Kia ora,

Welcome to Friday'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 we are struggling to find the proper words to describe the scale of the global economic disaster enveloping the world. And yet, equity markets are up today and remain relatively buoyant.

In the US, the number of new unemployment claims rose by +4.4 mln last week taking the total passed +26 mln in five weeks. At the start of March they had an employed workforce of 156 mln with 7.1 mln already unemployed then. Just six weeks later, 20% of their workforce is jobless. But things are worse than that. Not only have many people with jobs had hours reduced and pay cut, often both, states are still struggling to process unemployment claims so many more are actually newly jobless but not counted yet. We are witnessing a vast social disaster here.

In 'response' Congress has enacted a further US$0.5 tln in fiscal relief. But undermining that, the Republican leader in the Senate declared that states that run out of funds should just declare bankruptcy.

Just how hard the American economy has been hit can be judged from the April Flash PMI's released overnight. Their services PMI crashed to its lowest on record. Its factory PMI also fell very hard. Neither sector shows any optimism about the immediate future in coming months.

And a practical region example of the depth of the crash is in the overnight release of the Kansas City Fed survey. It is reporting lowest-ever factory activity, lower than the GFC contraction.

March new home sales contracted sharply too to be -10% below the same period a year ago. And it will have gotten much worse in April.

All this trouble compounds the US Federal debt problems. New analysis shows that the Trump fiscal irresponsibility, plus the pandemic mitigation funding, will push Federal debt levels to a larger share of GDP than during the Second World War.

Things aren't any better in the EU, with an unprecedented collapse in their April Flash PMIs as well. Their PMI index sunk to under 15, sucked lower by the French one at just above 10.

The worst PMI report is from Japan where their April PMI index is under 10. And the Bank of Japan is preparing to "go nuclear".

And China is also under increasing pressure to add to its already considerable stimulus. One plan is to relax car-buying rules.

In Australia, they have also had an "astonishing" drop in their service sector in April, according to the Markit CBA PMI. Company shutdowns and restrictions due to the pandemic response have resulted in severe declines in both business activity and new orders. The rates of contraction were much sharper than those seen in March, with a services PMI index under 20. Companies lowered their employment for the third month running, and at a considerable pace. Input costs decreased for the first time in the four-year survey history, mainly due to lower wages and fuel prices. The matching factory PMI data was well down too, but not anything like their service sector.

Worldwide, the latest compilation of Covid-19 data is here. The global tally is now 2,671,000 and up +70,000 from this time yesterday which is a slower rate of rise from yesterday. Just under 32% of all cases globally are in the US, which is an unchanged level, and they are up +13,000 since this time yesterday to 848,000. This is a much slower rate of increase. Just over 9% of all US cases have recovered so far, which is no improvement. Infection rates in Russia are rising very quickly and they will be the next country to have more cases than China, following Turkey. Russian cases rose +125% in one week; Turkish cases rose +37% in one week.

Australia still has 6500 cases and little-changed over the past week; their recovery rate to 63% and also unchanged in more than a week. Australia is reportedly extending is border closing but considering opening it for New Zealand only. It seems unlikely New Zealand will reciprocate.

Global deaths are now at 186,400, with very variable reporting across jurisdictions. The most promising drug trial for a vaccine for Covid-19 has been pulled due to early signs it is ineffective.

There are still 1451 Covid-19 cases identified in New Zealand, with no new cases yesterday on a net basis, and less than the prior day's +6 increase. Sixteen people have died, and increase of two and all geriatric patients. There are now 8 people in hospital with the disease, with one in ICU. Our recovery rate is now up over 73% and rising.

After a positive start, the S&P500's gains today are being whittled away with that index up now only +0.5%. Overnight, EU markets booked modest rises while yesterday most Asian markets were flat.

The UST 10yr yield has slipped -2 bps to just on 0.61%.

Gold is higher again today, up another +US$8 to US$1,723/oz.

Oil prices have risen again today. They are currently at just US$17/bbl and that is up +US$3 since this time yesterday. International oil prices are rising too, with the Brent benchmark up another +US$2 to US$22/bbl.

The Kiwi dollar has risen overnight as well. We are now back at 60 USc and up +¾c from this time yesterday. On the cross rates we are firmer at 94.3 AUc. Against the euro we are much firmer at just over 55.8 euro cents. That means the TWI-5 is back to 66.4 and the level it was at, at the start of the week. That is at its four-week average.

Bitcoin is sharply higher again today, moving up +6.4% since this time yesterday to US$7,559.

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

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Kia ora. I'm David Chaston. We will do this again, on Tuesday after the ANZAC weekend holiday, and when we have moved back to Level 3.