Treasury is to deliver Covid-19 economic scenarios today, Grant Robertson will give a Budget revamp speech on Wednesday, and Level 3 details are due on Thursday. Meanwhile, a big oil deal has been done, and stocks have recovered half their losses.
Number crunch: For the first time since the lockdown we will get some key data today on the damage Covid-19 has done to the New Zealand economy, as Treasury releases its forecasts and estimates ahead of the Budget on May 14.
Working on it: Finance Minister Grant Robertson is expected to hold a news conference later today with Prime Minister Jacinda Ardern to outline revised plans for the Budget and a likely change to the Government’s spending priorities because of Covid-19.
Cutting back: Saudi Arabia and Russia have struck a deal with other major oil producing nations to slash production as they attempt to stabilize a market that has been upended by the coronavirus outbreak. Members of OPEC and their allies, including Russia and Mexico, announced over the weekend that they have agreed to cut production by 9.7 million barrels a day in May and June; the deepest cut ever agreed to by the world’s oil producers. After that, the group will steadily ramp up production until the agreement expires in April 2022.
Stabilising: The wider group of oil producing nations, which together is known as OPEC+, had been seeking to cut production in order to buoy oil prices, which fell to 18-year lows in recent weeks. The price plunge came after Saudi Arabia and Russia abandoned years of production cuts in early March, launching a price war by flooding the market with crude. The coronavirus, meanwhile, dealt a devastating blow to energy demand, pushing prices even lower.
Packing up: Austrian oil giant OMV has announced it will postpone indefinitely its last remaining oil and gas exploration plans in the Taranaki Basin, largely bringing an end to offshore oil exploration in New Zealand. OMV announced that a programme to drill exploratory wells in the Taranaki Basin has been postponed immediately amid the Covid-19 crisis, and that it has no plans to bring a new rig here in the near term.
Environmental groups cheering: In November last year, around 30 protesters occupied OMV’s vessel the Skandi Atlantic in the Port of Timaru for three days, delaying it from heading to a drill site. A week later, over a hundred people shut down OMV’s offices in New Plymouth for a further three days, satirically converting the building into the ‘Museum of Oil History’.
Halfway there: In a bounce that few investors anticipated a fortnight ago, shares in the U.S. have now reversed almost half of their Covid-19 losses in the three weeks since the market low on 23 March. This follows massive government and Federal Reserve stimulus along with a slowing infection rate which have buoyed markets into believing the global economy may recover more quickly than originally anticipated.
Feeling brighter: Locally, the NZX50 recorded a low of 8499 on 24 March and it too has recovered almost half of its losses while the ASX200 in Australia has only recovered around one-third of its recent fall, weighed down by banking stocks that have largely not participated in the rally and energy stocks which have been impacted by a lower oil price.
Big data week: Reporting season in the US is about to kick off and investors will be keen to hear more from CEOs as they assess the outlook for their respective businesses. This week many of the banking heavyweights in the U.S. will report their quarterly numbers including JPMorgan, Citigroup, Bank of America, BlackRock, Goldman Sachs and Wells Fargo.
More to come: Also, on Wednesday this week the market will digest the much-anticipated U.S. retail sales figures which are poised to fall in March by the most ever seen, while industrial production and jobless figures will come out on Friday. Additionally, China is also set to release its GDP figures this week.
Eye watering: US$4,500,000,000,000. That’s the combined total of US government stimulus and Federal Reserve initiatives that has been injected into the US economy in recent weeks as the word trillion is now used as frequently as we spoke of billions previously. In an unprecedented response to the COVID-19 pandemic and led by the Fed’s aggressive securities purchases and money lending initiatives, politicians and bankers have enacted and proposed stimulus equal to 20.1 percent of global GDP, and a breathtaking 45.9 percent of GDP in the US alone. Just think about that for a moment and try not to let the implications scare you!
Down the drain: Dairy farmers in the UK have called for government support after a collapse in the milk market following the coronavirus lockdown that has forced them to start dumping the product. Around 5 million litres a week is at risk of being discarded due to the closure of restaurants, cafés and canteens cutting into milk demand, pushing down prices and compelling some farmers to start dumping milk after processors halted collections.
Fewer lattes, more powder: Overall the UK produces approximately 35m litres of milk a day. Here, it’s likely Fonterra is able to deal with any decline in domestic milk consumption by converting it into milk powder for export.
Emoji’s not immune: It seems even the much loved emojis have been caught up in the coronavirus pandemic. The Unicode Consortium, a non-profit that oversees emoji standards and is responsible for new releases, said it’s delaying its new batch of emojis by six months from March to September 2021 because of fallouts from coronavirus. Emojis are typically approved in January before they’re available across devices in September, which means iPhone and Android users won’t see new emojis in 2021.
But fear not: The decision doesn’t impact the release of the new emojis such as the transgender flag, the gender-neutral Santa Claus and others that were announced in January. The new set, part of Unicode’s 13.0 standard, includes 117 new animated characters and will be released in September.