that there are none. It may well be that they lack the resources to diagnose.For all we know, the extent may be wider than what is currently established.

https://www.smh.com.au/politics/federal/gps-test-bali-travellers-for-cor...

There a good comparison between the impact of similar outbreaks, Sars and the Mers virus in comparison to the Coronavirus in this BBC article.
BBC Coronavirus: South Korea confirms huge rise in cases.
"South Korea says the number of new coronavirus cases in the country has more than doubled in one day. Officials said on Saturday that 229 new cases had been confirmed since Friday, raising the total to 433". https://www.bbc.com/news/world-asia-51596665

At least it's raining.

yeh.. nah less than half a mm in Bay of Islands so far -(

HB hasn't had any

just got 15ml

Hell of a lot of open homes this weekend Eastern suburbs.

Are you going to any @loveyourwork. Would be interesting to get feedback on numbers attending. A reasonable amount of new listings over the last week but a lot of old stock still to sell too in the Eastern Suburbs.

Yes Roger all leading scientists are in on the conspiracy ..its all a fake and a plan by the elite to make us all fearfull and toe the line. Heating planet popycock.

The models are not science.
Priorities are missing.
Cost considerations not made.

The EU is getting 3 cents benefit for every EURO spent.

Our governing government is planning for us to spend $5 trillion dollars to slow global warming by 23 days.

https://youtu.be/F_ahqlByHXM

And Shaw & Co don't expect to change climate anyway.
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.”

It is an optimistic view for a man who is reluctant to use the word “optimism.”

Surprisingly if you read the study or not the Telegraph article only 5% of pro climate action tweets were from bots... Very different to the implications of the article headline/post.

I saw a comment last week from someone showing quite a bit of insight into the current situation.

"The NZX dips on Friday with a bit of profit taking in case of worse news over the weekend".

Now we have the bad news in the middle of no trading, South Korea! and Iran!, Monday could very easily be a wake up for some and welcome for the "Warren Buffets" of this world. How many Buffett's are out there, thousands I would guess, all betting on a big correction , as small corrections are not worth the cost of waiting for.

Don't forget Italy. Could be ugly on Monday, or if the recent past is anything to go by could be another record high - I mean why not right?

Terrible wifi out here in the sea, hit the button once and up it pops three times

"

And again

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