Here's our summary of key economic events over the weekend that affect New Zealand with news there has been a huge change of mood in financial markets.
Normally, this week would be focused on the upcoming non-farm payrolls report for November and the results of the Black Friday/Cyber Monday retail sales events. But the sudden risk-off mood has changed the perspective.
Investors took heed of the new WHO warnings of the emerging South African variant that is probably resistant to current vaccines, and the early closing of borders again in response, and have reacted in a sharp risk-off manner globally.
Commodity prices, equity prices, and interest rates have all tanked substantially, and there has been a rush to the 'safety' of the core currencies. The NZD has not fared well.
Copper fell -3.6% in markets on Friday to US$9465/tonne. Aluminium lost -4.2% to $2,601/tonne, zinc shed -3.1% to $3,197, lead was down -0.4% to $2,261, tin eased -0.5% to $38,600 while nickel ceded -3.7% to $19,895.
Oil prices sank much more, down -13% on the day and have stayed down (see below).
Countries around the planet have rushed in new travel restrictions. New Omicron (South African) cases have been detected in Europe, Australia and Hong Kong now, indicating broad travel spread already.
Meanwhile, it is emerging that Black Friday may have been a retail fizzer.
In China, they reported profits (¥818 bln) earned by their industrial firms rose by almost a quarter above 2020 levels (¥657 bln) in October, and almost doubling from 2019 levels (¥428 bln) in a major surge that is more than just a Covid rebound. Underpinning the jump are profits at coal and oil companies.
But China’s cement prices are going soft due to sluggish demand, and this is at a time when demand and prices are seasonally strong. However, the run-up in prices early in their season has been unusually high and with demand leaking away this year, we could see a quick retracing. There was an expectation that production curbs due to a new focus on climate policies would keep prices elevated, but it may not turn out that way with low demand trumping constrained supply.
Singaporean industrial production data for October showed an unexpected improvement.
In Germany, import prices surged +22% year-on-year in October, the largest annual increase in more than 40 years and well above market consensus of less than a +20% rise. These rises are largely driven by Russia energy prices, and given the political tussling between the EU and Russia, they may not fade like the rest of the world.
In Australia, retail sales jumped +4.9% in October as opening up generated a strong surge. But as ANZ economists have noted, their recovery is now "a supply side issue".
Omicron may already be in Australia, but Delta is still infecting thousands every day. Delta cases in Victoria were 1061 reported there yesterday. There are now 11,331 active cases in the state - and there were another 7 deaths yesterday. In NSW there were another 185 new community cases reported yesterday, with 2703 active locally acquired cases, but they had no deaths yesterday. Queensland is reporting three new cases. The ACT has 7 new cases. Overall in Australia, just under 88% of eligible Aussies are fully vaccinated, plus a bit under 6% have now had one shot so far.
The UST 10yr yield opens today at 1.48% and down a massive -17 bps since this time Friday. The US 2-10 rate curve starts today flatter at +97 bps. Their 1-5 curve is also flatter at just under +100 bps, while their 3m-10 year curve is very much flatter at +135 bps. The Australian Govt ten year benchmark rate is -20 bps lower at 1.66%. The China Govt ten year bond is down -3 bps at 2.88%. The New Zealand Govt ten year is down -6 bps at 2.47%.
NZ swap rates reversed sharply on Friday as the concerns about the new virus risks started to become evident.
After a very sharp fall on Friday to end the week (in a half-day, holiday session) the S&P500 futures are down sharply again, down -2.6% indicating that Wall Street will open in a very risk-off tone tomorrow.
The price of gold will start today at US$1786/oz and getting no boost from this risk-off dive.
And oil prices have softened further from Saturday to be just on US$68/bbl in the US, while the international Brent price is now under US$72/bbl.
The Kiwi dollar opens today softer again at just under 68.1 USc and a new 100 day low. Against the Australian dollar we are holding at 95.7 AUc. Against the euro we are soft at 61.3 euro cents. That means our TWI-5 starts today at 72.8, down -70 bps from Friday and also its lowest since the end of September.
The bitcoin price crashed -8.2% in Saturday and is now slipped another -0.2% since then to now be at US$54,135. Volatility over the past 24 hours has been modest at just over +/- 1.4%.
Market volatility is likely to be the theme this week, at least until there is more information on vaccine effectiveness, how harmful the new variant is.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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"None of the current trials are designed to detect a reduction in any serious outcome such as hospitalisations, intensive care use, or deaths
Vaccines are being hailed as the solution to the covid-19 pandemic, but the vaccine trials currently underway are not designed to tell us if they will save lives, reports Peter Doshi, Associate Editor at The BMJ today.
...Part of the reason may be numbers, says Doshi. Because most people with symptomatic covid-19 infections experience only mild symptoms, even trials involving 30,000 or more patients would turn up relatively few cases of severe disease.
“Hospitalisations and deaths from covid-19 are simply too uncommon in the population being studied for an effective vaccine to demonstrate statistically significant differences in a trial of 30,000 people,” he adds. “The same is true regarding whether it can save lives or prevent transmission: the trials are not designed to find out.”
...If the frail elderly are not enrolled into vaccine trials in sufficient numbers to determine whether there is a reduction in cases in this population, “there can be little basis for assuming any benefit against hospitalisation or mortality,” he warns.
...Doshi says that we still have time to advocate for changes to ensure the ongoing trials address the questions that most need answering.
For example, why children, immunocompromised people, and pregnant women have largely been excluded; whether the right primary endpoint has been chosen; whether safety is being adequately evaluated; and whether gaps in our understanding of how our immune system responds to covid-19 are being addressed.
https://www.bmj.com/company/newsroom/covid-19-vaccine-trials-cannot-tel…
And here's the thing.
The World is in the midst of the large cohort of ageing people it's ever had. By definition, that means more people are about to die - of everything. The stats of 'all causes of death' are going to skyrocket; death from virus', included - they have to. Even the line on the graph tagged "Natural Causes" is going rise.
From Peter Doshi's other work, I am not sure he has sound judgement, a sense of proportion, reasonable expectations. Here's one from him questioning the effectiveness of flu vaccinations:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1635629/
He is mind you an early-career junior: things may be improve if he doesn't nail his flag to the wrong flagpoles.
The science is way ahead of him: mass vaccinations and the resulting information on effectiveness have made big clinical trials for effectiveness a moot point. (Same with the flu vaccine). The effectiveness data and the social modelling tell the experts that 90% adult vaccination and masking and other limits will reduce transmission to 1 per patient or less. Sure enough, Auckland hits 90% and the case numbers decline.
Mass vaccination is not the way to run a trial. Interesting data out of Norway "We observed no difference in the LoS for patients not admitted to ICU, nor odds of in-hospital death between vaccinated and unvaccinated patients."
https://www.medrxiv.org/content/10.1101/2021.11.05.21265958v1
When you talk of Black Friday being a retail "fizzer", which definition do you mean?
fizzer
/ˈfɪzə/
noun INFORMAL
1. BRITISH
an outstandingly lively, energetic, or excellent thing.
"that fizzer of a letter"
2. AUSTRALIAN•NEW ZEALAND
a failure or fiasco.
"the greatest fizzer in the history of Australian politics"
Not a fizzer, a Pfizer...get with the programme
Good news from Medscape
Pfizer announced on Monday that its COVID-19 vaccine provided long-term protection against the virus in a late-stage clinical trial among adolescents ages 12-15.
A two-dose series was 100% effective against COVID-19, which was measured between 7 days and 4 months after the second dose.
The clinical trial researchers found no serious safety concerns while following patients for 6 months.
There is no news article attached to the statement that Black Friday sales may have been a “fizzer” - the early reporting I have seen from US financial media is that sales in the US were up 47.5% on last year (combined instore and online spending). Not sure how that turns out to be a “fizzer” unless its the British terminology being used.
"there has been a huge change of mood in financial markets"
Phew! Thank goodness for that.
What does any CEO, who has embarked upon the wrong strategy and refuses to openly acknowledge that; but deep down inside knows 'they've 'got it wrong' hope for? Something unexpected; out of their control.
"No one saw that coming! What I was doing would have worked, but now it won't, so I'll reluctantly have to change direction and, oh, sadly write off ten squiillion dollars worth of failed strategy at the same time"
What a boon The Virus has been to the Central Banking Cartel. What an 'unexpected' bonus, Delta and Omicron are.
Call me a cynic, but fewer and fewer people believe what they are told today, and we only know what we are allowed to know. Julian Assange's are now a thing of the past.
Two cases of the "new strain" in Australia were fully vaccinated with no symptoms, so they have been out spreading it, and no one knew, not them and not the people being infected. Obviously, It's much safer to hang out with unvaccinated people because you can see when they are sick!
Murray86 , just looking at the Singapore data this morning, which has recorded the lowest number of new cases since 20 September ( under 1000), 14 day moving averages continue to show no statistical difference between vaccination status and whether one is "likely to catch it", and 7 day moving averages for deaths and ICU active cases as proportion of population ( per 100,000) by vaccination status at 4.4 unvaccinated/partially vaccinated and 0.5 fully vaccinated .( Obviously across age groups this changes.) Interestingly the least vaccinated age group in Singapore are the over 80s who tend to skew the underlying data.
UK vax rates are closer to ours - including by age group. The UK data is comprehensice and reported weekly. Table 11 of the report is very clear - vaccination saves lives... https://www.gov.uk/government/publications/covid-19-vaccine-weekly-surv…
Just another opinion, of course...
...it is a virus non-fatal to almost everyone. This new variant with the fancy name of Omicron, has all the makings of an omni-con ..."The public were demanding something must be done, they got masks, it is just a comfort blanket," Dr Axon noted. "But now it is entrenched, and we are entrenching bad behaviour. All around the world you can look at mask mandates and superimpose on infection rates, you cannot see that mask mandates made any effect whatsoever. The best thing you can say about any mask is that any positive effect they do have is too small to be measured."
https://www.gbnews.uk/gb-views/mark-dolan-the-omicron-variant-has-all-t…
Yes some of the reading I saw over the weekend suggest that while more infectious than Delta, Omicron seems to be less severe on people with it.
But then I think it may be the mutations that are of concern as it would always be possible that a more dangerous version with the same high level infection rate emerges. This is, for those trying to avoid reality, is where the risk of the unvaccinated are the risk to the rest of us. This variant emerged from unvaccinated masses. Let's hope that it fizzles out.
Rather than listen to some random on the Internet that confirms your beliefs that masks are bad, you could look up the actual studies on this that show masks work, for example:
https://www.thelancet.com/journals/landig/article/PIIS2589-7500(20)3029…
Again, if this bubble is ever to actually have a top – and I believe it will – this would be a perfectly reasonable moment to expect one. From the standpoint of record valuations, it’s certainly the single most opportune moment that investors have ever had to obtain a “wealth transfer” from other investors, by selling. Still, the intent of this interim comment is only to share what we’re observing here.
As I’ve regularly noted, there’s no “getting out” of the market in aggregate – someone has to hold every share of stock outstanding, so there’s no point in advising investors to “sell.” Market capitalization is nothing but the price at which the most recent buyer and seller traded even a single share, multiplied by the total number of shares outstanding. Currently, the market capitalization of U.S. financial and nonfinancial equities stands at roughly $68 trillion, about 3 times the $23 trillion level of U.S. GDP. At the 2000 market peak, the record was about 1.9 times GDP. Indeed, the present ratio of U.S. market cap to GDP is nearly 50% above levels that were never observed prior to last year.
Market capitalization isn’t “wealth.” It’s the latest price, times shares outstanding. Blotches of ink on paper. Flashing pixels on a screen. If a dentist in Poughkeepsie buys a single share of Apple at a price that’s 10 cents higher than the previous trade, $1.6 billion in market capitalization emerges from thin air. If a single share trades 10 cents lower, $1.6 billion evaporates just as quickly. Whatever happens, every security in existence has to be held by someone until it is retired. Ultimately, the wealth inherent in a security is the future stream of cash flows it will deliver to its holder(s) over time. Price fluctuations don’t change those underlying cash flows. They just provide opportunities for the transfer of savings between investors. High valuations favor the sellers. Low valuations favor the buyers. Investors have never paid higher prices for those future cash flows, or accepted prospective returns so low.
Put simply, the bubble hasn’t changed the wealth, and a collapse won’t change the wealth. What will change is the market cap. I suspect that the erasure of market cap in the coming years, and possibly the coming quarters, may be brutal. Still, no forecasts are required, and our own attention will remain on observable valuations, market internals, and other factors. Meanwhile, even if an investor sells at these extremes, the only thing that will change is who holds the bag.
The main consideration, then, is to make sure that your own investment position is actually aligned with our own investment horizon and risk-tolerance. In the event that you choose to be heavily invested in stocks, at least take a moment to write out your reasons, and to clearly identify the evidence you’re using. - Link
From Goldman Sachs:
Conclusion: while we do not have sufficient information to forecast a global B.1.1.529 wave, a high rate of transmission almost inevitably leads to a variant dominance. Nevertheless, we can have reasonable degree of confidence that this mutation is unlikely to be more malicious and that the existing vaccines will most likely continue to be effective in preventing hospitalizations and deaths. As such, while we would monitor the situation in Gauteng closely over the next month, we do not think that the new variant is sufficient reason to make major portfolio changes. - Link
They are probably right. The amount of "natural immunity" that exists outside of the "zero covid" nations means that this could be a bit of a fizzer. It will probably just be another wave for these countries.
I think countries that will be seriously affected by this new varient are those like NZ, Australia, Thaiwan etc. Where the strategy is highly dependent on vaccines. If Omicron defeats these vaccines and gets into our society it will hit us hard.
My guess is it's due to the reports that this variant is vaccine resistant. The vaccines have worked well against the earlier variants. Sure, markets would have priced in a vaccine resistant variant at some point, but wouldn't have know if it were this year, or 2 years from now.
The doctor who discovered the Omicron variant says that symptoms are "extremely mild" and has said she believes the panic is unnecessary.
Also the Moderna CEO indicated tht they could develop and ship a new vaccine at the start of 2022 if required, or six months after the rest of the OECD for those unfortunate to be at the end of New Zealands procurement system.
That said it highlights the risks with being totally reliant on vaccines or even a single vaccine. Hopefully the Pfizer and Merck treatments get fast tracked through approval.
In Germany, import prices surged +22% year-on-year in October, the largest annual increase in more than 40 years and well above market consensus of less than a +20% rise. These rises are largely driven by Russia energy prices, and given the political tussling between the EU and Russia, they may not fade like the rest of the world.
The price of gas futures on Netherlands’ TTF hub recorded a further growth to $1,025.5 per 1,000 cubic meters, marking a weekly surge of 4.5%. - Link
The humans and viruses have existed together for thousands of years. Humans are a superior species. They have survived for thousands of years and omicron will pass too.
We should make sure our next generation is not kept packed in plastic but let them play in the sand, soil and get their hands dirty. Be natural and human body can defeat any virus.
And to the panic in the markets, the main reason for that is we are lonely people in this connected and social world. We don't trust each other and we get spooked at small things. We try to accumulate more and more to try to make ourselves happy. But it won't.
Hence the surge in such volatility and asset inflation in the today's world.
Most will hate my summary but if you think for 10 minutes, you know that's the truth.
Be natural and human body can defeat any virus.
Like the way the body defeats smallpox, polio, rabies or ebola?
In medieval times, everyone played in the dirt, got fresh air everyday and only eat organic food yet still died in huge number of diseases that we can easily prevent or mitigate using vaccines.
Not one body or human mate. I am talking about the species as a whole.. Certainly they are very less people in the species who can think properly. So survival is the fittest..
Many smart and fit ones are helping not so fit survive. That's what is humanity.
That's why we are a superior species.
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