Here's our summary of key economic events overnight that affect New Zealand, with news equity markets are trying to decide which way to go on the virus panic.
But first in the US, sales of new homes were up strongly, almost +19% higher in January than the same month a year ago. New home sales are much less than 10% of the residential market, but all the same, this was an impressive result. American home loan rates remain low and supportive of the real estate industry.
The latest compilation of Covid-19 data is here. There are now 3181 cases outside China, a rise of +250 since yesterday. South Korea and Italy are now the real hotspots. A week ago that number was 1097 so it has now almost trebled in one week.
Japan is also being hit with both the virus and the outsized economic contagion effects. Some think it will push Japan into recession. And the news gets even worse for Japan: an IOC official says the Olympics would be cancelled if the risks were too high, rather than moved.
Hong Kong's government is trying economic incentives to battle virus panic, offering a cash handout of HK$10,000 to every resident (about NZ$2,000), tax breaks and a raft of subsidies in a NZ$25 bln package (4% of GDP) aimed at easing the financial burden on citizens and injecting new life into an economy ravaged by months of social unrest and now pandemic fears. But it will see them book a huge and uncharacteristic -NZ$30 bln budget deficit in 2020.
In China, local governments have announced an eye-catching total of more than ¥11 tln in "investment", mostly in infrastructure projects, in an effort to boost the economy that has been hard hit. That is a startling NZ$2.5 tln in projects, worth more than 30% of Chinese GDP.
The stock market panic over the economic impacts is dividing into two camps. Asian and European markets are still showing signs of fear. Yesterday, Asian markets fell a further -0.8% while overnight EU markets slipped again too although they did show signs of stabilising at the close. Today, Wall Street has brushed aside fears and turned higher, and at one point recovering about half of yesterday's dump. But as the session rolls on some of those gains are being given up again. Update: It has slipped back into negative territory in afternoon trade.
In Australia, offical data reports large falls in construction completed in the December quarter. They were especially tough for residential building and came in larger than were expected.
The UST 10yr yield is little-changed from yesterday, now just on 1.33% and still at an all-time low. (Update: It has since slipped down to a new low of 1.31%.) Their 2-10 curve is still positive at +16 bps. Their 1-5 curve is less negative at -13 bps. but their 3m-10yr curve has shifted more negative at -26 bps. The Aussie Govt 10yr is holding at 0.90%. The China Govt 10yr now at 2.86% and also similar to yesterday. The NZ Govt 10 yr is now just under 1.20% and that is also very similar to yesterday's level.
Gold is down -US$5 to US$1,642/oz.
US oil prices are lower at just over US$49/bbl. The Brent benchmark is also lower at just on US$54/bbl. It is all driven by demand fears.
The Kiwi dollar starts today lower at 63 USc even. On the cross rates we are up to 96.1 AUc. Against the euro we are down to 57.9 euro cents and that's our weakest against the euro in three months. That means our TWI-5 has dropped below 69.1.
Bitcoin is now at US$8,735 which is another big -6.3% fall since this time yesterday and a -10% drop in a 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 ».
83 Comments
Singapore charges couple for evading coronavirus control measures, and strips another man of his residency (https://www.bloomberg.com/news/articles/2020-02-26/singapore-charges-tw…). Never happen here in easy-going old NZ!
Meanwhile, representatives of our 'thought leaders'/useless elites (NZIER in this case) publish research suggesting that because we haven't done a great quarantine job so far, that we should just abandon all efforts and open up, to all get infected now so that we don't overload the health system come winter (https://www.newshub.co.nz/home/new-zealand/2020/02/covid-19-high-chance…)!
Problem is, the health system is almost overloaded with our regular problems anyway (https://www.newshub.co.nz/home/new-zealand/2020/02/stay-away-doctors-wa…) (Mr T linked this one yesterday).
Bloody hell, what a country.
China is pushing to resume bau, so I won't be surprised that all the domestic stats look fab right now. Meanwhile, more countries are reporting confirmed cases and deaths. China can cook the book whatever the way they want, tho it looks like a pandemic is forming.
No matter what it does there at the present I can see a time where China gets its disease back again from other countries. Especially with attitudes like:
https://www.stuff.co.nz/travel/news/119575877/chinese-ambassador-hits-o…
Look how China treated Mexico.
In 2009, in the wake of fears of a worldwide swine flu pandemic, thought to have started in Mexico, relations between the two countries cooled substantially over China's decision to quarantine some seventy Mexican citizens, despite none of them showing symptoms of the virus. The Mexican government responded with outrage and, although China imposed the same measures on four nationals from the United States and more than twenty from Canada; dubbed the act discriminatory. Mexican Foreign Minister Patricia Espinosa used such terms as "unacceptable" and "without foundation", and advised compatriots not to travel to China.
https://en.m.wikipedia.org/wiki/China%E2%80%93Mexico_relations
Internally china news often runs a them & us narrative. Produces weird understandings.
Noting that on the same day that the Chinese Ambassador made those statements, China was instigating sterilisation of it's actual cash supplies, as a precaution.
However, according to the ambassador NZ isn't allowed to take precaution like controlling entry to our country. China is so arrogant.
Missy. You contrast two groups with great difference in political psychology (& other pyscholgies).
For you, thought experiment, don't assume they are the same. The key here is this frees nz from acting as if they were (and the sucker punch that the others operatives wish us to act as though they were of the same pyschology).
Maybe binge watch the Sopranos to see dueling pyschologies.
"not absolutely accurate". absolutely is superfluous. Chinese data are complete lies, nothing but a propaganda tool for the politburo to manipulate Chinese and foreign media. So so many sources of information show the lie. I don't doubt that infection rate has slowed up, but reality is 10-100x official numbers, eg today sees leaked document from Shandong Province shows reality up to 52x:
https://www.theepochtimes.com/leaked-documents-reveal-chinas-shandong-p…
We really need to use South Korea as a barometer of how things are going to pan out.
But overwhelmingly the biggest concern is Iran, who is reporting 19 deaths Which would indicate 1000+ infected but are only posting 139. There are reports of 40+ dead in Qom alone. The Iranian Govt isnt doing any containment efforts.
A study a couple of days ago estimated apprx 20K infected in Iran, It is pretty much a runaway train and everyone needs to block anyone coming from Iran.
Interesting how the cases in northern Italy are spreading throughout the world
1) a traveller from Northern Italy travelled to Brasil and was found to be infected. That person is patient zero there and is in quarantine.
2) an infected couple from northern Italy, travelled to the Canary Islands, and now all the guests in the hotel complex are in quarantine.
The Ireland v Italy six nations rugby match has been cancelled (says postponed but unlikely to find another date in the window) as a result of the Italian outbreak
https://www.theguardian.com/sport/2020/feb/26/ireland-v-italy-six-natio…
Gold is down -US$5 to US$1,642/oz.
The UST 10yr yield is little-changed from yesterday, now just on 1.33% and still at an all-time low.
At times like these, gold is strongly, inversely related to Treasury yields. In the conventional sense, gold is talked about as an inflation hedge. History proves that it is a poor one. That’s not what gold truly protects against, as I wrote the last time the curves all looked the way they do today:
Just as in the bond market, the gold market knows central banks are, outside of sentiment, powerless (moneyless monetary policy). That’s why as gold moves higher inflation expectations – especially longer run expectations – have cratered. Bonds as gold know what’s coming from officials, and yet both are discounting monetary policies because all the evidence says that no matter how big the talk monetary policies are only that.
Like 2008, the big error isn’t the Fed going way too far with stimulus, the big error is in thinking anything the Fed does is stimulus. And that’s precisely the backdrop and predicate condition for serious instability. We know what happens when liquidity turns sour without any effective backstop at all because unlike the mainstream media these markets haven’t the luxury of looking the other way and taking the word of Fed Chairs at face value. Link
Er, yes, can't argue with what he says, but it is a very US centric view (unsurprisingly). The paper gold market is dominated by COT futures positioning, followed by GLD holdings. Data is available (on a lag). The physical gold market is vast, broad and opaque. The West has a quaint but misguided trust in our institutions and their currencies, the rest of humanity has no such illusions. Those in power will always seek to steal the wealth of the rest, by whatever means they can get away with. Which is why people across Asia and Europe and Africa and South America like to keep their physical gold holdings private.
Here our corrupt leaders and their lick-spittle toadies steal quite openly and legally by transferring wealth and power to their supporters as a tribe, much more sophisticated than envelopes stuffed with cash given to individuals. Just as destructive to society, it just takes a little while before it turns violent. What do you think RMA application fees are in reality? A ritual payment to the tribe of rubber stampers to consider your request for the approval of your project. Pay to play. Ritual kow tow and "gift". It puts food on their table and they get to eat first. It takes food from your table and you can only eat what is left. This is the result of that process:
https://www.theguardian.com/world/2020/jan/28/french-police-clash-with-…
How we stay blind to the story of power
Re: Assange case:
Woolwich Crown Court is designed to impose the power of the state. Normal courts in this country are public buildings, deliberately placed by our ancestors right in the centre of towns, almost always just up a few steps from a main street. The major purpose of their positioning and of their architecture was to facilitate public access in the belief that it is vital that justice can be seen by the public. Link
The Decline of the West into Tyranny and Violence would seem an apt headline.
We seem to have chosen the Roman/French/American/Statute legal system over the Danelaw/Common Law system. That is, you are guilty until judged innocent.
It was money printing following the French revolution that led to mass guillotining of ordinary shopkeepers for putting prices up to try to keep up with inflation. Followed by the killer of Frenchmen (and millions of others across Europe) Napoloen Bonaparte. It is a sad road.
Hence my reference to the RMA, which is a guilty until judged innocent system. It is based on giving power to whoever decides what you are allowed to do. As Stalin put it, it's not the votes that count, it's who counts the votes.
The Danelaw system, the basis of a parliamentary democracy, is that individuals can do what they like except for things that are expressly forbidden. You are innocent until proven guilty. The bureaucrat tribe hate it (although they are clever lick-spittles with silver tongues and experts in doublethink and self deception to boot).
his latest book will be a hit too
Rich Dad, Poor Dad, Bankrupt Dad?
https://www.forbes.com/sites/helaineolen/2012/10/10/rich-dad-poor-dad-b…
Question for thought. Is Kyosaki in the business of
1) property investment?
2) selling the books that he has authored?
3) creating a franchise platform "Rich Dad, Poor Dad" and receiving a royalty on that franchise in different platforms such as books, property investment seminars, property mentoring, board games, etc?
In the last cycle, at least one property mentor went bankrupt. Also, I heard some students got into financial stress, as they unexpectedly got caught out in the last cycle.
Would expect the same in the next downturn. Likely to be more collateral damage if the economy goes into a deep recession.
I did reno jobs for a person in the Wellington group for a few years.
The bloke running it is a A'hole!
Funny to hear his speils about a property, you could record it and play it at the next house.
Rip this out, do this that and the other thing. Reno cost... $30,000 and you will sell it for $X.
The reno would cost $50k and the sale price would be lower... Break even, or maybe make $20k tops for a few months work and being exposed to risk.
No need to stock up on ammo as there are no flesh eating zombies. Seriously..its not the end of the world.
It might be the end of you financially especially if you have ridiculous leverage in stocks and property. That silly game has had a great run, but reversion to mean is coming. Which bank will fold on lending defaults first? Then it's a repeat of GFC as the music stops.
Plink a plink....a plink, wheres my seat again...
Maybe not ammo, but it was interesting walking around doing the weekly shop last night.
No hand sanitiser in stock, and notes saying only two per person if and when it arrives.
Milk, bread, bottled water, toilet paper, tissues, and milk powder also in short supply.
Although our Govt and Media don't appear too concerned, it looks as though the general public are preparing.
I did a prep shop in Dunedin yesterday and no sign of anything here.
Ammo isn't about tipping flesh eat zombies over, it's about being able to get your own meat. The last thing I am going to rely on is this governments ability to provide tucker for me when I'm on lock down. In a country of pine trees, they could'nt get Kiwi Build to work. The Greens will be giving us a daily rassion of mung beans.
HT Mr T from yesterday.
https://www.newshub.co.nz/home/new-zealand/2020/02/stay-away-doctors-wa…
The Medical Association says many clinics are already at capacity and we're approaching flu season.
And doctors warn general practices around the country risk being overwhelmed if coronavirus takes hold here.
from MoH
‘Our Technical Advisory Group will be meeting tomorrow morning (Thursday) to assess the evolving global situation and what actions the Ministry needs to take to respond to the changing situation and to support New Zealand's overall response to COVID-19,’ says the Ministry’s Director of Public Health Dr Caroline McElnay.
‘This will include looking at expanding our case definition for testing of COVID-19 cases.
This may explain why 121 people been tested.
SMH.
Dr McElnay says she also wants to emphasise the need for people to ring ahead if they are concerned they may have COVID-19.
https://www.health.govt.nz/news-media/media-releases/covid-19-novel-cor…
From my time in China I can tell you how they do it.
"See that road over there, rip it up!"
"But Sir, we just put the finishing touches on that road! We completed it yesterday! And it's an 8 lane highway that goes between these two ghost towns"
"Doesn't matter, we have been ordered to spend another billion, rip it up"
"Yes Sir!"
Rinse and repeat. The number of times I saw a road perfectly finished just to be ripped up again a few weeks later... They weren't built to last in the first place.
In saying that, they often do awesome train networks. They might just build another 20 high speed train lines.
Yep. The inside (seats/curtains/carpet) was crap and it shook quite a bit and was quite noisy. Went fast though, have a picture with the speedo at 390ish kmph. Was cool looking out the window and seeing buildings in the distance, which a couple of seconds later fly past you!
Built by Germans though so not really Chinese. Unlike all the other high speed train lines in the country.
Problem is that we cannot trust the numbers coming out of China
They fire and/or prosecute people who are simply the messengers, and I would suspect that some Wuhanian Hospital and healthcare officials and city managers are understating the numbers to prevent getting into trouble.
When a person with an pre- existing condition dies ( from COVID19 ) its easy to record the cause as the pre-existing condition , which could be anything from TB to cancers , a heart condition , obesity , diabetes , high blood pressure or cholesterol .
This would be done to under-report the numbers
Showing how big the lies are, leaked PRC govt documents show real cases up to 50x reported (can look at page source to see full text of story):
https://www.theepochtimes.com/leaked-documents-reveal-chinas-shandong-p…
This is no surprise, but will be studiously ignored by mainstream media.
Nov 16, 2015
Lab-Made Coronavirus Triggers Debate
The creation of a chimeric SARS-like virus has scientists discussing the risks of gain-of-function research.
https://www.the-scientist.com/news-opinion/lab-made-coronavirus-trigger…
Engineered bat virus stirs debate over risky research
https://www.nature.com/news/engineered-bat-virus-stirs-debate-over-risk…
Made in China
Watch @ min 13, 22 & 24 - thanks you Andrewj
https://www.youtube.com/watch?v=QlF0LcQO9Tg&feature=youtu.be
Don't panic people, there is money to be made on the equity markets. I'm targetting the big medical product suppliers and pharma stocks, they will benefit greatly from all of this, as will telecommunication co's as face to face contact might be a bit patchy in some countries for a while...can you kik me that contract please....
Airlines slashing capacity from April onwards means a very tough winter for tourism/retail everywhere they have seen the bookings going forward and they are now in survival mode.
https://www.stuff.co.nz/travel/news/119841087/singapore-airlines-cancel…
https://www.9news.com.au/national/virgin-australia-group-flights-cancel…
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12…
Different cultures will have different ways of dealing with the pandemic. Time will tell which is the best way. The Chinese may have a culture of officials not wanting to be bearers of bad news. More religious communities may be more fatalistic accepting that all things are the will of God. This will affect the way they approach dealing with the virus.
Lots of things are going to tip over. We have not had bussiness going broke for a long time due to low interest rates and a good economy. The ones struglung will go and take a lot of others with them. House prices to drop at least 10% but I'm guessing 20% to 25%. Kwiwsaver accounts taking a hit and people pulling money out due to hardship. Tourist numbers to zero. Health lock downs of cities. It'll all impact on each other.
"House prices to drop at least 10% but I'm guessing 20% to 25%"
If that turns out to be correct, there will be collateral damage. A large number of highly leveraged property owners believe:
1) property prices double every 10 years
2) property prices do not go down by very much. At the most they might fall 10% based on the last GFC in 2008.
3) there is an underlying housing shortage in Auckland and this supports continuing property prices.
A number of these beliefs are perpetuated by high profile property market promoters in the media, and property mentors.
As a result of those beliefs, some have been willing to take on large amounts of debt to purchase property at high valuations.
It was only arround 40 days ago we were talking about bubbles and global issues arround the world that could negitively effect the markets. We haven't been here before and the world was a shakey place before this kicked off. This is set to finish off the job that started in 2008.
I have a $1,000,000 Zimbabwe note on my fridge door to remind me that it can go extreamly wrong.
Look at the management of the health system.
It is being demonstrated before your eyes right now.
Effectively they are not testing for virus (121 people tested to yesterday, isn't trying).
Look around at the poor productivities.
You have health leaders unable to make the case for funding, and rivals, other spending, get the better of them.
The current spat when the PM is arguing with Auckland hospitals about shitte running down walls, when not, shows the political grandstanding, and how govt views health managers.
Check out the explosive project over spends of Christchurch health new builds.
Dodgie contractors putting in rubbish spec pipework etc.
It's the core of government systems that are poor. It's the delivery.
The sewage running down hospital walls story was debunked months ago, loudly and repeatedly in the media. Ardern seems to have missed that, showing that she doesn't keep up to date on issues or just prefers a shallow sound bite take for the camera, over fact based appraisal.
ChairmanMoa. No recent govt has 'cut' health spending. It increased on a gross basis every year since 2001. However health spending as a ppn of GDP fell every year between 2013 and 2017 (but was still at a higher ppn of GDP than under the previous labour govt). Whether it is adequate for our burgeoning population is the pertinent question.
Messaging to come from Director of Public Health
News article
27 February 2020
Director of Public Health Dr Caroline McElnay will address media on 27th February 2020 at 2:00pm, to give an update on COVID-19 (novel coronavirus).
Check back to this page at 3:30pm for a livestream video of the media briefing.
https://www.health.govt.nz/news-media/news-items/covid-19-novel-coronav…
And pathetic.
Unfortunately we had technical difficulties with today's livestream. We hope to have an alternative option available soon.
https://www.health.govt.nz/news-media/news-items/covid-19-novel-coronav…
Where is the community testing!
This self diagnosis is bollocks.
The Ministry’s expert advisory group has revised the case definition for health professionals by adding Hong Kong, Iran, Italy, Japan, Republic of Korea, Singapore and Thailand as countries of a higher level of interest when diagnosing patients. See the Case definition of COVID-19 infection for more information.
Anyone who has visited those countries in the previous 14 days who develops symptoms of fever, cough or shortness of breath should seek medical advice by first phoning Healthline’s dedicated COVID-19 number 0800 358 5453 or contacting their GP by phoning ahead of their visit.
FYI, regarding Hong Kong, the money being paid by the government to its permanent residents is technically, not a helicopter drop.
A helicopter drop implies that the money is financed via central bank funding (and issuance of new currency).
The Hong Kong government is paying that money from its existing cash balance / savings account.
The Hong Kong Monetary Authority (HK central bank) does not control monetary policy, due to the HK Dollar currency board with the USD. Unlike the NZD, the HKD is not a freely floating exchange rate.
Not a foreign currency specialist or expert, but I've studied it a little and here are some thoughts.
Very high probability that the HKD currency board will hold.
Note that the HKD is a CURRENCY BOARD, and not a managed peg (like many Asian countries hit during the Asian Financial Crisis in 1997 / 1998). Structurally it is different, and there are some important structural differences.
There are also important differences between the HKD currency board and the currency board that was implemented by Argentina previously (and was subsequently devalued).
Hayman Capital (Kyle Bass) was previously reported to have a short bet on the HKD (not sure if it has been closed out). I've read their investment thesis on that trade and there is an inherent misunderstanding in their logic compared to my understanding of the workings of the Hong Kong currency board. Kyle Bass has continued his commentary against the HKD recently, likely promoting his view and economic interests. FYI, here is the Hayman Capital thesis - https://www.zerohedge.com/news/2019-04-25/quiet-panic-kyle-bass-hong-ko…. This was been debunked by the HKMA which highlighted Hayman Capital's underlying essential misunderstanding of the workings of the HKD currency board.
The Swiss National Bank (Swiss Central Bank) has a monetary policy targetting price stability (i.e inflation) - this is similar to the RBNZ in NZ.
(Refer Swiss monetary policy here - https://www.snb.ch/en/iabout/monpol/id/monpol_strat#t3)
In contrast, the HKMA targets a stable exchange rate - that is the exchange rate band with the USD, resulting from the currency board. The HKMA does not target price stability (i.e inflation). In order to defend the exchange rate, during the 1998 Asian Financial Crisis, 3M HIBOR went to 15%, it got much higher in shorter term duration, as speculators attacked the HKD, along with other Asian currencies.
Here is the historical 3M HIBOR chart: https://tradingeconomics.com/hong-kong/interbank-rate
As a result of the attack on the currency, the Hong Kong economy subsequently experienced consumer price deflation for about 5 years from 1998 to 2003. Refer https://tradingeconomics.com/hong-kong/consumer-price-index-cpi
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