Kia ora,

Welcome to Tuesday's Economy Watch where we follow the economic events and trends that affect New Zealand.

I'm David Chaston and this is the International edition from Interest.co.nz.

Today we lead with news the relentless declines are building relentless economic problems.

The next regional manufacturing survey in the US is from the Dallas Fed and it paints a very pessimistic April picture and a record low at an index of -74. (In February 2020 that index was in positive territory.) This is deeper than their negative Beige Book survey just two weeks ago.

Aircraft maker Boeing said it will need more capital to survive. Just two weeks ago it said it had all it needed. And there is more evidence that the American food distribution chain is unravelling as producers work to keep their employees safe with social distancing and much lower output.

The new US $310 bln SME rescue package that is a top-up from an earlier one that was rorted by large businesses, has been overwhelmed and its application system crashed under the load.

In China, industrial profits at their large SOE companies fell -37% in March. This was not quite the -38% fall in February, but the extension into March when their virus emergency was coming under control indicates the long haul they are in to recover economically.

Worse, China's banks are in trouble with increasing numbers requiring state bailouts. But it is the nature of these bailouts that seems to add to risks, not reduce them.

In the shadow of the virus emergencies, China is pushing hard on its crackdown in Hong Kong, and its "nine-dash-line" claims in the South China Sea. Both are raising serious alarm.

In Europe, their aircraft maker Airbus also says it is in a fight just to survive. Their main current pullback is currently at a large UK facility.

In Australia, maintaining profits was a major consideration for the big four banks as they weighed whether to reduce mortgage rates in line with Reserve Bank of Australia cash rate cuts during 2019, their competition regulator, the ACCC has found.

The latest compilation of Covid-19 data is here. The global tally is now 3,002,300 and up +48,000 from this time yesterday which is a slowing rate.

Now, over 32% of all cases globally are in the US, which is up +17,000 since this time yesterday to 956,300. This is a slowing rate of increase too. US deaths now exceed 55,000. Global deaths are about to exceed 208,000. Russia now has more cases than China; in fact, nine other countries have more cases than China, and China will be pushed out of the top ten by Brazil next.

In Australia, there are now 6720 cases, 83 deaths and a recovery rate of 83%, all unchanged levels. 113 people are in hospital there with 43 in ICU.

There are now 1469 Covid-19 cases identified in New Zealand, with no new cases yesterday compared the prior day's +9 increase. But nineteen people have died, all geriatric patients. There are now seven people in hospital with the disease, with one in ICU. Our recovery rate is now up over 80% and rising.

In equity markets, the S&P500 is up +1.3% in afternoon trading today. That comes after a much more enthusiastic rally in Europe, with most markets they up more than +2.5% overnight. Yesterday, key Asian markets were mixed with Shanghai up just +0.3%, Hong Kong up +1.9%, and Tokyo leading the way, up +2.7% on the day.

The UST 10yr yield firmer today by +4 bps at just under 0.65%.

Gold is down -US$18 to US$1,712/oz.

Oil prices have fallen sharply today. They are currently at just under US$13.50/bbl, a dive of -US$3.50/barrel. International oil prices are down too, with the Brent benchmark just under US$20/bbl. The oil patch's woes are deepening with every day the market price is below the cost of extraction. We had previously noted that low oil prices undermine renewables investment, but actually, the big loser here is coal which is an industry that may never recover.

The Kiwi dollar firmed overnight against the greenback and now at 60.5 USc. On the cross rates it's a different story; we are down at 93.7 AUc and that is a five month low. Against the euro we are up at 55.9 euro cents and while that is not a big overnight move, it is now at a two week high. That means the TWI-5 is at 66.6, and now above our four-week average.

Bitcoin is little-changed overnight, now at US$7,674 and up less than +0.7%.

You can find links to the articles mentioned today in our show notes.

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