Here's our summary of key economic events overnight that affect New Zealand, with news investors are running for the hills.
Fear is gripping the market today. And it is the fear that world trade is under threat. Wall Street is down sharply. Gold is up sharply. Investors are piling into benchmark bonds. Rate inversions are larger.
The first signals started on the NZX yesterday, which was down -1.8% and the ASX200 fell even harder, down -2.3%. Key Asian markets took the cue with Hong Kong down -1.8% and Shanghai was down -0.3% (despite 'home team' support). Tokyo was closed, so expect a very sharp drop there when it re-opens today. Then the Europeans took a bath with most markets down -4% overnight.
Wall Street can't ignore the signals. In midday trade it is down a massive -100 points or -3.6%, a move that wipes out all of February's gains. On that basis, it's not critical, but it is a fearsome signal all the same.
It is a market sentiment shift not supported by some domestic data. The Chicago Fed's National Activity Index for January improved from December, even if it is still quite negative. The Dallas Fed's regional factory survey for February is also somewhat positive.
North of the border, Canadian wholesale trade in December also showed a modest improvement.
Across the Atlantic, the IFO sentiment survey also reported a pickup in sentiment for February. But it is hard to see these levels being sustained if world trade falls further.
In China, the drive to restart the economy is also coming with rising fear. Putting large workforces back to work too early risks mass reinfection and there is evidence this may be happening in steel mills in Wuhan.
The latest compilation of Covid-19 data is here. There are now 2208 cases outside China. A week ago that number was 756 so it has trebled in one week. China may be getting on top of a situation its leader calls 'grim', but outbreaks elsewhere, especially now in South Korea and Iran, are unsettling. The fear of a pandemic is much greater than a one-country epidemic.
One reason for the selloff today is that investors are becoming increasingly nervous about the ability of central banks to protect them from the economic impacts of a pandemic virus. It will be up to governments to come up with targeted fiscal policies now and these could well have beggar-thy-neighbour aspects in the rush to 'do something'. The recent tariff war showed how easily politicians succumb to that sort of cheap policymaking.
Savvy investors normally buy-the-dips, but there is evidence this may not happen today. Warren Buffett isn't buying, although he is holding.
In Malaysia, political turmoil has gripped their Government forcing their 94 year old prime minister to resign and call early elections. He carries on in a caretaker role.
In Australia, the security and reliability of their power grid is now at a "critical" status even as power prices start falling. (See page 8.) Climate change, surging green energy sources, and faulty regulation are all conspiring to undermine what they have in place.
The UST 10yr yield is sharply lower again, now just on 1.36% and lower by another -11 bps overnight. Their 2-10 curve is less positive at +12 bps. And their 1-5 curve is more negative at -15 bps. and their 3m-10yr curve has also shifted much more negative at -23 bps. The Aussie Govt 10yr is lower at 0.89% and down -4 bps overnight. The China Govt 10yr now at 2.88% and down -5 bps. The NZ Govt 10 yr is at 1.22%and that is a -4 bps overnight fall.
Gold has had another sharp rise today, up +US$30 to US$1,673. The yellow metal is now up more than +10% since the start of the year. (And +21% in NZ$ terms as our exchange rate has fallen away over that period.)
US oil prices are also sharply lower overnight at just over US$50.50/bbl and that is a -US$3 drop. The Brent benchmark is also lower at just under US$55.50/bbl. It is all driven by demand fears.
However, the Kiwi dollar will start today unchanged at 63.5 USc, cementing in last week's fall. On the cross rates we are up slightly to 96 AUc. Against the euro we are also unchanged at 58.5 euro cents. That means our TWI-5 is still at 69.5.
Bitcoin is now at US$9,889 which is a -1.9% fall since this time yesterday. 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 ».