US Congress talks more huge stimulus; regional data dire; China restart faces huge challenges; Aussies launch huge stimulus too; UST 10yr yield at 0.67%; oil and gold down; NZ$1 = 60.4 USc; TWI-5 = 66.5

US Congress talks more huge stimulus; regional data dire; China restart faces huge challenges; Aussies launch huge stimulus too; UST 10yr yield at 0.67%; oil and gold down; NZ$1 = 60.4 USc; TWI-5 = 66.5

Here's our summary of key economic events overnight that affect New Zealand, with news equity investors are out on their own with economic optimism.

That may be due to the US Congress already looking at new vast stimulus and rescue funds, just days after the passing of a US$2 tln package. The US Administration says its not needed.

Back in the real world, the Dallas Fed factory survey was expected to come in sharply negative (-10 from +1.2 in February), but has come in way worse than expected at -70. A huge dive in new orders was behind the very sharp drop.

We get the March US non-farm payrolls report this weekend but due to the timing of the survey, analysts don't expect it to show up the full extent of the American job losses yet. The weekly jobless claims report, next due on Friday will be a more timely guide. Also out this week are another consumer sentiment survey and some key PMIs for March. Both are expected to be very ugly.

In China, they may be on the other side of their virus emergency, but are having to face up to an economy that will be very hard to restart without export orders. One analyst expects 18 mln job losses there over the next two quarters, out of a 60 mln export-oriented workforce. That is likely to be a major social earthquake. On top of that, more than 2 mln graduates are entering their workforce and have zero employment prospects at present - and another huge social risk.

Meanwhile, China's central bank cut its 7-day reverse repo rate in a surprise move, taking it down by -20 bps to 2.20%. That's its largest cut in five years. At the same time it is issuing ¥2 tln of Treasury bonds, about 3% of GDP.

In Australia, they have announced a huge new stimulus program where almost half the workforce will receive AU$750 a week for the next six months under an emergency AU$130 bln wage subsidy. Its a program worth 9% of Australian GDP and is on top of the previous announcements and takes their total stimulus program to AU$215 bln or 15% of GDP.

The endless stream of stimulus announcements has equity markets excited. The S&P500 is up +2% so far today. European markets were up between 1 and 2% overnight. Yesterday however, Asian markets were all lower by more than -1%. Perhaps equity investors should wait to see if any of this stimulus will actually work before taking such big bets. One piece of data that will move markets will be when employment returns, but that seems a long way off yet.


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There are now 589 Covid-19 cases identified in New Zealand, with another 75 new cases since Sunday, in six important clusters. One person has now died here. We have twelve people in hospital with the disease, and three are expected to be discharged soon.

Worldwide, the latest compilation of Covid-19 data is here. The global tally is now 756,000 of officially confirmed cases, and actually up relatively little from where we left it last night (721,000). The US (148,000), Italy (102,000) and Spain (85,200) each has more cases than China (82,200) but the recovery level in China is now up to 92%. Australia has now over 4200 cases, and 17 deaths. The pace of global infection may not be accelerating as fast today but the global death toll now now exceeds 35,000 and only 3300 in China. The US Administration says it is expecting about 100,000 deaths there alone. Experts suggest it could be double that.

The UST 10yr yield is soft again today at under 0.67% and down another -2 bps. A few hours ago it did get down to 0.60%. Their 2-10 curve is slightly less positive again, at +41 bps. Their 1-5 curve is also less positive at +22 bps, and their 3m-10yr curve is at +62 bps and also less so. The Aussie Govt 10yr yield is now at 0.81% which is down another -5 bps. The China Govt 10yr is up +2 bps at 2.70%. The NZ Govt 10 yr yield is down -7 bps at 1.03%.

Gold is down another -US$17 today, to US$1,611/oz.

US oil prices are even lower today, down US$1.50/bbl to just on US$20/bbl. They were below that earlier in the day. The Brent benchmark is also lower at just under US$22.50/bbl. The world crude supply is far more than anyone needs and place to store output have vanished. The US shale industry is in an existential crisis, but then, so is every other producer.

The Kiwi dollar is starting today marginally softer than this time yesterday, now at 60.1 USc. On the cross rates we are down by -½c at 97.5 AUc. Against the euro however, we are firmer at 54.6 euro cents and at a two week high. That means our TWI-5 is little-changed at 66.5.

Bitcoin is now at US$6,394 and up +4.8% since this time yesterday. 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 ».

Our exchange rate chart is here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

95 Comments

13
up

If the global debt mountain, or more accurately an upside down monumental pyramid, was dire before the advent of CV19 where then are the billions & billions of $ € £ ¥ et al of government emergency funding arriving from. Somewhere down the line there are going to have to be write offs on a scale never ever imagined. Who exactly then wears that and who pays the piper? Post WW2 the Marshall plan more or less bailed out Europe including held over WW1 debts. USA ain’t in that position any longer, far from it. Who bails out them then? Just asking!

From the press conferences yesterday Trump indicated the USA was getting funds/finance to Italy and Spain.

10
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This is what happens when you intervene in markets that are designed to be free in price discovery. The worse the intervention, the worse the results and flow on consequences. And you probably don't fix the problem, you make them worse, so you have to intervene again and again. They have not stopped intervention since the last financial crisis, so simply grown the problem.

No, the markets are designed to be free to discover prices. Intervention is required to ensure certain market participants can discover prices they wouldn't normally find if the market were actually free.

he who controls the energy supply sets the terms of the servitude

And we all know who controls the European natural gas supply... Putin

read petrodollars

Japan was the first to lead us down the rabbit hole. As of June 2018 the BOJ was a top 10 shareholder in 40% of all listed companies on the Tokyo stock exchange, some USD 227 billion worth. Privatizing profits and socialising losses through monetary policy.

"where then are the billions & billions .. arriving from"
Money printing mate aka QE which doesnt even cost the paper its NOT written on. It's a credit entry from reserve bank to treasury with which the govt pays all those subsidies. Grant has up to 50 billion in the petty cash tin with which to grease the wheels of industry and will leave the financial reports till later when this is over. "Unite against the virus!"

Mortgage bankers called for Fed help. The Fed bought up the market to zero and negative interest rates. Now they are complaining that the Fed drove their hedges against high interest rates into a massive loss causing margin calls. The mortgage bankers have about 2 days before collapse if the Fed keeps intervening.
https://www.cnbc.com/2020/03/29/mortgage-bankers-warn-fed-purchases-of-m...

22
up

Very interesting article in the dom post by an epidemiologist today. Some rational thinking sorely needed at the moment. One thing really worries me: the people making the decisions about our future, ie politicians, civil servants and the police, will have their jobs when this lockdown is over. Those who are less privileged won’t. Some weird ad hoc decisions being made, imho. I live rurally and need rat bait, two stroke oil, fertiliser quite urgently. Can’t get it. Can buy cigarettes an chocolate, though, and got some great coffee delivered yesterday.

Farmlands and PGG are still open for all that stuff, but not my pumpshop.

My daughter was talking about all the people in California that have lost jobs, people like waiters, now just hiding out while they miss debt payments, waiting for some kind of end game.

14
up

A rural contractor has less than 5 staff but decided to register anyway. They needed a new vehicle battery, "if you don't have an MPI registration number we can't sell to you. We only sell to customers who are essential and who are registered." The contractor happily gave their number and was able to go in and pick up the battery. The shop wasn't 'open' as such ie the doors are kept closed but is still open for genuine 'essential' business. A farmer had a breakdown on a piece of harvesting gear that needed an engineer to fix. The engineer repaired it. The engineering company door is closed, but again it is operating.

How Jenny Craig can be classed as an essential service but butchers aren't, defies belief. It's a bit like My Food Bag being able to continue but fruit and vege growers who sell online and direct to public weren't. Thank goodness MBIE has changed that, and now growers can sell on line and continue to supply locally via door to door deliveries. The supermarkets need some competition.

I'll explain it for you. JC makes diet specific meals for a particular segment of the population, you can't suddenly expect them to go eat out of the supermarket like everyone else. Would you expect your diesel powered car to run on petrol simply because you don't believe it needs a special diet?

11
up

JC stuff is calorie controlled, not some magic food that saves lives. Carrots, lean meat, and water are a great alternative.

who would want to eat lean meat?

Vension imo is better than beef

try living on it and see what happens

I substitute venison for every beef dish I cook and feel normal

So JC providing over priced microwave dinners that said segment of population could produce at home for less is essential?

It's called End of history illusion .

Yeah great piece that. Along the lines of what I have been saying for weeks. But he's an 'expert'

You're right Pietro, private companies/professional sports organisations, will be/are asking employees to take reduction in salary/wages just to survive, the public sector carry on with their huge salaries, the boat is starting to get a lean on. I would hope Government turn around after this and ask for the same through all their servants..IRD/ACC/MBIE/NZTA etc etc etc

What about our FIRE industry? Any word from them on wage cuts? Bankers appear to get paid HUGE wages (at least those in higher management) - if I were in those positions I'd be taking the moral high ground pretty early on in this and declaring wage cuts before the pitch forks come out from the general public.

19
up

If you have any moral high ground whatsoever you are obviously ruled out for any sort of middle and above banking job. See John key ANZ textbook example.

less employees etc etc …. its all deflationary

less doesn't work for efficiencies … and the financial system already geared to max leverage cant undo debt promises

Case in point FREIGHT . .. Less backload freight / half full loads ... increases the cost of EVERYTHING

10
up

How about this. Went into 4 square yesterday and they were selling fried chicken and chips, pie oven full and fridge full of cakes, slices etc. So we are told not to drive and go for a walk on the beach yet we can buy ready to eat food that has been handled by staff not wearing PPE? Boggles the mind

I didn't think they were allowed to be selling unwrapped ready to eat food. Pies would be fine as they're wrapped at the factory...but not cakes and slices, surely??

They were uncovered slices not pre werapped or anything. I should have taken a photo. And the fried chicken was BAU

10
up

I bet you still brought a pie though...

Wrong. Fried chicken. Just to hear the vegans screech

Good luck with those walks on the beach..

You mean good luck with the fishing ;)

Nope I meant good luck you actually walking to a beach.

I'll just drive like the rest of the public ignoring official advice

I raised the issue of fridges and washing machines on twitter. The Government says that MBIE is looking into it but if anyone has broken down essential whiteware and so on they can't buy them. They also can't buy heaters or blankets. No mention of essentials like warm clothing, shoes, etc. MBIE is barely functional under normal conditions and they clearly lack a grasp on how the economy and business (farms too) function.

When things restart there are going to be lead time problems for construction projects. It's difficult to install a door or fan when they haven't arrived on site.

I'm waiting to see the Easter announcement with people potentially unable to buy food for four days, which would create a spike in demand before and after Easter.

Ah....but if you had a National Storage unit with these 'essentials' in it, you can go an retrieve that spare fridge to replace the one that broke down, the heater and also the blankets etc. Crazy, eh.

Warm clothing is interesting - many schools would be looking go to their winter uniforms after Easter, but how can parents access these when they can't buy them online? Yet Ezibuy says they are still delivering, but the likes of Farmers aren't....

PM says supermarkets are likely to remain open over Easter.

It looks like there's some clarity appearing and the warehouse and noel leemings are open for essential supplies.
https://www.stuff.co.nz/business/120695471/the-warehouse-opens-for-limit...

"One thing really worries me: the people making the decisions about our future, ie politicians, civil servants and the police, will have their jobs when this lockdown is over"

Yes - its very hard for people to get their heads around the effects of deflation
Once you start a deflationary spiral its hard to head it off - take China with capacity apparently coming on stream … yet a lack of export orders now

When many in Wellington think of a business, they picture one of their cafes … and reason that it will be humming as soon as the lockdown is lifted.
Unfortunately, its not that simple
Covid is decimating the debt system as we speak ….

"Covid is decimating the debt system as we speak …." Great! The debt system we operate practically ensures deflation. Hopefully, this will pull the curtains back on the whole magic show so to speak.

the debt system we operate relies on inflation

the not so great part is we rely on it holding if we wish to continue to live like kings ...

I know but it's getting to a point now where less and less are living like kings. Time for a reversion to sound money in my books.

From the Guardian:

‘Over in Greece, political figures have been prompted to volunteer half of their salaries over the next two months to help the cash-strapped state combat the novel virus.

Katerina Sakellaropoulou, the country’s first female president who assumed the post this month, says she will be handing over 50% of her wage to a special fund created to deal with the economic fallout from the virus. Bank of Greece governor Yannis Stournaras followed suit.

The prime minister, Kyriakos Mitsotakis, had called on his cabinet and MPs in his ruling centre-right New Democracy party to do the same..’

Can we ask our lot to do the same?

apparently this is a great film, for all those stuck at home. ' Searching for sugarman.'
https://www.youtube.com/watch?v=QL5TffdOQ7g

In China, they may be on the other side of their virus emergency, but are having to face up to an economy that will be very hard to restart without export orders.
Indeed

It really hurts that much they have to say "White House-led" rather than "Chinese." Link

we are getting enquires daily about ordering goods from china, they have a problem not only finding buyers but also finding a way to get the goods to end user.
its time like this that shows NZ advantage being a food basket for the rest of the world.

It's a test to get a test.

Stuff reporter Tom Kitchin had a temperature and a persistent cough but was repeatedly refused a test for coronavirus.

https://i.stuff.co.nz/national/health/coronavirus/120673031/coronavirus-...

12
up

Tough situation. I'm guessing there are a bunch of people with mild hypochondria who are also insisting they need to be tested and staff are having to triage as best they can.

12
up

You mean like the hypochondriac convention that had to be cancelled because everyone called in sick.

Yes those sort of questions need to keep coming. Don’t wish bad news on anyone but at least media staff, as in this case, have the ability and means to get it onto the news.

it does make you wonder what the true number of infected really is,
I suspect you could double todays number

They would like to continue with the fear it is going to kill everyone and further indebt us rather than blame the last 10 years debt bubble on goverment. The best thing they could do is lock up anyone who has registered as high risk i.e 70 plus/immune comprimised and diabetics and the over weight and let the rest of us carry on living and economy running the best it can.
Why lock down children and fit workers who have very low risk when they are not the problem.
In nature everyone know what happens to the weak and who is to say this virus want keep mutating and be with us forever at last count they have found 40 mutations which means it has already adapted to us as hosts and may just become like the flu which we accept will kill many every year.

"in Nature" blah blah.
This is human kind mate. This is not Darwinian fittest trope garbage.
They always crawl out the woodwork

Actually it's not survival of the fittest - it's survival of the good enough.

Like it or not, Darwin's theory applies to humans as well. We would be arrogant to think otherwise

At risk of incurring the wrath of the gods - why don't we just get them to wear a six pointed yellow star and put them is concentration camps - oh that has been tried before.......

Yes, when you look the number of leaders sick and run some probabilities you come up with a much higher infection rate. It reinforces the suspicion of many that Covid 19 is a copable illness for the vast majority who get it. And say what you will, statistics show that the elderly and those with underlying conditions are by far the most at risk and are the ones who need the most preventive attention, home isolation, monitored care, food deliveries etc. 20-50,000 people in the US die of flu each year, And some 200,000 are hospitalised. With its associated pneumonia, is the 8th leading cause of death. Worldwide, the annual flu toll is between 200-500,000. As an aside, as a very young child I survived a severe case of flu in the 1958 pandemic which killed two million people worldwide. I remember how seriously ill I was, and still smile when people sniffle and say they have the ‘flu’. My point: is a total, economy wrecking lockdown the best way to go about tackling this new virus? Has Sweden got it right?

Yes, my wife and I got the swine flu in 2010 - death would have been welcome.

Agree, my husband and I suffered through Swine Flu. My doctor every now and then keeps repeating that we could have died. I tell him my immune system did what it was designed to do....but I agreed with him that death would have been so much easier. The pain was unbelievable and the lack of energy meant that it took months to get back any of our previous fitness.

Sweden, Japan and Korea have avoided full lockdowns. All very sensible, well run countries.

There is clear evidence (and a fatality) that their is community transmission.

We still don't test though unless a close contact of a confirmed case, or overseas travel is present.

Granted this is because of limited tests. But it still makes a mockery of all the reporting.

US airline industry seeking $50 billion assistance, in addition to $60 billion for Boeing. Outsiders demand US Government only consider if not used for share buy-backs

Agree Pietro. While the herald continues to stoke fear this morning over the loud speaker to their readership, Stuff may slowly be changing the NZ media narrative with this...

https://www.stuff.co.nz/national/health/coronavirus/120666809/do-the-con...

Are the government now a replacement for our immune system?

Yes I was just about to post that link. Very interesting:

Remember swine flu in 2009? Initial estimates of case-fatality rates were about ten times higher than those calculated once the dust had settled. It turned out that swine flu, that year's killer virus, was no more harmful than seasonal flu.

So at the end of the day what is being said is we just don't know.....

We will know soon. I have been an advocate for the lockdown but not a lockdown that lasts forever. The lockdown and border control should work if everyone plays their part. At the same time we can watch what happens in other countries and adjust things accordingly.

I'd put my money on this all being a huge overreaction. However an overreaction that could have deadly consequences that go way beyond even the worse case scenarios of the virus.

With time we will get better statistics and it can be argued that the initial response is / was appropriate because we just don't know but at some point NZ is going to have to open up at least internally. Perhaps one thing that will come of this is better awareness of hand washing and more use of hand sanitizer.

Here another article questioning the "extreme" lock-down

Before lockdown, Britain quietly downgraded status of virus threat
https://www.washingtontimes.com/news/2020/mar/26/lockdown-britain-quietl...

It's only what one or two of us have been saying for weeks. Mortality likely to be much lower than what has been stated.
I felt sorry for my children already with climate change. I feel doubly sorry for them now with this financial mess that has been created.

The mortality rate on the Diamond Princess of course only considers actual deaths, not how many deaths there would have been in the event of no intervention - and that includes medical intervention as well as isolation intervention once it was put in place to slow the transmission.

The true morbidity of the disease could only have been known if we had left all those people aboard the ship with no intervention (medical or distancing) until such time as everyone left was asymptomatic.

As people change their behaviour and wash their hands more there will likely be a drop off in "normal" flu related deaths. The Z score charts don't look out of the ordinary. Were some bigger peaks in 2016 and 2018 - though may not be peak flu season.
https://www.euromomo.eu/outputs/zscore_country65.html

It will be interesting to see how the figures look in a years time. Will there have been more deaths than usual? Flu deaths around the world are quite high:
https://www.worldlifeexpectancy.com/cause-of-death/influenza-pneumonia/b...

But many countries have different ways of measuring things. Many old people die from pneumonia while terminally ill with something else or from simple old age.

2009 must admit a bit vague remembering it all now but your raise a good point. Over 3000 cases & 19 deaths in NZ. No closed borders, no enforced lock down. There was concern, think that was when Tamiflu was dished out, but nothing like this time. Is CV19 that much more virulent? If so how/where that is has not been exactly defined to the community.

How to explain Italy -surely that's not normal flu?

The chinese will keep themselves busy tearing down brand new infrastructure and replacing it with even newer stuff. I am more concerned about the miserable inclinations that many NZers hold in regards to staying the course of action and investing sufficiently to make something work equitably. I fear the emergence of the dreaded NZ half measure.... do it on the cheap approach.... aka Chch EQC disaster!

Keep an eye on markets 1st April opec may increase oil production and cause further glut and price cut below $20 barrel
USA now in bad position will need to cut further or burn a lot of cash/collapse of loans etc.
I am still picking a major sharemarket correction this week on this news alone unless FEDS bail them out??.

I don't think the Fed & US Govt can stop what is coming despite all the dollars they are and will pump in to try and and keep it afloat.

Agree they may delay it but everything they are doing is going to cause problems in other areas.
I think you will see the people rise up soon if they keep up with one sided bail out of 10 perecnt while leaving 90 percent i ruins.
People are expecting markets to go down so why stop it when it will be more pain to pump it bigger and then pop anyway.
Maybe they are still allowing friend to finish selling stocks before final crash.
https://www.marketwatch.com/story/two-senators-are-under-fire-for-sellin...

The world crude supply is far more than anyone needs and place to store output have vanished. The US shale industry is in an existential crisis, but then, so is every other producer.

Putin, Trump discussed pandemic, oil prices

The case for mass testing. "Twenty five billion dollars to test the entire US population. Now suppose the pandemic knocks 5% off US GDP over the next year or two, that’s roughly a trillion dollars lost. Or to put it differently, $3 billion a day. Thus, if mass testing reduces the number of days we are away from work by 9, it pays for itself. Let’s again be conservative and say that testing will also require a $25 billion fixed cost to build the enzyme factories and so forth, for a total cost of $50 billion. 18 days and it’s worth it."
https://marginalrevolution.com/marginalrevolution/2020/03/a-solution-if-...

"We propose an additional intervention that would contribute to the control of the COVID-19 pandemic and facilitate reopening of society, based on: (1) testing every individual (2) repeatedly, and (3) self-quarantine of infected individuals. By identification and isolation of the majority of infectious individuals, including the estimated 86% who are asymptomatic or undocumented, the reproduction number R0 of SARS-CoV-2 would be reduced well below 1.0, and the epidemic would collapse."
https://medium.com/@sten.linnarsson/to-stop-covid-19-test-everyone-373fd...

The folk in Wellington, Zooming.
See the live stream

https://i.stuff.co.nz/national/health/coronavirus/120696660/live-simon-b...

It is another of those times when it does not serve one to voice a practical view out loud. Best to just nod and smile to avoid the wild eyed rants.

Agreed.

All those who think that growth can (a) go on forever) and (b) be re-started seamlessly and (c) is 'normal', I regard as wild-eyed ranters.

That includes the op/ed referenced above. It merely shows that our choice to specialise was fatal. There' a an epidemiologist who believes the economists. Who follow a creed which required a flat - and therefore infinite - planet.

Gonna be funny, in an un-funny way, to watch the pennies dropping while the pennies drop, over the next wee while.

I really hope that the people do rise up this time and a new system is formed and those responsible pay the price. But then there is reality.

It's time to explore the final frontier...

https://www.ft.com/coronavirus-latest

Here's all graphs on the Virus from the FT.

Check out the graphs on how China has been affected.

The number I'm interested in currently is number of tests conducted. As the WHO told us "Test, test, test." There is no substitute for testing as South Korea is showing.

https://www.bbc.com/news/av/world-51916707/who-head-our-key-message-is-t...

Secured Overnight Financing Rate Data sits at 1 bp above the Fed's official O/N RRP 0.0% rate floor, and as of Friday 3mth US Libor stands out at 1.4501%.

Not Good: Eurodollar Futures Curve Sells Off, At The FRONT

https://kunstler.com/clusterfuck-nation/forced-liquidation/

It rewards careful reading.

Reminds one of Rowan Atkinson/The Devil; Financiers, bankers, economists; you're with that lot......

Nevada, a state in one of the richest countries in the world, has painted social-distancing boxes on a concrete parking lot for the homeless to sleep in. Link

USA equity markets are being month end bought by pension funds.
Rest of week they will fall back again.
Being reported in UK that Ministers are livid with China for understating number of virus cases by a factor of 15 - 40 times. So, can we please stop crediting China with a miracle for only having 3300 deaths.

What do you mean "We", Kimosabe?

Politicians don't lie - right!!!

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