Investors still chasing the old normal

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 investors are still looking at the horizon and see the old normal returning.

Wall Street is up in afternoon trading today with the S&P500 rising +0.7% so far, mainly on the news of promising COVID-19 vaccine trials. Second quarter earnings are expected to be cut by at nearly half, but investors don't seem to care (even if CEOs do). They are still banking of a full rebound in earnings. Overnight, European markets gains a similar amount (although London dropped -0.5%). Yesterday, it was Shanghai which starred again, up a hefty +3.1% as the home team doubled down. That contrasted with only minor daily movements in both Hong Kong and Tokyo. The ASX200 fell -0.5% and the NZX50 Capital Index slipped -0.3%.

The Shanghai result was partly driven by the listing news of Jack Ma's Ant Group, the operator of the giant Alipay payments network.

One of the reasons the Japanese stock market missed the party was because their exports suffered a double-digit decline for the fourth month in a row in June as the pandemic took a heavy toll on global demand, reinforcing expectations that their economy has sunk into its deepest recession in decades. Exports were down -26% in June from the same month a year ago. Imports were down -14%.

In contrast, Taiwan has reported a strong trade recovery in June with export orders, up +6.5% from the same month in 2019 and far above what was expected, and was driven by strong electronics exports to the US, Europe, and surprisingly China. It is their best result in more than a year.

Singapore has announced that more than 140,000 employers, with 1.9 million local employees, will receive payouts starting next week totaling over NZ$4.4 bln under their jobs support scheme, or NZ$2300 per employee. There are about 400,000 registered businesses in Singapore in a population of 5.9 mln. Their employed labour force is 3.8 mln. (New Zealand has 547,000 registered businesses in a population of 5 mln. Our employed labour force is 2.6 mln.)

In Hong Kong, the focus is on their labour market today, and their jobless rate rose to 6.2% although that was not quite the deterioration analysts were bracing for. (We should also note that Hong Kong has an unusually low participation rate of under 60%.)

In Brussels, EU leaders still don't have a recovery program deal.

In Australia later today, they will announce how they are going to extend their pandemic support programs and early indications are they will be cut back from September.

The latest compilation of COVID-19 data is here. The global tally is 14,567,000 and that is up +211,000 since this time yesterday. Global deaths reported now exceed 607,000 (+4,000).

A quarter of all reported cases globally are in the US, which is up +95,300 from this time yesterday to 3,928,600. US deaths now exceed 143,500 and a death rate of 434/mln (+1/mln). The number of active infections in the US is now up +27,000 in a day to 1,970,900.

In Australia, there have now been 12,069 cases reported, another +267 since this time yesterday, and still concentrated in Victoria but growing in NSW in Sydney's suburbs. Their death count is up to 123 (+1) and 33 people are now in ICU (+4). Their recovery rate has slipped back further to under 70%. There are now 3,554 active cases in Australia (up +146 in a day).

The UST 10yr yield is unchanged at 0.62%. 

The gold price will start today marginally firmer at US$1,816/oz which is a small net +US$6 gain overnight.

Oil prices are again little changed. They are now just over US$40.50/bbl in the US and the international price is just over US$43/bbl.

And the Kiwi dollar will start today marginally firmer at 65.7 USc. We are unchanged at 93.7 AUc. Against the euro we also stable at 57.5 euro cents. That means our TWI-5 is now at 70 and broadly the level for the past two weeks ago.

The bitcoin price is little-changed at US$9,205.

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

And get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston. We will do this again, tomorrow.