Here's our summary of key economic events overnight that affect New Zealand, with news the Aussies are trying to restart and open up but face an angry China. It is a delicate time for New Zealand.
But first, Wall Street opened today with a bounce after yesterday's crash. But the +2.8% gain just after opening was as good as it got and it has faded to be up +1.3% at the close. The S&P500 will lost -5.4% for the week, shedding -US$1.4 tln in market capitalisation in just seven days. That makes it the largest value loss since March 23 (and all of that decline was subsequently recovered.) For the year so far, the S&P500 has seen its capitalisation drop by -US$1.7 tln or -8% of US GDP.
The equity market bounce hasn't been matched by the bond market.
Americans’ view of the economy improved in early June as the country tried to reopen. The latest survey’s index of consumer sentiment rose to 79 in the past two weeks and above what analysts were expecting. But that level is still very low, down -20% from this time last year. Fear of income loss is very high, driven by what might lie ahead with a second wave from the pandemic. And as each day passes, that fear is becoming more realistic.
Yesterday's market fall was triggered somewhat by Fed Congressional testimony by Chairman Powell. Today, they released the Monetary Policy Report to Congress giving more details of the fragile situation American households and businesses are in. A key message is that these vulnerabilities will be persistent.
In Australia, they have decided at a national level that all states except Western Australia will open their borders by late July and the first foreign students will be allowed in from overseas. But the spat with China is a serious issue for them. There is rising alarm among universities and tourism operators in Australia that China's travel warnings for tourists and students are here to stay.
Also under threat are Australia's coal mines. Their new risk is that they won't be able to get insurance, and insurers shy away from covering risks that add to climate change exposures. Another danger is that China is signaling it may avoid buying Aussie coal. China is looking elsewhere. The growing China-Australia hostility is a tricky dynamic for New Zealand.
India’s industrial production shrank a record -55% in April with manufacturing crashing a whopping -64%. It was so bad, the Indian Government refused to release the headline IIP growth number saying it is "not appropriate to compare the IIP of April, 2020 with earlier months". They even took their official statistics website down after releasing the data earlier.
In Japan, industrial production fell a sharp -15% year-on-year in April data released overnight. This is an awful result. Business sentiment is now at an eleven year low. In response, the Japanese government has enacted +¥32 tln in extra stimulus. (+NZ$460 bln). The irony of this is that NZ$1.5 tln of previous stimulus hasn't yet been spent, "mired in a bureaucratic logjam".
In England, they have posted a -20% drop in economic activity in April. It is a fall of historic proportions - even in the Great Depression of the 1930s, GDP didn't fall more than -1% in one month.
The latest compilation of Covid-19 data is here. The global tally is now 7,573,700 which is up +141,000 in a day, and a faster rising pace. Global deaths now exceed 423,000. China is reporting small (actually tiny) isolated but important outbreaks of a second wave of infection - important because one is in Beijing.
Just on 27% of all cases globally are in the US, which is up +24,000 since this time yesterday to 2,033,000. This is also a faster rate of increase. It is becoming clear that 'reopening' is raising the infection rate. Florida and Texas are the new hotspots (both Trump heartland). US deaths now exceed 114,000.
In Australia, there have been 7290 cases (+5 since yesterday), 102 deaths (unchanged) and a recovery rate of just over 92% (unchanged). 17 people are in hospital there (-1) with 2 in ICU (unchanged). There are now 405 active cases in Australia (-17).
The UST 10yr yield is a little higher today, bouncing off yesterday's decline and up +5 bps to 0.71%. But that still means it is down -18 bps in a week. Their 2-10 curve is only marginally changed at +51 bps. Their 1-5 curve is a little steeper at +15 bps, while their 3m-10yr curve is also little-changed at +56 bps. The Aussie Govt 10yr yield is unchanged at 0.90%. The China Govt 10yr is down -2 bps at 2.78%. And the NZ Govt 10 yr yield is lower too, down -5 bps to 0.81%.
Market volatility, which reached very elevated levels in March and fell away as monetary and fiscal stimulus poured in to the global economy, has started to rise again. And the Fear & Greed index we follow is now neutral having week strongly on the Greed side last week, and strongly on the Fear side a month ago.
The gold price is little-changed today at US$1,732/oz.
Oil prices are holding at yesterday's level. They are now just over US$36/bbl in the US. The Brent price is just under US$39/bbl. But the US rig count fell yet again, and for the first time in the modern era there are now less than 200 oil rigs operating in the US. Total rigs operating are down to a new all-time record low also. Low prices have killed off the US domestic drilling industry for now. The international rig count is diving too.
And the Kiwi dollar has held too at 64.2 USc. On the cross rates we are still at 93.9 AUc. Against the euro we have are down more than -½c at 57.2 euro cents. That means our TWI-5 is now at 69.2 and -70 bps lower than this time last week.
The bitcoin price has also held its lower level, now at US$9,401 but -3.5% lower than a week ago. 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 currency charts are here.
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