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 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%. Still, it is the sixth straight day of declines which have grown to a cumulative -7.8% 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.
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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.
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%.
You can find links to the articles mentioned today in our show notes.
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