Here's our summary of key economic events overnight that affect New Zealand, with news we are starting to contemplate where the 'peak' is and what happens after that.
First, the latest set of US Fed minutes for their March 15 meeting shows them increasingly concerned about the pandemic emergency, but not fully engaged. Full forceful actions came after this meeting, emphasising just how quickly the economic side of the emergency developed.
And it developed, not because of official policies, but because consumers recoiled at the implications. American policy makers were downplaying the seriousness but American consumers were acting. The NY Fed tracked sentiment weekly in March and it clearly shows consumers led policymakers with their concerns. Lack of preparation is probably why the US economy is being hit so hard. One analyst sees US GDP falling -30% in Q2-2020 after falling -10% in Q1, and for all of 2020 it will be down more than -5% because they bravely assume a U-shaped recovery in the second half.
Heading into this crisis, American consumers were pulling back on consumer debt. In February, these levels fell a massive -US$108 bln from January, the largest month-on-month decline in four years. It will be massively lower when March and April data is published, you can assume. The point is, the crisis came to reinforce consumer pullback decisions.
US mortgage applications dropped -18% from one week ago and are down a third compared to a year ago. The severest decreases are in the coronavirus hotspots of course, but with today's revelation that infection rates are jumping worryingly in the middle of the country now, this market may yet drop twice as far.
Worldwide, the latest compilation of Covid-19 data is here. The global tally is now 1,465,000 and up +74,000 this time yesterday. Now, more than 28% of all cases globally are in the US and they are up +23,000 since yesterday to 403,000. This is a slower rate of increase. Less than 6% of all US cases have recovered so far. China's recovery rate is now 94% and they claim they only have 5200 active cases nationwide now. Australia has now over 6000 cases, 5000 active, and while the rise in infection is slowing, deaths are not and now exceed 50.
Global deaths now exceed 85,000. Death rates in Europe are frightening and rising; the death rate in Italy is up to almost 13%, in the UK to just under 12%, and in Spain is touching 10%. But they are much lower elsewhere in Europe. The US rate is up to just over 3.2% and now exceeds 13,000 people.
There are now 1210 Covid-19 cases identified in New Zealand, with another +50 new cases on Wednesday and lower than the +54 increase on Tuesday. That is the lowest daily increase in two weeks. The number of clusters is 12. Only one person has died here, but there are 12 people in hospital with the disease, with four in ICU, and two of those are in a critical condition. 23% of all cases have recovered.
China is flooding its financial markets with liquidity, like most other economies, but theirs has the best, earliest chance of working, and working in a way that could help New Zealand. Perhaps we saw the first effects of that in yesterday's dairy auction.
In New York, equity markets are extending Tuesday's rally, and with more enthusiasm today. The S&P500 is up +3.4% so far although there were no such signals in Europe overnight nor Asia yesterday. What seems to be driving today's rally extension is American modelling that deaths will peak sooner than earlier predicted and at a lower level. No-one seems to be concerned that they didn't need to have got out of control in the first place. And they are ignoring the new rapid spread of the disease into heartland America.
The UST 10yr yield is up +3 bps at just on 0.77%. Their 2-10 curve is more positive today at +49 bps. Their 1-5 curve is less positive at +23 bps, and their 3m-10yr curve is also flatter at +62 bps. The Aussie Govt 10yr yield is now at 0.98% and a rise of +3 bps. The China Govt 10yr is down -1 bp at 2.51%. The NZ Govt 10 yr yield is also down -1 bp at 1.09%.
Gold is down today, dropping by -US$8 to US$1,644/oz.
US oil prices are a little lower at just on US$24/bbl. The Brent benchmark is also lower at just on US$32/bbl. Updated data shows American crude oil and petrol stocks jumping to near record-high levels. The Russians have rejected US overtures for steep output cuts.
The Kiwi dollar has strengthened even further against the greenback, up another +¼c to 60.2 USc. On the cross rates we are little-changed at 96.6 AUc. Against the euro we are firmer at 55.4 euro cents. That means the TWI-5 is at 66.7 and its highest in a month.
Bitcoin is now at US$7,317 and little-changed in a day. 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 ».