Here's our summary of key economic events over the weekend that affect New Zealand, with news of a rolling earthquake of economic destruction.
American employment levels fell sharply in March. The official non-farm payrolls report showed payroll employment fell by -701,000 in March, and the unemployment rate rose to 4.4%. But these are seasonally adjusted results. Their actual employed workforce fell to 155.2 mln in March from 158.0 mln, and that is a fall of -2,850,000 and probably a far better indication of what actually happened. But this only the situation mid-March; the survey behind these numbers predated many coronavirus-related business and school closures that occurred in the second half of the month. The weekly jobless claims report is a more up-to-date indicator of the shock their jobs market is taking - more than 10 mln people filed for these benefits in March after losing their jobs.
Unsurprisingly, the US service sector PMIs look awful. The widely-watched ISM one showed a sharp fall, but not a contraction. (The survey was taken too early in the month to be relevant now.) The internationally-benchmarked Markit one did show a precipitous decline into a severe contraction and probably more accurately reflects the end-of-month situation.
As the crisis deepens in the US, the threat of bank runs rises (despite their deposit insurance program). Now Fed researchers are wondering if holding back information and data that was once transparent would help control such urges. They conclude it will: "a policy of suppressing information about banks' balance sheets has a significant and positive effect on deposits". The Americans will find it hard to criticise China when they do the same.
The growth in the US Fed balance sheet is just stunning. The latest data shows that in the past four weeks, they have added more than +US$1.5 tln in net support to their banking system, far outpacing anything they did in the GFC. This is what "whatever it takes" looks like - and it is also clear that this is only just the beginning, even if there is some slowing of intervention in the past few days. Officials seem determined that there will be no 'austerity' response for this crisis, but despite the cash splash, the impacts at the household and firm levels don't look any better. The US economy is now expected to shrink -5.5% in 2020.
There are now 1039 Covid-19 cases identified in New Zealand, with another +89 new cases yesterday and lower than the +71 increase the prior day. The number of clusters has been risen to 12. Only one person has died so far but here are now 15 people in hospital with the disease, three in ICU and two are in critical condition.
Worldwide, the latest compilation of Covid-19 data is here. The global tally is now 1,247,100 and up +182,000 from the 1,066,700 we had this time on Saturday. 26% of all cases globally are in the US and they are up +66,000 since Saturday to 324,100. Both Germany and France now have more cases than China, joining Spain which now has more cases than Italy, and the US. Australia has now over 5700 cases, and 35 deaths. Global deaths now exceed 68,000. Death rates in Europe are frightening; 12.3% in Italy, 10.2% in the UK, 9.5% in Spain, 8.3% in France. But they are much lower in Germany at 1.5%. The US rate is 2.8% and China is 4.0%. Death rates in the rest of Asia are modest by comparison at about 1.4% in their developed countries.
After accusing China of unreliable data, it now appears that American data is also unreliable, understating the extent of infection and death. Every country is struggling with accurate record keeping.
Japan announced it would supply a 'clearly effective' coronavirus drug free to any country that asks for it. In contrast, the Americans have banned the export of masks and other life-saving production, even to Canada. Meanwhile, China is ramping up "mask diplomacy" in the resulting vacuum.
And China has sharply cut the amount of cash that mid-sized and small banks must hold as reserves, releasing about NZ$100 bln in long-term funding to shore up their economy. They also cut the reserve requirement ratio for those banks by -100 bps, in two phases. But it is holding off cutting retail deposit rate minimums despite bank pressure to do so.
Their private Caixin/Markit services PMI hasn't shown the same full recovery that their factory one did. The Caixin survey shows a still fierce contraction in March, unlike the official services PMI which claimed an expansion. Likely the Caixin survey is more realistic.
The Aussie services PMI doesn't make comfortable reading either. And their economy is now expected to contract -4% in 2020.
And the huge Australian superannuation funds are in a liquidity crisis and withdrawals now exceed inflows. It's a sector that is about to be shaken up hard. And the expected fall in iron ore prices is starting to happen now. Prices for steel-making coal have tumbled hard in the past week and iron ore will follow.
And supply-chain disruption is seeing American dairy farmers dumping milk, even though retail demand is rising. The links between producer and consumer are breaking down.
The Asian Development Bank sees China's growth slowing to just +2.3% in 2020 but then jump to +7.3% in 2021 before "reverting to normal". But any reversion to the old normal frankly seems very unlikely. The damage being done will last a generation and alter the global economic trajectory forever.
The UST 10yr yield is holding at just under 0.60%. Their 2-10 curve is less positive today at +37 bps. Their 1-5 curve is slightly more positive at +23 bps, while their 3m-10yr curve is a bit less so at +48 bps. The Aussie Govt 10yr yield is still at 0.76%. The China Govt 10yr is also holding at 2.61%. Likewise, the NZ Govt 10 yr yield is also unchanged at 1.03% in international markets.
Gold is firmer again today, up by another +US$4, to US$1,622/oz.
US oil prices are sharply higher today that where we left it on Friday, at just over US$28/bbl, a +US$3.50 rise. The Brent benchmark is also higher at just over US$33.50/bbl. But a failed American attempt to patch up the Saudi-Russian fight will probably see these prices fall again this week.
The Kiwi dollar has been stable over the weekend at 58.7 USc after last week's cumulative loss of almost -2c. On the cross rates we are at 97.8 AUc. Against the euro we are at 54.3 euro cents. That means the TWI-5 is at 65.7 and down about -100 bps for the week.
Bitcoin is now at US$6,792 and and little-changed from where we left it on Saturday. 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 ».