Here's our summary of key economic events overnight that affect New Zealand, with news equity markets are in a sharp selloff.
The IMF now says global activity is expected to fall -4.9 percent in 2020, 1.9 percentage points below their April 2020 forecast. They say the pandemic has had a more negative impact on activity in the first half of 2020 than they anticipated, and the recovery is now projected to be more gradual than previously forecast. If the expected rebound happens this will leave 2021 GDP some 6½ percentage points lower than in the level they were expecting at the start of 2020. The adverse impact on low-income households is particularly acute they say, and will probably add more to extreme poverty than at any time since the 1990s.
It's a grim realisation that is impacting equity markets. Wall Street is sharply lower, with the S&P500 down -2.5% so far in mid-afternoon trade and taking -US$640 bln off the market cap overnight. That follows even steeper declines in Europe overnight, down more than -3%. Yesterday, Asian and Australian markets were flat although the NZX50 Capital index did rise +1.1% on the day.
Not helping American markets was a sharp and unexpected fall in mortgage application data for last week.
But the rise and rise of the pandemic infections is the main reason investors are suddenly gone risk-off.
The IMF report is tough reading. It sees the US -8% lower at the end of 2020 than 2019, and the EU -10% lower. Japan will be -5.8% lower while China will be +1% higher and among the large economies, the clear 'winner'. India will be -4.5% lower. Australia is seen shrinking -4.5% (and that is less than their April forecast) but New Zealand doesn't get a mention in this update.
Keeping the Chinese growth going is proving hard work for local banks. Many Chinese commercial banks are offering interest rates for consumer loans at lower rates than to businesses, supposedly to lure quality individual customers. But such loans are raising concerns about their possible unlawful use in the real estate and stock markets.
And Chinese firms are having real trouble refinancing their offshore bonds, with defaults reaching record levels. But easy money and government support inside China has default levels falling.
The latest compilation of COVID-19 data is here. The global tally is now 9,295,400 which is up +141,000 since yesterday and a rising pace. Global deaths reported now exceed 478,000.
A quarter of all reported cases globally are in the US, which is up +23,000 since this time yesterday to 2,349,000. US deaths now exceed 121,000. The number of active cases in the US is now up to 1,580,100, up +15,100 in a day.
In Australia, there have been 7521 cases, +29 since yesterday. Their death count is up +1 to 103 deaths and their recovery rate just under 93%. There are now 494 active cases in Australia (+19).
The UST 10yr yield is down -3 bps at 0.68%. Their 2-10 curve is flatter at just under +50 bps. Their 1-5 curve is marginally flatter at +14 bps, while their 3m-10yr curve is also also flatter at +57 bps. The Aussie Govt 10yr yield is unchanged at 0.90%. The China Govt 10yr is down -4 bps at 2.91%. But the NZ Govt 10 yr yield has not joined the down-trend yet, up +3 bps to 0.96%.
The gold price is unchanged at US$1,766/oz.
Oil prices have fallen sharply today as it is clear demand is going to be very soft. It is now just over US$38/bbl in the US and down more than -US$1.50/bbl. The Brent price is just over US$40/bbl. American crude oil inventories have risen to record high levels.
The Kiwi dollar is lower after the RBNZ OCR review yesterday, down this morning to 64.1 USc which is almost a -1c drop. On the cross rates we are less affected at 93.3 AUc but against the euro we are down -½c at 56.9 euro cents. That means our TWI-5 is down at 69.1.
The bitcoin price has moved sharply lower today, now at its lowest level of the month and down -3.9% to US$9,291. 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.