Here's our summary of key economic events overnight that affect New Zealand, with news uncertainty is widening and economies are feeling more direct effects.
The WHO is now saying that a pandemic declaration is closer, although they are still holding back. Australia has activated their pandemic plan.
The latest compilation of Covid-19 data is here. There are now 4052 cases outside China, a rise of +720 in one day. A week ago that number was 1200 so it has more than trebled in one week. South Korea's new cases are now rising faster than China's.
First up, Wall Street opened sharply lower again, down -1.3% in early trade. These losses are being wound back as the day unfolds however, and it is now down -0.8%. Update: the plunge has resumed and it was down -2.4% in mid-afternoon trade, but ended up down -4.4% at the close. It is the sixth straight day of declines which have grown to a cumulative -10% drop in the S&P500 so far this week.
And that comes after heavy falls in Europe, with most markets down -3.3%. Yesterday in Asia, Shanghai and Hong Kong actually posted modest gains, but Tokyo fell a sharp -2.1%. The ASX200 was down more than -0.8% as was the NZX50 Capital Index.
American economic data, which of course precedes the current stresses, was mixed.
US durable goods orders fell in January from December, but not by as much as analysts were expecting. They were however -2.3% lower than January 2019, a wider retreat. Capital goods were almost -8% lower year-on-year.
But the American housing market is gaining positive momentum. Pending home sales rebounded in January, ticking up following a decline in December. They are now at levels that are +5.7% higher than the same month a year ago.
The factory survey by the Kansas City Fed shows that manufacturing activity increased modestly in February, and reaching positive territory for the first time in eight months.
The Atlanta Fed's GDPNow model suggests this data points to a +2.7% Q1-2020 growth rate. But such data-driven estimates are passe now with current economic 'fear' behaviour much more likely to drive that result lower.
In China, just how hard the Covid-19 virus has hit their economy can be gauged by an official estimate that only 30% of SME's have restarted operations following the Chinese New Year holiday which originally was to run from January 25 to January 30. Others see the impact waning. A lot will depend on reinfection rates and how companies respond to that.
In Australia, new capital expenditure declined in the December quarter, falling more than expected. Investment in buildings and structures is now looking far weaker than for equipment and plant. Subsequent events aren't going to improve this either, of course.
It is not all bad news. A2 Milk says it is seeing a big spike in demand for its products in China and it is air freighting in some supplies to meet that demand. Much of its production is from New Zealand.
The UST 10yr yield has plunged to a new record low of just under 1.26%. But it has recovered to 1.31% now, similar to yesterday's level. Their 2-10 curve is now much less positive at +10 bps. Their 1-5 curve is more negative at -17 bps. and their 3m-10yr curve is still negative at -23 bps. The Aussie Govt 10yr is down -2 bps at 0.88%. The China Govt 10yr now at 2.85% and down -1 bp since this time yesterday. The NZ Govt 10 yr is now just under 1.13% and that is a -7 bps plunge from yesterday's level.
Gold is up +US$8 to US$1,650/oz.
US oil prices are sharply lower again today, now just over US$47/bbl. The Brent benchmark is also lower at just on US$52/bbl. Both are drops of about -US$2/bbl. The modern all-time lows are US$46/bbl and US$51/bbl respectively so we are testing these levels - and on a 'real' basis we are well there now.
The Kiwi dollar starts today firmer at 63.2 USc. On the cross rates we are holding at 96 AUc. Against the euro we are down to 57.6 euro cents and that's still our weakest against the euro in three months. That means our TWI-5 is actually unchanged at 69.1.
Bitcoin is firmer after yesterday's sharp drop, now at US$8,940 which is a +2.3% rise in a day but takes weekly fall to more than -7%. 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 ».
131 Comments
Possibly - I think it's more down to the immediacy / unfiltered nature of the news cycle though.
The hysteria that would have traditionally taken weeks to evolve / be tempered over time by editorial stance through traditional news media, is now firehose of click-bait to grab eyeballs.
Modern media channels are basically a massive panic / propaganda amplifier.
EDIT: to be fair media has always been a massive panic / propaganda amplifier but what's missing now is the filter / a clear understanding of who 'owns' the editorial stance.
One doesn't help the other. Humans are wired for "bad" - helped us on the savanna - not so much today (nor does it help that journalist's chase ambulances). My comment is more to highlight how a small event (which no one can control) is having a big effect on the economy due to decisions made years ago - eggs in one basket type thing.
The state of intelligentsia.
""Western Sydney University is offering $1,500 payments to Chinese students to help fund travel packages to third-country transit destinations to get around the federal government’s coronavirus ban."
..."Tim Dodd, The Australian
Chinese travel agents are marketing bespoke “14-day, 13-night” packages to third-country transit destinations to help Chinese students enrolled at Australian universities get around the federal government’s coronavirus ban for as little as $2700 each.
Agents said the packages, which are being micro-targeted on Chinese social media, are selling well, as almost 65,000 Chinese students look for ways to get around the federal government’s travel ban on all non-Australian citizens and non-permanent residents coming from mainland China. “Thailand and Malaysia are the top two choices. Next is Cambodia,” said an education agent in Beijing.
Scott Morrison imposed the travel ban on February 1, when almost two-thirds of the 109,000 Chinese students enrolled in Australia were in China for the Lunar New Year break. Estimates suggest the ban could cost universities up to $2bn in deferred fees."
https://www.theaustralian.com.au/nation/politics/travel-deals-get-stude…
I was reading Melbourne University were giving out $7,500 grants. (https://www.abc.net.au/news/2020-02-26/melbourne-uni-offers-coronavirus…)
It's bordering on Treason. The uni's are deliberately acting against the best interests of the country.
I was listening to something on a podcast the other day, apparently USydney derives 25% of total revenue from Chinese students (might have been all foreign Student).
Which if they are anything like Auckland uni, their revenue stream includes a whole bunch of royalties from patents and their commercialization arm.. I wonder how much the govt funding for domestic students is? It could be less than you think.
Domestic is still the vast majority of funding in NZ, without it they would grind to a halt almost immediately. International students are basically just the "Profit". Which is why they all cry so much.
The stupid thing is, in reality if the funding did get cut they would just go full international. Then they would just cry even louder next time.
Incorrect.
International students are far more than the 'profit' (surplus). They pretty much underpin all the key capital expenditures currently and drive the direction of a substantial amount of courses - most predominantly in the business and STEM offerings.
I would not be surprised if the current situation is wiping out at least 25% of their revenues for the first semester.
Incorrect? I'm i the industry so I have a fair idea.
OPEX is 100% Domestic funding. So yes they would immediately grind to a halt.
CAPEX is about 50%/50% in terms of funding. But about 20% dom/80% Foreign in terms of expenditure. Basically, they spend on ways to entice Foreign students - as that is where they see the "Profit"
Was it ever going to be anything different?
Over the past 5-10 years, the solution to every problem at a NZ university has been "just attract more international students".
They have been completely dependent on this market for some time now, utterly oblivious to any associated risk.
Not for about a decade. They were quite good at extracting $$$ at every oppurtunity like most capitalists. But free market? hell no, they want every last handout they can get their hands on, just like every other capitalist. Free-market and capitalist don't belong together often.
Western Sydney University is offering $1,500 payments to Chinese students to help fund travel packages to third-country transit destinations to get around the federal government’s coronavirus ban
Oh that's great. So they go stay in Thailand for 2 weeks where coronavirus is endemic.
Related: University of Auckland announces staff hiring freeze due to coronavirus travel ban
https://www.stuff.co.nz/national/education/119859480/university-of-auck…
The state if intelligentsia - the BOM have adjusted away Australia's politically incorrect world heatwave record. "In 1924 Marble Bar set a world record of the most consecutive days of 100 °F (37.8 °C) or above, during an incredible period of 160 days starting in 1923. It was legend — but thanks to the genius homogenized adjustments, we now find out all along it was wrong. The experts at the Australian Bureau of Meteorology (BoM) have reanalyzed the temperatures from 4000 km away and nine decades in the future and apparently it wasn’t that hot."
http://joannenova.com.au/2020/02/acorn-adjustments-robbed-marble-bar-of…
https://www.epa.gov/sites/production/files/styles/large/public/2016-07/…
Changes in technology and adjustments of historical temperatures by the Bureau of Meteorology has made "the present seem warmer" says climate scientist and author Jennifer Marohasy.
An old record has been ignored by the Australian Bureau of Meteorology because it was recorded on a Sunday, and the record keeper at that time should not have been going in on a Sunday.
You cannot make this stuff up.
Looks like we may be at Peak Climate Hysteria as it seems plants like CO2. Gosh. Who knew? It seems there are still some objective scientists that haven't been purged, which is a huge relief. The idea of consensus science is a very scary one if you know any history. It will probably go on for a few more years as a handy excuse to gain power in the We Will Control You political, banking and public and private bureaucrat oligarchies and their useful idiot supporters.
Hopefully the focus can now shift to the really good stuff like replacing poisonous diesel with pollution free electric buses. Replacing Kill You Slowly Nuclear with offshore wind. Burning clean coal with scrubbers instead of Burn More Lignite, as in lying bureaucrat heaven, the EUSSR.
https://www.armstrongeconomics.com/world-news/climate/the-greenhouse-ef…
Global warming hysteria is total BS
Dr Richard Lindzen has been advocating calmness about all the machanics of the cycles of the planet for years.
of course higher CO2 makes plants grow more, even NASA agrees that the planet is greening. Greenhouse growers regularly pump CO2 into theuir greenhouses to around 1000 ppm
Meanwhile the anti greta will be speaking at the 2020 CPAC
https://www.breitbart.com/europe/2019/12/05/meet-naomi-seibt-19-the-ant…
An utter load of garbage. I used to be interested in your comments, but this is basically ridiculous.
I suggest you actually read the article he points to. His assertion "What they have discovered is the as CO2 has increased, temperatures have actually decreased by 0.2C to 0.25C degrees (0.36F to 0.45F) since the 1980s" isn't even in the article linked and they don't say anything of the sort. They do suggest the greening has lowered the amount of warming, NOT lowered the actual warming. So he is basically making up his own false conclusions.
CO2 fertilisation is a well known aspect of climate change. Suggesting that climate scientists are oblivious to the effect is ridiculous. You only need to look at the rapidly increasing CO2 concentration in the atmosphere to realise that CO2 fertilisation effect is nowhere near enough to absorb all our pollution. And you only need to look at Venus to see the CO2 warming effect on another planet.
This biosphere can and has sustained much greater CO2 levels than what currently exists. But it didn't have a massive population on it reliant on a stable climate, which we have had for the past few thousand years. Dramatically ramping up pollution while dramatically changing tree cover and ocean acidification in a very short time span is not going to result in stability.
You miss my point. I have nothing against the theory of man made climate change or the healthy exploration of alternative theories. The possibility and danger are entirely plausible.
My issue is with the politicalisation of the debate and the attempt to divide and rule by those who are so desperate for power over others that they fall for the old lie "The Means Justifies The End". Unfortunately Mao, Stalin, Hitler and Pol Pot all thought that too.
Seems you edited your original comment... not sure why, but if there are replies, it's rude to do so as the replies no longer make sense. Please refrain.
You're jumping at shadows. Consensus science occurs all over the place, there is a consensus over Newtons laws (minus quantum scale), there is consensus on relativity theory, there is a consensus on all myriad of physics/chemical/biological observations and theories. On top of those consensus arguments are then technologies and tools. Are some of the consensus theories wrong? NO! Sometimes we simply miss different aspects of the theories, so investigate them. Generally the theory is then modified slightly to take into account the new data. But in general, observed rational scientific theories with a massive body of proof have already covered 95% of reality. But just because 5% is still unexplored/unknown/untested, that does NOT invalidate the other 95%.
To paint climate change and our response to it as some sort of global power grab is unhealthy paranoia. It is a global problem, that requires a global solution. The idea that it will result in some sort of dictator taking over the world belongs in the loony bin. It will probably just mean we pay a bit more for energy and end up with more efficient and less wasteful systems. Oh dear, poor us.
If you keep following that line of thought, you could use it for anything. For instance: "ISO standards can be quite political and could be used by those desperate for power to that they (sic) end up like Mao/Stalin/Hitler..." blah blah. Same argument is used by American gun advocates that hysterically claim removal of their second amendment rights will mean their country ends up like Germany circa 1935. Despite all the evidence that gun controls work in similar democracies, they simply raise their voice above the sensible, informed people. Yelling something louder doesn't make them more right and making spurious links between political power and environmental problems doesn't make you right. Listing dictators might be fun, but offers no sensible insight into our response to human induced climate change. Did the Montreal Protocol result in an international power struggle and millions dead from starvation and hunger? No? Why on earth do you think a climate change response will?
Jim Grant, investment errors
https://thesoundingline.com/jim-grant-rise-in-gold-signalling-growing-a…
At least that is better than cow dung. (https://www.wsj.com/articles/the-cow-dung-cure-for-coronavirus-11581378…)
We've known it was coming for a month, the grim wave is building: https://www.worldometers.info/coronavirus/
It's spreading in the community in San Francisco (a patient with no known source of infection) so US is screwed. Also; China is not lower than Korea - they're lying (read all the reports from china-watchers Epochtimes), totals in China at least 10x higher than official, and Iran has 50k infected too (based on number of known infected travelers from Iran). Prepare your families, good chance it is in NZ.
Now China has a case from someone travelling from Iran!!!!!
'Q2 will rebound' 'there maybe a recession'
'this could be the tipping point'
It was clear from the start that is was not going to be contained and it was going to have a massive impact on the world. 20% of the population is going to need hospital care for weeks, high number of deaths, missery, money issues, fear, lock downs the list keeps on going. It is not a story of maybe a recession it's going to be a recession and maybe a depression.
Melodramatic? here's another way to think about it. Say your chances of survival are 98%, and lets say you have 10 close friends. The probability that they'll all survive the coronavirus is 0.98^10 = 0.81 That means there's a 1/5 chance that one or more of them will die. I conclude that we will probably all personally know someone who dies from coronavirus.
Fritz. I respect your view on a lot of calls you make on here but as Ive mantained from the start, it is going to be a shocker. My view jasnt faltered on that but yours has taken quite a few steps towards my view. Keep going you're starting to grasp it..
From exeperaince we know that in these situations those with the media exposure will fight to keep their system going and we are seeing that they now realise they can't keep pumping 'don't worry' PR. It is still worse than they are letting on, a lot worse.
As you have stated from the start, it is not the human life issue that is the major here, it is the economic fallout that is going to be the shocker. And it all comes at a time of big bubbles and massive debt which exsaperates the situation.. The average person now days isn't as hard / capable mentally or phyically as the average person 50 years ago and that will also have a drastic down side.
No joke intended, far from it. I'm a hunter and I have remorse for each animal I take.
The other day someone on here stated that a massive amount of Kiwi's were on anti depresants, somsthing like a quarter. I find that number stagering. Imagin that stat after the viris has gone through and your good by to your loved one was at the door when they were taken away in a body bag and no furneral. Just back inside the house and shut the door. The human cost is going to be insane but at the same time dealing with money issues, that is some serious hurt that is impossible to get your head arround.
The question to myself is, what do I do to protect my family? Stay put and hope / cross my fingers? Or prepare and go bush? The logical action is to prepare and go bush. Hey it may not pan out as bad as I expect but if it dose I'm ready and making proactive choices. Sitting at home is Dunedin where I can not access food and at the mercy of the tucker supply chain to continue working, is not how I going to roll when I have the skills to be elsewhere.
The people who read / comment on here are proberly the most informed and if we look at the comments section people are getting a a bit more agressive in their replys. Fear is starting to hit and reading between the lines it is starting to make a marked deteriation in replys.
Hmmm, I see your point. I did read his post, the one he made at 11:36 and to which I replied at 10:56… 40 min earlier. Yep he did edit his post and remove the paragraph about massive human deaths in NZ. BTW, I do agree that the economic consequences of the virus will not be good at all
I didn't write that there would be massive deaths in NZ. From what I see is that the death rate isn't that high. It's the economic event that I'm concerned about.
I kept re reading but I could'nt find any jokes about death that I could see. Its not a laughing matter at all ut my 'filter' isn't the best sometimes, a bit black and white according to my wife.
1. If I dont go and hunt them, DoC will just poison them / cull with choppers and leave them.
2. I go to the supermarket and pick up meat without remorse for that life. I would rather get my own and have better meat and also enviromentally friendly, plus I do my own dirty work out of respect.
It comes down to me and that animal, not on someone else. I take what I need and use the whole animal. If I was that animal in the bush, I would rather a hunter than a chopper or poison.
"Mr. Harichi, the deputy Minister of Health to Iran allegedly says there are 1,400 dead in Iran and over 10,000 infected. Keep in mind he himself came down with #covid19 and tested positive."
http://itwitter.co/hectorology/status/1233094993398550528
It only takes one person.
https://www.bloomberg.com/amp/news/articles/2020-02-26/how-one-patient-…
Potential suspected case in NZ
https://www.newshub.co.nz/home/new-zealand/2020/02/suspected-case-of-co…
There is no way that China grows this year, maybe not next either. They have slowed the progression of the epidemic but they can't stop it, and the cost of slowing it on the economy will be enormous. They can afford to have about 1% of population sick at any time without overwhelming hospitals. At that rate it takes a few years to go through population.
A2 Milk mentioned this, and they have a lot of cash, will they buy synlait or build their own plant
Due to the increasing scale of our infant nutrition business, the Board considers it is now appropriate to assess participation in manufacturing capacity and capability to complement our existing supply chain relationships. Accordingly, we are presently evaluating opportunities to address this issue
The interest rate fallacy further proved yet again. QE’s don’t matter nor does the Federal Reserve all that much beyond short run sentiment (and signals to the stock market). The real economy needs (euro)dollars only the private system can provide.
And that private system consistently wants only UST’s and the like, the world’s safest, most liquid assets. Even during the “best” of times, the interspersed reflation episodes that also last for years, the constant demand for safe assets during them tells you all you really need to know.
If things are going so well the most return-hungry players in human history wouldn’t be sitting here backing up the truck for less than 135 bps in UST’s, or paying out a rate, a guaranteed coupon loss, for bunds. Link
Yes, but I know that because I've been following Jeff Snider inconsistently for almost two years.
I would read "..And that private system consistently wants only UST’s and the like, the world’s safest, most liquid assets."as an indirect reference to a need for Sovereign debt purchases for regulatory purposes. What isn't stated (but is implied) is that they are needed because unsafe, illiquid assets are less reliable than 'normal'.
I read the following sentence "..If things are going so well the most return-hungry players in human history wouldn’t be sitting here backing up the truck for less than 135 bps in UST’s, or paying out a rate, a guaranteed coupon loss, for bunds." as saying that private actors would not choose the safe, liquid, low-bearing assets if they had a better choice that also adequately dealt with regulatory/liquidity needs.
Put differently, I'm just not sure where you disagree with Jeff Snider.
I don't have time now to pull it apart for you, he writes very poorly and says very little. It reads far more like a conspiracy theory than fundamental insightful macro analysis. Clearly there is a huge risk-off trade going on - no doubt many were levered up after the huge bull run. These risk flush-outs are part and parcel of all markets. In the UST's these are exacerbated by the convexity mortgage hedgers who are forced to wade in and buy large amounts of Treasuries. As far as reading goes, Bloomberg is very good (a very modest subscription), they know what is going on. Dennis Gartman I rate as well.
Thanks for the reply.
I agree with '..he writes very poorly and says very little. It reads far more like a conspiracy theory than fundamental insightful macro analysis.' That is definitely true and is annoying. But I have found better predictive value of GDP growth/bond prices from his writing than elsewhere.
I will follow Bloomberg and Dennis Gartman for a while :)
This a bit more than regulatory demand.
Read on, including the links: Why 2014? Less (Big) Banks, Fewer ‘Dollars’, No Growth
For clarity, I do not follow markets consistently and most of my reading is the daily updates on this site, or the commentary from hussman funds and alhambra. I am very Very interested in thoughts and analysis from outside this bubble, especially on the weaknesses of what I am following.
Just wait until the Fed cuts 0.5% three times in a row as credit spreads blow out and Bernie Sanders gets nominated (and avoids assassination, or other "mishap"). Interesting times ahead, it seems.
Bernie is hands down Democratic favourite so far, and just ahead of Trump already. Capital may turn tail and flee the US en masse, ahead of the election. Roosevelt confiscated (ie stole) the gold of the entire citizenry. Who knows what Sanders will do? No one is safe. Empires collapse slowly at first, then all at once.
It took two world wars for the power shift from Britain, France, Germany and Russia to the USA becoming Number 1. It can be a messy process and capital flows are at the core of it. It was inheritance tax to pay the first world war debts to the US bankers that destroyed wealth accumulation in Britain and thus crippled the world trade system. Reparations on Germany were imposed so France could repay it's war debts to the US bankers. Russia died and capital fled the murdering Bolsheviks.
Don't test don't tell
https://www.epsilontheory.com/dont-test-dont-tell/
As of yesterday 125 tested, results for six be waited for.
TAG giving advice on who and when to test.(who is on the TAG).
A promise to send resources to GPs when they can.
From today they are telling kiwis to wash their hands.
Health in your hands...
https://www.health.govt.nz/news-media/news-items/covid-19-novel-coronav…
See the borrowed video.
I think it's time to start testing The don't ask, don't find strategy, I don't like.
Reality struck:
Yet the iron law of investing is that a security is nothing but a claim on a future stream of cash flows. Valuation is a crucial determinant of long-term returns. The higher the price an investor pays for those cash flows today, the lower the long-term rate of return earned on the investment..
The corollary is also true. The lower the long-term rate of return demanded by investors, the higher the price moves today. So clearly, changes in investors' attitudes toward risk will strongly affect short-term returns. If investors become more willing to take market risk, it is equivalent to saying that they are demanding a smaller risk premium on stocks (that is, a lower long-term rate of return). Prices rise as a result. Now, the fact that current stock prices are higher also implies that future long-term returns will be lower, but that's part of the deal. Link
Red sales in the Sunset...
A comparison
Property market rationale:
1) There is an underlying shortage of houses in Auckland - there is insufficient new housing coming available for the population. Not enough new houses are being built.
2) Underlying demand - we have new inward migration, a organic population growth due to births, Auckland is one of the most livable cities in the world, so there is demand for houses, so property prices will keep rising. As a result, property prices should not fall and we expect the property price to double every 10 years.
Same logic applied to other free markets (e.g the shares of NZ stock market):
1) Underlying supply - there is very little new supply of new shares coming to the market. In fact, underlying supply may even be decreasing due to company buybacks of their own shares.
2) Underlying demand - there is demand for shares as we have a growing population due to births and inbound migration, and more people are saving for their retirement. Since we have a growing population, there is demand for shares. Due to the shortage, prices should keep rising and not fall by much.
We could double the demand but the controling factor is dollars to buy. No work, no money no new house. It is abundally clear that a lot more Kiwi's are going to be without work or on reduced hours. Then we have risk of the market going down so people playing the waiting game / them and the banks taking stock of if their job is recession proof.
House prices to drop 10% fast and keep going down after that. Loosing our bigest export earners from one day to the next will do that. Yeah the figures dont stack yet because they will not be out for a couple of months.
https://www.stuff.co.nz/national/119888495/expenses-complaint-about-chr…
More evidence of Chinese interests meddling in our politics - not that we needed any
https://nzmessengers.com/2020/02/13/lianne-dalziel-battling-against-mis…
It has been frightening to watch the impact of what has been described as an “infodemic” in the wake of the Coronavirus outbreak.
Not aging well.
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