Here's our summary of key economic events overnight that affect New Zealand, with news we are going into a week where the economic fallout of the global shutdown will really start to bite viciously at the local level.
Wall Street ended last week in sell-off mode, with the S&P500 down -4.4% on the day on Friday. For the week that is a cumulative dump of a huge -15%. For the month of March it is down -22%, and since the peak on February 20, it is down -32%. We are down to levels last seen at the beginning of 2017.
In the minute-by-minute battles in the liquidity trenches, the NY Fed supplied US$67 bln in repo funding on Friday. On Thursday it was US$88 bln. For all of last week it was US$609 bln of activity with the most, US$206 bln, on Tuesday alone. Some of this is rollover of course so not all is net-new, but much of it is. They had to put out another Statement earlier saying they are now up for another US$½ tln in ongoing support.
And they put out yet another Statement saying they are going to buy US$100 bln in mortgage-backed securities in the coming week.
The NYSE dive means asset backings are highly dubious and liquidity has dried right up. There are sellers, many forced, but no buyers without the Fed. Even though the Fed will bail out the largest financial institutions, widespread bankruptcies and closures look across the whole US as the shutdowns spread fast.
Boeing said it is at risk of failure and shutdown. But the US Administration also said it will bail them out.
And staying in the US, the Trump Aministration is taking a leaf out of Beijing's paybook, trying to manipulate down the data for a tsunami of jobless claims. They jumped +33% last week to 281,000 but state-level anecdotes suggest jobless claims could hit more than 2 mln in this coming Friday's report. (NZT)
And Britain is joining in the subterfuge, telling companies not to publish updated earnings guidance despite legal and listing rules that they must. Transparency is an early casualty of this crisis.
In Canada, sudden unemployment is at crisis levels. In fact almost 3% of their entire workforce has lost their employment in the first three weeks of March. That's more than ½ mln people.
Back in Britain, it is so sudden and so extreme, the Government there is promising to pay wages of laid-off workers up to NZ$5,000 (£2,500) per month. That is sure to cause a cascade of further layoffs as employers hand off the liability to the taxpayer.
Every country has put in place huge economic bailout measures, and adds to them almost daily.
In Australia, landlords are under extreme pressure to give rent relief, possibly up to six months deferral of rent payments. It is a development that will unstitch investor returns in residential and commercial property, potentially causing a valuations crash. Australia also raised its debt ceiling by +25% to AU$800 bln. And their Government seems to be announcing economic bailouts every few days - a third one is expected later today of tomorrow. So far, their bailout programs have amounted to 10% of Australian GDP.
China, South Korea and Japan all seem to be on top of their outbreaks, even if the West isn't. This should be as big news as the failures, because it probably involves herculean public health leadership that should be celebrated.
In China, big car makers and electronics chip firms are all back working as their supply chains restart. But that doesn't necessarily mean all will survive. Part of that is because international orders are drying up fast. But there are solid signs that China's housing market is recovering. After a February wipe-out, sales are up to half the normal rate in the first half of March and rising.
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The latest compilation of Covid-19 data is here. The global tally is now 319,000 of officially confirmed cases, up +90% in a week. There are now 237,200 cases outside China and almost all of them are in five core countries. Italy's cases have doubled in a week, both Spain and Germany are up 4 times in a week, France might be plateauing but is still up 3 times in a week. But the USA is up by a factor of 8 times in one week, now with 27,000 cases and the global hotspot. Mismanagement of the crisis in its early stages is a key cause. The rest of the world is up 4x of reported cases on one week. The global official death toll now exceeds 13,000. Twenty seven new cases of COVID-19 in New Zealand have been confirmed in the past 24 hours, bringing the total number of cases here to 66.
Large parts of the developed world are now in complete shutdown. More than one billion people are in these lockdowns.
In Australia, they are saying most of their Covid-19 cases are coming in from the USA. Cases there doubled over the weekend. And Australia now has more cases (1314) than Japan (1086), a country that got it early but where their curve just didn't steepen. At the end of February, Japan reported 240 cases - the fifth most in the world at that time - when Australia had only 25. Now Japan is a minor infection site, which is probably why they want the Olympics to still go ahead. (And Japan has five times Australia's population.)
The UST 10yr yield is falling again and still on its wild ride. It is now at 0.89% but that is actually higher than this time last week. In between it hit a high of 1.27% and a low of 0.68%. Volatility like this is rare in this core benchmark yield. Rate curves have moved sharply positive as short term rates have collapsed. Their 2-10 curve is still very positive at +56 bps. Their 1-5 curve is also very positive at +34 bps. and their 3m-10yr curve is out there at +86 bps. The Aussie Govt 10yr yield is now at 1.07% which is a net rise of +4 bps over the week. The China Govt 10yr is up +5 bps in the week to 2.76%. The NZ Govt 10 yr yield is very sharply higher, now at 1.48% and a weekly gain of +28 bps.
Gold has risen +US$18 over the weekend to US$1,499/oz.
US oil prices are lower again overnight at just over US$22.50/bbl with the Brent benchmark just on US$27. These represent another -25% drop in a week as demand growth prospects vanish and more than a halving in two weeks.
The Kiwi dollar is starting the week lower and now at 57.1 USc. That is only a minor fall from Friday but it is a -5.8% devaluation in a week. On the cross rates however we are higher from this time last week at 98.7 AUc. Against the euro we are softer by more than -1c for the week at 53.1 euro cents. That means our TWI-5 is now at 64.9 and a -2.9% devaluation in a week. And that has now grown to an overall -10% devaluation over all of 2020 so far.
Bitcoin is now up to US$6,069 which is a weekly gain of +13%. 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 ».