Here's our summary of key economic events overnight that affect New Zealand, with news the expectation of central bank bailouts is high.
First up today, equity markets have had second thoughts about the big sell-off. It started in Shanghai yesterday which rose +3.2% (ignoring the NZX50 lead drop of -1.4% and the ASX200 drop of -0.8%). Then Hong Kong (+0.6%) and Tokyo (+1.0%) chimed in. Europe followed with healthy rebounds everywhere (except Frankfurt). And this morning, Wall Street has followed the upbeat mood, and with some enthusiasm. The S&P500 is up +2.3% in mid-day trade, reducing the February losses to -6.0%.
This enthusiasm is not based on current data. There were two factory PMIs out in the US. The internationally-benchmarked one has manufacturing at a virtual stall (50.7) and the more widely-watched ISM version retreated as well to a very similar level (50.1). In both, new order levels fell.
Sharply falling new order levels are a feature of the global PMI update, falling at their fastest rate since 2009.
The OECD sees sharply growing and severe pressure worldwide. Growth was weak but stabilising until the coronavirus hit. But restrictions on movement of people, goods and services, and containment measures such as factory closures have cut manufacturing and domestic demand sharply in China. The impact on the rest of the world through business travel and tourism, supply chains, commodities and lower confidence is growing, they report. They expect China's 2020 growth to be sub-5%, and the US sub-2%.
Interestingly, the private sector Caixin PMI in China wasn't anywhere near as severe as the official Government PMI. The Caixin survey was sharply lower and to 2009 levels, but the Government survey had indicated a complete collapse. Maybe the Caixin survey was behind the Shanghai equity rebound. Or maybe not: the independent China Beige Book sees China growth of under 2%. Wild swings are a feature of Chinese data at present. And Orwellian controls.
Another reason equities are on the rise today - perhaps more persuasive - is that markets now expect central banks to "take action" and bail them out with public money. The IMF and the World Bank have already said they are ready to supply "emergency financing".
The latest compilation of Covid-19 data is here. There are now 9228 cases outside China, a rise of +670 in one day. A week ago that outside-China number was 2690 so it has trebled in a week.
And as if China doesn't have enough to worry about, a Government report there said there is a real threat that the African locust plague could arrive in the Middle Kingdom via 'favourable' trade winds.
The UST 10yr yield is now at 1.09% and lower by another -7 bps overnight on top of last week's sharp -31 bps fall. Their 2-10 curve is more positive at +27 bps. Their 1-5 curve is less negative at -3 bps. and their 3m-10yr curve has stayed sharply negative at -33 bps. These are more like signs of confusion rather than indicators. The Aussie Govt 10yr recovered somewhat, up +8 bps but only to 0.76%. The China Govt 10yr still at 2.80% and unchanged overnight. The NZ Govt 10 yr is down another -5 bps to 1.01%.
Gold is back up today, up +US$13 to US$1,598/oz. But in the context of last week's huge falls, it is a minor correction.
US oil prices have rallied as well, now at US$47/bbl. The Brent benchmark is also up at US$52/bbl.
The Kiwi dollar starts today unchanged at 62.5 USc but still at its lowest level since 2009. On the cross rates we have held at 95.8 AUc. Against the euro however we down sharply again to under 56 euro cents. That means our TWI-5 is little-changed at 68.
Bitcoin is now at US$8,862 representing a rare +4.0% rise following its recent heavy retreat. 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 ».
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