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 ».
78 Comments
https://www.resilience.org/stories/2020-03-02/the-promise-of-ecological…
"Rather than offering a path forward, neoclassical economics seems perfectly constructed to perpetuate the status quo. Examining some of the field’s fundamental ideas reveals that it largely amounts to ideology dressed up as a rigorous discipline"
All species have the freedom to overstock the paddock with themselves.
Only one did so with enough intelligence to refrain. Although by your comment, maybe that has to be qualified with 'nearly'.
Rolling to a halt, is more like it at this stage. Good luck with your epithany.
It is pretty much impossible for any species to 'overstock' a paddock. In any form of the metaphor.
A basic understanding of ecological population growth would highlight why this is the case.
https://www.nature.com/scitable/knowledge/library/how-populations-grow-…
5-10% Inflation used to be more reliable in backing that up. Then we had low interest rates that pushed disposable income into house credit - (all societies spare cash funneling into the commodity in shortest supply), now we have exhausted all sources of money that can push houses up above rate inflation. Paradigm has changed. For good. Significant real capital gains are a thing of the past.
https://academic.oup.com/ips/article-abstract/14/1/57/5572332
Wilberforce looked equally stupid facing off against Huxley.
The Huxley debate?
You mean the one where he presents evidence for the theory of evolution and Wilberforce blindly argues from a basis of ideology?
Sorta like how the overwhelming majority of economists present empirical evidence for / attempt to falsify and PDKs link sociology articles?
The reason economic liberalism and the trendy 'neoliberalism' buzzword exist is because they represent a framework which explains observation well.
Was the cat already dead? I mean the index's only fell 10% last week after years of growth that's still pretty good, and at close today it has regained around 3%. The system is broken but its going to take more than a couple thousand deaths from a cold to break the system.
https://www.ft.com/content/58410fea-5a30-11ea-a528-dd0f971febbc
Some monetary policymakers have argued that coronavirus is a supply shock to the economy — removing workers from their places of employment and components from factories — and therefore makes stimulus ineffective.
Jon Cunliffe, deputy governor of the Bank of England, said on Thursday that since coronavirus was “a pure supply shock there is not much we can do about it”.
Calls for policymakers to act to prevent coronavirus ‘doom loop’
https://www.ft.com/content/58410fea-5a30-11ea-a528-dd0f971febbc
At the start of the GFC coordinated central bank action, October 7 2008, the RBA cut by a full basis point. The following day the Federal Reserve began.
https://www.federalreserve.gov/monetarypolicy/files/FOMC20081007confcal…. This time the central banks will need to go well into negative territory given the starting point. JPY /Euro could appreciate significantly if history repeats.
Read the link I put up, right through.
Neoliberal economics has constructed a story. If it was a human, we'd say it was on the spectrum; focused on a very narrow window. Using that restricted aperture, a host of growth-requiring outfits (like pension-funds) have constructed algorithms which commence buying at X% drop. Thus the game is self-perpetuating, except that it's not related to reality. The mom-and-pop investors probably get displaced more every time there's a dip, and there will be more and more algorithm-touters in the game. But the game bears less and less correlation to the real underwrites. And seems incapable - as do the media we trust to report them - of addressing the bigger-picture truth.
The New Zealand media in general terms couldn’t explain the bigger picture even if a big picture was placed in front of them with “Ask me!” Written in big letters across it. They just pedal the “buy real estate” “see how much your house is worth” “Are you living in a Booming area?” stories..... The underlying story being “here, take on loads of extra debt, you know you can afford it at current interest levels and they are likely to be even lower soon - go on you know you want that bigger house, or maybe buy a boat or upgrade the car” Debt fuelled real estate market = One trick pony .... got to keep it going at all costs.
This is just the end of the beginning, market reaction goes like this:
-It probably won't be at issue
-It might be an issue
-It's definitely going to be an issue (freak out)
-Wait, GDP hasn't dropped yet maybe it won't eventuate (you are here)
- Oh that's right all our measures are lagging by several months and are turning down all of a sudden (resume freak out)
Bull trap at this point. There are going to be a lot of hits from forward bad data whether it's virus related or more likely profit related.
The US has the virus spreading through a rest home at the moment. So it looks like Mike Pence's strategy of thoughts and prayers didn't work to stop the virus.
the Turkey/Syria/ Russia crisis is hotting up and getting interesting, is the USA going to standby, what will be the EU's response to millions of migrants swamping border controls?
https://www.almasdarnews.com/article/russia-can-no-longer-guarantee-tur…
https://www.almasdarnews.com/article/russia-deploys-military-to-saraqib…
https://www.almasdarnews.com/article/russian-air-force-not-backing-down…
https://thesaker.is/are-russia-and-turkey-on-a-collision-course/
If you stand back and look dispassionately, we are looking at a systemic phase-shift. The frenzied energy-using, resource-consuming, trash-excreting, other-species-displacing regime of the last two centuries, is up against the limits. The refugee streams, the fires, the droughts, the fisheries collapses, the pollution, the desertification, the degradation and the draw-downs, are all interlinked.
The sad thing is that even now, we are viewing the whole-system thing through a dollar window - and dollars are keystroke-generated debt-expectations conjured up by folk who were taught that the earth was flat. Hanging on their coat-tails, are a whole echelon who made debt-bets believing them, and believing the 'journalism' which parroted them. If the system holds together, I can see a tidal-wave of suing. But I don't think the conditions which would trigger the suing-anger, will allow the system to continue anyway - so no suing. Lotta bewildered frustration, is my pick, and a lotta folk finding out they have no relevant skills.
History always ends in war, whether it's resource driven or some power crazed dictator all have the same ending. Lots of those young men trying to get into Greece are also trying to escape Syrian national service.
We have been warned of the consequences of the high birth rates in Africa and the Middle East ,overwhelming those countries ability to feed and educate. It didn't take a lot of nouse to see the outcome and yet we sit here unprepared and shocked.
But that warning was through the false lens of our own social narrative.
We take those people's resources, to keep our own truckin' along. And we screw them via IMF and World Bank 'loans', while pretending their problems are their own (as we do with our own poor).
Make no mistake, this overshoot includes us - to live at our rate of consumption the conventional conversation says maximum global population = 1 billion. If you read nothing else today, AJ, read this:
http://energyskeptic.com/2019/bodhi-paul-chefurka-carrying-capacity-ove…
Yep, we will fight each other. And it won't be pretty. I prefer to look say 100 years ahead, work out what the best would be then, and work backwards to see how to get there. The trouble with that is that one gets increasingly frustrated with the mass who need to believe a prettier story (or the one they're hitched their mana/personal cred to).
It won't be a V shaped recovery form Coronavirus
https://thesoundingline.com/dr-lacy-hunt-global-recovery-from-coronavir…
I imagine the cases in Iran are getting out of control.
If several senior politicians and one person returning to NZ have it, you know it must be a very serious epidemic there.
Speaking of Iran, an article on CNN a couple of days ago said the virus shouldn't go too mental there because of the hotter climate! What an ignorant comment!
We haven't heard from the Presidential Plunge Protection Team for some time
There are only two markets in the world that are open 24 hours - New York and Sydney - they work in tandem - while New York has lifted overnight - Sydney has not - at the time of writing, Sydney is slightly negative - they're not sharing NY's love
NY: is Trump's signature claim to success. Last week's has been called a hoax. Is today's rise a sign of the presidential PPT (Plunge Protection Team) at work? Sycom SFE200 currently not sharing the love. ASX200 will share some of it during the day session - probably
The markets - investors and businesses - comprise different horizons. We're seeing a collision of short-term and the longer term. If your horizon, or your swimming ability, is 12 months or less, you're in deep trouble. For many, the virus will bring business destruction. If your horizon is in many years (for a pension fund or substantial business it may be 30 years plus), the virus will be a serious road-bump, but thereafter - when the world takes on its new shape (as in post-war years), we'll see creative renewal. Survival plus new businesses, new ways of doing things.
Ain't that the problem. Nailed it. The only questions are when and how, but collapse it will.
It is interesting to watch the universities, in lock-step with politics and the media currently. Presumably the Joyce years didn't help, but these institutions were meant to be purveyors of real knowledge - real research and real learning. Regardless of whether the story was placatory or scary.
What they have turned into is businesses. Hence the recent edict to back off on 'conservation' and put more emphasis on 'the blue economy' - whatever that is. So the universities are forward-bettors like everyone else. Thus we get the nonsense that is the Massey/GDP thing we're going to be peddled hereabouts. Sure, their consumption-counts will be fanatically accurate, but the 'externalities' are so many orders of magnitude bigger threat-wise, that it is effectively porky-peddling via avoidance.
The blueprint required now, is how to pick up the post-collapse pieces, how to construct a meaningful, much-more-local, much-less-consuming societal construction.
Beware falling into the trap of believing in the fungibility of 'cash' or 'capital'. They are digital bets. If the future cannot supply whatever they wish to be cashed-in for, they are worthless.
The classic was LA's 'funding for depreciation'. Even the last word was wrong. It should have read: Stockpiling for entropic decay. This over-supply of forward bets, compared to the dwindling supply of planetary parts, is what will probably trigger collapse. If we don't beat the drums of war first. (I can see the posters now; Simple Simon needs You!).
Central banks "broke the centuries-old Concordat with the commercial banks" (Charles Goodhart) & now aim to take away the private-sector banks' business by launching their own retail accounts & digital currency & pushing banks out of business by regulation & low interest policy. Link
Dear stock markets, there is not a single scientific paper that's ever been published in all of history that proves interest rates help deal with a flu virus Link
Agree with below that in this scenario bailout will not help - may be sooth sentiment for a day or two BUT...
https://www.cnbc.com/2020/03/02/jim-cramer-coronavirus-vaccine-more-imp…
In stock market cutrent relieg rally after the current Massacre may be used to minimize loss and buy later on dip.
MoH. No scheduled briefing yet for today.
Remembering, yesterdays briefing was scheduled and then cancelled.
- this is poor.
https://www.health.govt.nz/our-work/diseases-and-conditions/covid-19-no…
Latest news and media
Today's COVID-19 media briefing scheduled for 2:30pm has been cancelled
News article
02 March 2020
Today's (2 March 2020) media briefing has been cancelled
If you are not one for humour in this hour, look away.
This is parody.
https://mobile.twitter.com/TitaniaMcGrath/status/1232675707924439046
"South Korea's surging outbreak has overwhelmed its health system. At least four infected elderly people have died in Daegu while waiting to be hospitalized.": https://www.thestandard.com.hk/breaking-news/section/3/142950/Koreans-o…
That is with just 0.01% of their population infected, when optimistic projections put the likely infected in every country during peak of outbreak at 100's to 1000s of times higher, so reality will be essentially no hospital treatment and much higher rates of death: https://s3.amazonaws.com/jo.nova/graph/health/microbiology/Epidemic-cur…
When you drill into the numbers, the concerning part is the speed at which it is spreading outside of china:
https://ncov.r6.no
It suggests either the quarantine measures adopted within China may be need to be adopted in every country the virus takes hold, which if done across multiple countries seems almost certain to trigger a global recession. It could also suggest the numbers coming out of China aren't entirely accurate. Hard to say which is true.
Either way, if the number of infected outside china continues to double every 4 days, by the end of the month we could have 5 million people infected. This will have a big impact.
Our friends were kind enough to give their daily briefing. It is noted that China is now also blocking individuals from other nations entering to stop the spread
http://www.chinaconsulate.org.nz/eng/fyrth/t1751334.htm
Why are the reported cases low in the state of New York in the US? Insufficient tests being conducted.
Now how many people who are infected and are not being tested are going around infecting others in the community?
https://www.youtube.com/watch?v=0Wg_OTTzUv8
Also saw that someone had the test for coronavirus. They were charged over US$3,200. Now how many people who are infected and unable to afford to be tested are going around infecting others in the community?
China Amassing Commodity Mountain That Risks Crushing Prices
https://www.bloomberg.com/news/articles/2020-02-28/china-s-amassing-a-c…
It gave some examples, without naming airlines:
“A carrier experiencing a 26% reduction across their entire operation in comparison to last year”
“A hub carrier reporting bookings to Italy down 108% as bookings collapse to zero and refunds grow”
“Many carriers reporting 50% no-shows across several markets”
“Future bookings are softening and carriers are reacting with measures such as crew being given unpaid leave, freezing of pay increases, and plans for aircraft to be grounded.”
https://wolfstreet.com/2020/03/02/just-how-bad-is-it-going-to-get-for-u…
Yesterday, when the NZX troughed, virtually all shares on my ASB Securities watchlist were still ABOVE their Equivalent Fair Value (EFV) as deteremined by Morningstar. So, we can accurately describe the so-called "rout"as merely removing the froth of the last few months, and not a fundamental "Correction".
This morning's NZX is going upwards gangbusters. So, a worsening course of the Coronavirus is the only thing that can reverse that.
SWise. Right now coronavirus hypo centre Auckland airport is trading at a sensible P/E of 17.56. The market either does not believe covid19 impacts will be as severe as feared, or it does and reasons the now almost certain OCR cut will maintain the effective margin between the AIA div yield (currently 4.07% but likely to slip) and lower risk investment alternatives. Or, and I think this is the most likely explanation, investors are looking through the covid scare and bottom drawering their defensive stocks. In support of this theory, a relatively modest 1.3m AIA shares have changed hands today from a total of 1.2bn on issue. A similar story with THL and other covid front line stocks. The demented reef fish brigade is getting the headlines but most holders are sitting tight. It has been a very good morning for some traders !
That's an oxymoron, wrapped up in a misconception.
The CC is the exhaust gases of our over-exploitation and overpopulation (the latter being the flip-side of the former, by and large). It indicates how globally-forcing is our energy-use and by inference, our activities.
You will have more famine, disease and deprivation the longer growth is attempted (both growth of population and of per-head consumption). By addressing CC, we will inevitably scale back towards something called a 'sustainable level' of consumption. But be very aware, sustainable levels of population and consumption are very, very much lower than what we are and do, currently. Oh, and poverty isn't the problem. How many times have I got to repeat it hereabouts? Poverty is the lack of access to energy and resources - if it wasn't, you could print your way out of the problem. (and for the lefties - even if you went completely egalitarian, there's still the problem of the sinking overall resource lid.
It's too late to 'fix' poverty. Too late to softly fix population. Too late to realistically assuage currently-held debt. But addressing CC will indeed go somewhere in the right direction, time-buying-wise
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