Here's our summary of key economic events overnight that affect New Zealand, with news investor risk appetites are up sharply in what looks like a completely irrational mood swing.
On Wall Street, equities are very much higher on the hopes Congress will pass a huge fiscal stimulus bill, bailing many of them out. The S&P500 is up +6% in mid afternoon trade, reversing yesterday's -2.9% fall and more. But for March it is still down a net -19% for all the yo-yoing in-between.
The reason companies need that fiscal stimulus (and the Fed's unlimited support) is that the real economy is in a bad way. The US factory sector is now contracting and is now at an eleven year low. But much worse, their service sector is contracting very steeply and is now at an all-time low of 39.1. (a score of 50 is a stable state.) Sadly for them, it is likely to dip further as the gloom spreads as unemployment explodes.
The next regional Fed survey in the mid-Atlantic states district didn't reflect the PMI manufacturing gloom, but it did reflect the bad employment track with a sharp net shedding of jobs in the region's factory sector. Nationwide, carmakers are shutting down and laying off workers. They mirror the aviation industry. And the American real estate industry is going into a sharp reverse. Worse, their US$3 tln commercial mortgage markets has borrowers with tenants that just can't pay the rent. And none of these are impacts that only affect the US.
The list of impacts goes on and on. So it is unclear what investors see in the huge fiscal packages that will reverse the bite of layoffs and closures.
Still, across the Atlantic, European markets rallied very strongly, with most up +10% on the expectation the Americans would join the Germans and others in massive stimulus. Earlier, Asian markets set the tone although not quite at the same bullish levels.
In China, Hubei province is being released from lockdown and the number of new cases evaporates and the recovery rate surges. It is now almost 90%.with only 4300 active cases left in this province. Nationwide the recovery rate is now over 90%. But that is leaving behind economic devastation. Chinese companies had their worst quarter on record, with every individual sector reporting worse results in the first three months of this year, according to the China Beige Book. Major infrastructure projects are getting a renewed boost. And these are so big, that is keeping core commodity prices from falling.
In Australia, they are facing a virus storm because of an inadequate response, mirroring the US. A wide range of economic analysts predict their economy will shrink -3% or more this year and more than 1 mln people will be out of work soon. Retail and the related commercial property sectors will be particularly hard hit. Many businesses just won't survive.
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There are now more than 150 cases identified in New Zealand, with 55 new cases in the past 24 hours, including community transfer. Worldwide, the latest compilation of Covid-19 data is here. The global tally is now 400,000 of officially confirmed cases, up +100% in a week. There are now 317,000 cases outside China and almost all of them are in five core countries. Italy is up +5000 from just yesterday morning's tally. The US is up +10,000 cases from the same time and now at 47,000 cases. The caseload is rising so fast there that later this we will probably report that the US is the world's epicenter of the global outbreak, surpassing China which seems to have things under control for now. And Switzerland now has more cases than South Korea, with the UK not far behind. Japan and South Korea have successfully isolated the outbreak. Sadly however, case numbers in the rest of the world are shooting up, up +50% overnight to over 50,000. The official death toll now exceeds 17,500 worldwide, but is probably much higher - as is the real infection rate.
The Tokyo Olympics have been delayed by one year even though Japan is largely free of the virus.
The UST 10yr yield is rising again and also on a wild yo-yo ride. It is now at 0.83% and up +8 bps since yesterday. Rate curves have moved sharply positive as short term rates stay collapsed. Their 2-10 curve is still very positive at +47 bps even if that is a pullback. Their 1-5 curve is much less positive at +25 bps, and their 3m-10yr curve is still way out there at +86 bps. Essentially, markets have no idea how to price yields at present. The Aussie Govt 10yr yield is now at 0.99% which is a net rise of +7 bps in a day. The China Govt 10yr is down -1 bp to 2.71%. The NZ Govt 10 yr yield is now at 1.46% and unchanged since yesterday.
Gold has risen very sharply today, up another +US$69 to US$1,614/oz.
US oil prices are up +US$1 today to US$23.50/bbl and the Brent benchmark is at US$27.50.
The Kiwi dollar is starting today a lot firmer than this time yesterday, up +1c and now at 57.9 USc. The greenback is being sold down. On the cross rates however we are lower at 97.7 AUc but most of that fall happened early yesterday. Against the euro we are also firmer at 53.7 euro cents. That means our TWI-5 is now at 65.5 and its highest in more than a week.
Bitcoin is now up to US$6,651 which is a daily rise of +5.7% from this time yesterday and a second day of good gains. 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 ».