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The devastating impact of the pandemic is beginning to become more clear, revealed in economic data, and Central bank responses. The Fed Chair Powell said that the immediate future was ‘highly uncertain and subject to significant downside risks’. He also commented that the stimulus should see a ‘substantial recovery once the coronavirus is under control’. This tipped equity markets into a downward spiral, which was not assisted by the probability of a trade war, with China. President Trump tweeted that the ‘plague from China’ will not be made up for by ‘100 trade deals’! The aggressive rhetoric from the US towards China suggests a looming trade war and a shifting of investment away from a Chinese dominated supply chain.

The RBNZ left rates unchanged, but nearly doubled their QE program, from NZD$38 Billion to NZD$60 Billion. The Central Bank has confirmed a recession, with Q1 economic growth contracted by 2.4%, while forecasting Q2 at a stunning 21.8%, contraction. There appears to be no demand for NZ Government Debt, supporting the massive fiscal spending, thus forcing the RBNZ into supporting the markets. Some red flags are going up the pole? The NZD crashed below 0.6000, while the AUD plunged to 0.6450, confirming the parlous state of the vulnerable and trade exposed countries.

The UK GDP numbers revealed a contraction of 5.7% and significant falls in both industrial and manufacturing production. The Bank of England is increasing monetary QE measures and are actively considering interest rate cuts into negative territory. The RBNZ is also considering these emergency measures. The plan is to ‘go big and go hard’ and worry about the consequences down the line.

Weekly Market Calendar

11/5 NZ Retail Sales, Bank of Japan minutes

12/5 US Inflation, NFIB Small Business Optimism, US Inflation

13/5 Japan Current Account, Australia Consumer Confidence, RBNZ Rate Decision, UK GDP, UK Trade, UK Industrial/Manufacturing Production, EU Industrial Production, US Weekly Mortgage Applications

14/5 Australia Inflation, Australia Employment, German Inflation, US Weekly Jobless Claims

15/5 NZ PMI, China Industrial Production, China Retail Sales, China Employment, EU GDP, EU Trade, US Retail Sales, Empire State Manufacturing, US Industrial/Manufacturing Production

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