Australian dollar safe harbour holds as virus shock intensifies

See the latest Australian dollar analysis here:

Australian dollar pops and drops on Evergrande vs Fed

DXY was up last night but not a lot:

Australian dollar rose against most DMs:

And EMs:

Gold was flat:

Oil is in trouble again as Libya disgorges barrels galore:

Metals fell:

Miners were hit:

EM stocks too:

Junk was mixed:

The crazy Treasury back up ran screaming for cover:

Stocks are in danger of printing one of the truly great double tops:

Westpac has the wrap:

Event Wrap

Covid-19 cases in the U.S. made a daily record of 85,000 on Saturday. The World Health Organization’s director general said the northern hemisphere faces a “dangerous moment” as Covid-19 cases have surged.

White House economic adviser Larry Kudlow said that while stimulus talks were ongoing, President Trump cannot accept parts of the plan the Democrats have proposed.

U.S. new home sales fell 3.5% to 959k in September, disappointing expectations (est. 1025k). Sales had surged from May to August by a cumulative 61% following a three-month pandemic-related plunge of 29%.

Dallas Fed manufacturing survey rose 6.2 points to 19.8 in October (vs est. 13.5). This is the third month in positive territory after five negative prints, the region hit by the double whammy of the pandemic and weakness in weakness in the oil industry. Gains were broad-based, although the employment fell to 8.7 from 14.5. Chicago Fed national activity survey slipped -0.84 points to 0.27 in September. The index was at a record high of 5.93 ,in June after a record low of -17.74 in April.

German Ifo business confidence survey fell from 93.2 to 92.7 in October (vs est. 93.0). The current conditions indicator continued to improve, but the future expectations reading fell as virus developments undermined confidence in the recovery. The breakdown showed that services and trade were mainly hit by the jump in new case numbers and associated restrictions in Europe.

Event Outlook

Australia: RBA Deputy Governor Debelle and Assistant Governor (Financial System) Bullock will appear before the Senate Economics Legislation Committee (13:30 AEST). Assistant Governor Bullock will also give a speech at the Ayr Chamber of Commerce at 18:30 AEST.

New Zealand: Exports are expected to soften in Sep, widening the trade deficit (prior: -$353m, market f/c: -$1015m).

China: Industrial profits saw double-digit growth of 19.1%/yr in August, reflecting continued recovery in production and stronger exports.

Euro Area: M3 money supply is anticipated to moderate in September (prior and market f/c: 9.5%), though the second wave of cases is raising the prospect of additional easing.

US: Durable goods orders are set to track sideways in Sep at an expected 0.5% pace as transport and machinery orders slow. The forward-looking Conf. Board’s Consumer Confidence is also likely to be little changed at 101.8. Strong demand and low interest rates have seen FHFA house prices rise 6.5%yr, though depleted inventories are a potential headwind for further gains (prior: 1.0%, market f/c: 0.7%).

It’s all about the virus again now as it runs wild in both Europe and America:

Lockdowns are underway in Europe with Germany joining in last night. So far they are of the “light” variety but good luck with that as winter deepens. So far, manufacturing is OK as the global inventory cycle plays out:

But services are leading the decline:

It’s the same in the US though lockdown there will be slower. Morgan Stanley offers the anything could happen chart:

The equation is straightforward. The less the government does, the more the private sector will do. There is no avoiding lockdown. I expect we’ll follow that base to bearish case (blue and red lines) of virus cases until the death count is bad enough that the US private sector closes its doors. Then the virus will peak again and trend lower.

Unfortunately, there is still no fiscal support in sight and the best case is a lame-duck passage if the ‘blue wave’ gets up but there are doubts even about that.

The virus is about the tear the heart out of the North Atlantic economies and the Australian dollar is no safe harbour in that event.

Houses and Holes

Comments

  1. Sweden’s performance is looking consistently more exemplary. No lockdown, and still a lower death toll per capita from COVID than the USA, Spain, Italy, Belgium.

    • And Total Lockdown New Zealand; “Hard and Early”, had 25 deaths in a population of 5 million. And Sweden’s 6,0000 deaths (so far) into just twice the population is what…success?

          • I doubt NZ has the same level of population movement as Sweden

            Anyway, what does it matter now? Taiwan did even better than NZ, fewer deaths and no lockdown, would it be useful to bring that up?

          • Just like Australia, NZ relied heavily on Tourism and Foreign Students; mass people movement of all kinds. So I’m not so sure about that. (**Visitors to New Zealand were down 24.9% when compared with the 3.8 million of the previous year (ending June 2019 )- In 2019, approximately 7.4 million tourists visited Sweden. So about the same rate)
            And correct me if I’m wrong, but Taiwan was ready for the inevitable. It had a functioning track-and-trace that it learned from during the SARS and Swine Flu outbreaks.
            Maybe we’ll all be better prepared next time ! ( Just did the shopping here in NZ and still had to swipe-in on the Covic app)

    • What, you mean the worst performing countries in the world (or close to it). Why not compare them against the other Nordic states which have had way lower death rates for the same economic outcome?

  2. Mike Herman TroutMEMBER

    Is this the first time that “positive” vaccine news ie. the AstraZeneca trial, hasn’t been met with an jump in the markets. I think that’s an important shift.

  3. scottb1978MEMBER

    My wife’s family is in Czech and they all got infected recently. They haven’t been proactively managing anything and all of sudden they have 15k cases per day. Scary stuff 😥

  4. 43 million globally ‘officially infected’ and an estimated 300 million unofficially infected as XImatosis or the Chinese Virus goes into mass outbreaks everywhere.

    … And still no effective prevention or cure measure, apart from 100% physical isolation of the non infected from the infected.

    And a constant leakage of the virus into Australia as it spreads globally, planes, ships & other forms of human contact and virus transmission into Australia.

    Fact check:
    9 out of 10 infected in the past 4 months in Australia have migrant travellers, usually foreign national PR returning back to Australian to live of the expanded welfare largesse.
    The other 1 in 10 infected were invariably in our migrant enclaves, who were infected from overseas traveller or migrant visa holder coming in.

    Conversely:
    9 out of 10 deaths are very aged or health compromised Australians who got infected by so called ‘community transmission’. As they were in isolated aged care or hospitals, where did the community transmission come from? From migrant guestworker non nationals going into those aged care or hospital environments to do bed pan, cleaning, food services.

    There’s your incubation hub and vector.
    Migrant non Australian PR & travellers bringing the virus in.
    Infecting fellow migrants in the migrant enclaves.
    Their fellow migrants, typically on pretext visas, fake ID as they work cash in hand in bed pan and cleaning or other service jobs, not tested.
    Falsified identities, refusing contact tracing (as they are living & working here illegally) and infecting our aged or sick Australians in these nursing homes or health care environments.

    And yet despite the Australian health authorities knowing all this, the migrant travellers continue to pour in..
    366,000 people entered Australia in the last 6 months with 186,000 being NON AUSTRALIAN foreign nationals as ‘PR’, TR etc.

    So Australia is ‘not isolating’.

    Australian is not ‘bio secure’.

    Our vast non Australian migrant enclaves in our main cities (2.5 million non Australian Third world TR / SCV) stand primed like powderkegs, ready to explode in virus contagion and then health services overload..

    -/-

    Why wouldn’t Australia be the same as every other country in eventual mass infection & the resulting 1-1.2% overall deaths (*depending on the ratio of aged, obese & health compromised in that population)

    Just say hypothetically there is no cure or vaccination and Australia fails to act on the vast pool of 2.5 million migrant guestworkers on pretext visas and they act as the virus reservoir and transmission vector into the wider Australian community.

    👉🏾Eventually all of Australian is infected.

    We have about 2.1 million people aged over 70.

    https://www.abs.gov.au/ausstats/[email protected]/previousproducts/3101.0feature%20article1jun%202016
    The death rate for that age bracket is about 11%.

    We have another 1.3 million that are health compromised to different degrees (ABS) and death rate is about 15%.

    Say 3.3 million at very high risk of virus death and a conservative 5% death rate.
    (which is very low and assumes our health care capacity will be for Australian citizens, not burnt out and overloaded from what will be a mass virus outbreaks in the non Australian migrant slums like we saw in Melbourne)

    👉🏾That’s at least 165,000 Australians dead.

    Why is this not inevitable?