Kia ora,

Welcome to Thursday'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 a roundup of international economic consequences from the pandemic.

First, American mortgage applications don't seem to be falling away any faster in the latest data for last week. But they are -31% lower than the same week a year ago.

And staying in the US, severe disruptions of supply chains is crimping meat supplies, and prices are rising fast.

In Japan, Toyota said it was halving car production in May. This is another signal that the economic effects of the virus are continuing to bite hard worldwide.

In Hong Kong, the Beijing-inspired arrests of democracy activists has brought forward plans for a major protest despite social distancing rules. Anger is near exploding point there.

China's steel mills are making more product than they can sell. And yet iron ore prices are rising again. It is a situation that will break one way or the other soon.

The latest survey of EU consumer sentiment came in lower than expected and very much lower than for March, taking them to 2009 levels.

And ECB boss Christine Lagarde dispelled notions of them buying bonds directly from EU member country governments, or doing some sort of helicopter money drop. The will stay only as an actor in secondary markets.

Turkey has chopped its official interest rates again - the eighth time in a row and down -1.00% to 8.75% - as their economy tanks. This rate was 24% at the start of 2019.

Worldwide, the latest compilation of Covid-19 data is here. The global tally is now 2,611,200 and up +135,000 from this time yesterday which is a faster rate of rise from yesterday. 32% of all cases globally are in the US, which is an unchanged level, and they are up +48,300 since this time yesterday to 834,900. This is a much faster 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, followed by Turkey. 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.

Global deaths are now at 181,200, up +50% in a week, with very variable reporting across jurisdictions. I don't wish to add to fears, but it was the second wave that killed more people than the first in the 1918 Spanish flu pandemic. It is lesson about why our borders should stay shut until the rest of the world has credible control on Covid-19.

There are now 1451 Covid-19 cases identified in New Zealand, with another +6 new cases yesterday and more than the prior day's +5 increase. Fourteen people have died here, one more, all geriatric patients. There are now 11 people in hospital with the disease, with two in ICU. Our recovery rate is now up over 71% and rising.

In Australia, there is increasing talk of the Federal government bailing out struggling companies by buying equity shares - in effect, nationalising them. Virgin Airlines might be one of the first. Then again, it might not. The question of whether Australia can afford two airlines is currently front and center there.

In New York, the S&P500 is up +2.5% in afternoon trade there. Overnight, EU markets rose as well, although by not as much. Yesterday, Asian markets were flat, as was Australia. The NZX50 Capital Index fell more than -1%.

The UST 10yr yield has recovered +6 bps to just on 0.63% and pulling back from its spike lower yesterday.

Gold is much higher today, up +US$37 to US$1,715/oz.

Oil prices have risen today but are still very low, especially US crude prices. They are currently at just US$14/bbl and that is up +US$5 since this time yesterday. That is still in the extreme pain zone for producers however. US crude oil stocks came in higher than expected (+9%) but much lower than this time last week (-22%). International oil prices are rising too, with the Brent benchmark up +US$2 to US$20/bbl. Just one week ago, this price was US$28/bbl and considered unusually low.

The Kiwi dollar will start today weaker again. We are now at 59.3 USc and another -¼c lower than this time yesterday. On the cross rates we are -¾c lower at 94.1 AUc. Against the euro we are little-changed at just under 55 euro cents. That means the TWI-5 has slipped back to 65.8 and now well below its rolling four week average.

Bitcoin is higher today, moving up +3.2% since this time yesterday to US$7,104.

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

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