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China wants to trade

Good morning! ScoMo's plan to allow vaccinated residents travel across state borders even with the odd COVID-19 case was pooh-poohed by WA's Premier Mark McGowan yesterday, who said "the state always will reserve the right — and the High Court has said we have the right — to put them [hard borders] in place".

That's going to make ScoMo's "sliding sort of scale" towards borders a bit difficult to implement.

Market Wrap

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Note: Brent oil, gold bullion and iron ore prices are the second futures contract.

The US S&P500 (-0.85%) fell last night following disappointing housing starts data for April (-9.5%), with high prices due to "shortages of lumber and other raw materials" cited as a reason.

Economic conditions: The RBA released the minutes from its last meeting yesterday, reaffirming that it will keep monetary conditions easy unless wages growth was "materially higher than it is currently", and "actual inflation is sustainably within the 2 to 3 percent target range". It expects "these conditions as unlikely until 2024 at the earliest" – in other words, economic conditions (wages/prices growth) will trump the Board's 2024 timeline, were they to increase "sustainably" (define that as you will).

Japan's double dip: Japan's GDP recorded a dismal 1.8% year-on-year contraction in the March quarter 2021 (-1.3% quarter-on-quarter). Its largest cities remain in a state of emergency (a lockdown-lite) and the government has been slow to roll out COVID-19 vaccines, meaning we could see it shrink further in the June quarter. The Nikkei 225 rose 2.1% on the news (more stimmy!)...

Trade Wrap

China wants to trade

China isn't very popular these days and removing tariffs could help.
China isn't very popular these days and removing tariffs could help. Bloomberg

Bloomberg reported that China is pushing to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which is a trade agreement involving Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam (around 13.4% of global GDP). It was originally devised by the United States, but former President Donald Trump withdrew his support in 2017.

Stepping back: China has been embroiled in trade disputes with just about everyone over the past few years, from the United States to the European Union and as we all know, Australia. But with a new US President and the fact China has been failing in its trade 'war' against most countries (or at the very least, not winning), there have been signs that tensions are cooling: earlier this week a Chinese state media outlet announced that China was extending a tariff exemption for 79 US products in "a show of China's sincerity in improving trade ties".

Implications: Australia already has a trade agreement with China, the China–Australia Free Trade Agreement (ChAFTA), and is part of the Regional Comprehensive Economic Partnership Agreement (RCEP), which also involves many of the countries included in the CPTPP. If China is allowed into the CPTPP (joining requires the consent of current members), it would be more symbolic than anything – a sign that it (and potentially the US, which may also seek to join) is ready to move on from the mercantilist, race-to-the-bottom Trump years.

The Wrap Up

  • Almost a third of Australians said they wouldn't get a COVID-19 vaccine, according to a survey by research company Resolve Strategic...
  • The NYT published an excellent article on the EU's vaccine rollout failure. "One goal, clearly, was to increase the power of E.U. institutions — notably the European Commission, led by Ursula von der Leyen... Such transfers of responsibility are rarely reversed, even if the policies themselves are a failure."
  • Singapore's government reported that new variants, such as the Indian double-mutant B1617 strain, "are much more virulent, and they seem to attack the younger children".
  • A possible travel bubble? Hong Kong has now gone 24 consecutive days without an untraceable COVID-19 infection.
  • The Olympics are due to start in 65 days: The Tokyo Medical Practitioners Association, which counts about 6,000 primary care doctors among its members, wrote to Japanese Prime Minister Yoshihide Suga requesting that "authorities convince the IOC (International Olympic Committee) that holding the Olympics is difficult and obtain its decision to cancel the Games", because "medical institutions dealing with Covid-19 have their hands full and have almost no spare capacity".
  • The European Medicines Agency said the Pfizer vaccine is safe to store in a fridge for up to a month (unopened).