Here's our summary of key economic events over the weekend that affect New Zealand, with news the world's economy is shutting down.
The US is still getting explosive increases in its coronavirus infections and deaths, becoming the world's epicenter for the disease. State shutdowns are spreading in the absence of any Federal leadership to deal with the crisis, except on a financial level.
As a consequence, consumer confidence is diving, almost its steepest decline ever. Not only is it likely to get worse, it is likely to get much worse as people realise the policy failures have been toxic. It could get ugly for civil society there. New emergency measures are on the table for helping State and local governments from going broke.
On the economic front, Congress has finally passed its US$2 tln stimulus and bailout bill, and it is now signed into law.
In the real economy, the dive in economic activity is having many costly effects, not the least of which is that back-haul freight opportunities have vanished leaving only one-way traffic and effectively doubling the cost of moving goods.
Across the now-closed border, Canada cut its official interest rate by -50 bps overnight to 0.25%. But that was just part of a coordinated response with their government which included a 75% wage subsidy for affected workers.
India has also cut its official interest rate by -75 bps to 4.40% and unleashed US$30 bln of stimulus.
In the UK, senior members of their government, including their prime minister, have tested positive for Covid-19. And the UK has suffered a credit rating downgrade.
China has now effectively closed its borders to travelers who are not citizens, worried about undoing their hard-won and painful Covid-19 containment gains. Their recovery rate is now up to 91% but it has cost them 3300 deaths so far. But China is increasingly optimistic it can restart its economy and a number of innovative 'helicopter' measures are being deployed. New Zealand's immediate economic future probably depends on these being a widespread success.
Company profits fell by a third in the first two months of 2020 in China, according to official data. It is a result that reinforces the fact that while the impact was nationwide, the virus shutdown only really affected one province fully. China's 2020 economic issues will be more due to the international effects than its own local impacts.
In Australia, confused signals continue and there is still no nationwide lockdown. But they have just announced a "two person rule" - no groups larger than that, and that may effectively be a lockdown. Some state borders are closed, many businesses are shuttering, but many aren't. And many people are ignoring the risks. They have a fragmented and dangerous situation brewing.
And we are now all aware of the wild up and down swings in the equity markets. But more analysts are suspecting that this unique volatility is being driven by trading robots, software AI that was not designed for a crisis like this. Real investors are getting hurt by these programmatic gyrations. And those that are getting out, are rushing cash funds. That leaves pension and superannuation funds (KiwiSaver in passive index funds?) very vulnerable indeed because managers of this vast sector became enamoured with robot trading.
For the record, the S&P500 was down -3.4% on Friday. European markets fell as much in their final session. But it is crystal clear equity market pricing signals now mean squat as investors have no idea how to price their holdings. Time won't be friendly to pricing decisions taken over the past week.
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There are now 514 Covid-19 cases identified in New Zealand, with another 146 new cases over the weekend, in six important clusters. One person has now died here. We have nine people in hospital with the disease, 3 in Wellington, and 1 each in Blenheim, Nelson, Whangarei, Waikato, Taranaki and Dunedin hospitals. There are currently no cases in any Auckland or Christchurch hospital. More than half the cases from visitors are from three countries - Australia, the UK and the USA. Direct visitors make up more than half our cases and they have spread it to the other half.
Worldwide, the latest compilation of Covid-19 data is here. The global tally is now 692,000 of officially confirmed cases, up +162,000 from this time on Saturday and still accelerating. China is no longer the epicenter. That has moved to the US which now has 125,000 cases, up a third since Saturday. Italy is about to report 100,000 cases; Spain is about to pass China's total. Australia has now over 4000 cases, and 16 deaths. The pace of global infection is accelerating even quicker and global deaths now exceed 33,000.
The UST 10yr yield is soft again today at under 0.68% and down another -5 bps. Their 2-10 curve is still very positive at +43 bps but slightly less so overnight. Their 1-5 curve is positive at +29 bps, also less so, and their 3m-10yr curve is still way out there at +67 bps and also less so. The Aussie Govt 10yr yield is now at 0.86% which is down -3 bps. The China Govt 10yr is unchanged at 2.68%. The NZ Govt 10 yr yield is also unchanged at 1.10%.
Worldwide, companies with investment grade ratings are racing to raise more cash ahead of expected cashflow strains. Companies without investment grade ratings will be paying steep premiums if they can raise market debt.
Gold is down -US$10 today, to US$1,628/oz.
US oil prices are staying lower at under US$21.50/bbl and the Brent benchmark is also low at just under US$25/bbl. The world is drowning in crude oil nobody needs anymore.
The Kiwi dollar is starting today marginally firmer again than this time Saturday, now at 60.4 USc. That is a remarkable +4c rise in a week as the greenback takes a hammering. On the cross rates we are still high at 98 AUc. Against the euro we are at 54.2 euro cents and a +2c rise in a week. That means our TWI-5 is up to 66.6 and its highest in ten days.
Bitcoin is now at US$6,104 and giving up all its gains over the past 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 ».
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