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Mining boom take... three?

Good morning! We've gone heavy on coronavirus coverage today, with more countries joining the growing list of those suspending the use of the Oxford/AstraZeneca vaccine, potentially jeopardising the timeline of the pandemic recovery in Australia.

Market Wrap: Another day, another record high

Daily % change

AUD/USD

77.5

-0.1%

ASX200

6,773

0.1%

Brent (bbl)

68.8

-0.5%

Gold (oz)

1,729

0.5%

Iron ore (t)

157.7

-1.3%

Bitcoin

56,582

-0.6%

Note: Brent oil, gold bullion and iron ore prices are the front month future contracts.

US markets were stronger overnight on the back of Biden's Big Stimulus, with the S&P500 and Dow reaching new record highs – and the stimulus cheques haven't even arrived yet (they're due around Thursday)! However, a two-day Fed meeting starts today that could flip everything on its head.

Mining boom take... three?: CBRE is predicting a housing boom in all Australian cities this year. It expects Perth to lead the way with a 9-12% house price increase and a 5-7% increase for units. Craig Godber, CBRE’s head of residential research, said the strength in Perth was due to "a solid resources sector outlook". All good while the iron ore price is high and interest rates are low. Until they aren't.

Iron ore falls again: Beijing has been covered in a thick plume of smog for the past few weeks (made worse by a recent sandstorm), and it's clearly getting on Xi Jinping's nerves. On Friday, China's Ministry of Ecology and Environment urged officials in large steel-making cities such as Tangshan (less than 200km from Xi's residence in Beijing) to enforce air quality rules, with the city responding by warning "that any steel and cement plants that fail to do so [cut emissions by 50%] will have their pollutant discharge permits revoked and production suspended". It's difficult to make steel without emissions. Less steel equals less iron ore, hence the price falls.

Smog in Beijing will force policymakers to act.
How can you command that which you cannot see? Yahoo!/AFP

Corona Wrap: AstraZeneca, we have a problem

Italy, France, Germany and the Netherlands suspended the use of the Oxford/AstraZeneca vaccine over concerns about possible side effects. Austria, Denmark, Norway, Ireland and Iceland have all recently stopped using the vaccine. A review of the vaccine's safety will be conducted by the European Medicines Agency (EMA).

The Wrap: This is a troubling development because at this stage, AstraZeneca is the only vaccine that will be available to most Australians this year. Note that AstraZeneca has not found any evidence of increased risk, and Thailand – which had previously suspended its use over health concerns – will start using the vaccine again today.

Elsewhere:

  • Queensland and New South Wales both reported no new community cases following their respective quarantine breaches over the weekend. Meanwhile, yesterday was the first day in 12 months that all of Australia's interstate borders were open.
  • The CEO of British Airways said he thinks "people who've been vaccinated should be able to travel without restriction", and that there is "huge pent-up demand". Fair enough, too – imagine being locked up in Blighty for a year!

Econ Wrap: China's Jan/Feb data dump

China activity soars.
Bloomberg

China released a impressive array of data for the first two months of the year, including fixed asset investment (+35.0%), industrial production (+35.1%) and retail sales (+33.8%).

The Wrap: Them's some biiigg numbers! Alas, it's hard to read too much into these data. Other than the usual questions about manipulation, during much of Jan and Feb 2020 China was in full lockdown, making comparisons difficult. Further complicating matters was the fact that travel was heavily restricted over the 2021 Chinese New Year period, a time when many migrant workers normally return home to spend time with their families.

Elsewhere: In the latest shot fired against Billionaire Jack Ma's empire, Ant Group chief executive officer Simon Hu "unexpectedly resigned amid a regulatory-driven overhaul of the financial technology giant's business". Jack Ma has rarely been seen since his proposed $US37 billion initial public offering for Ant Group was thwarted by Chinese regulators. China's President Xi Jinping – who was "uneasy" with Ma's growing influence – is believed to have been personally involved.

Poli Wrap: An SME bailout is coming soon

JobKeeper is ending on 28 March but never fear, another bailout is here! SmartCompany reported that the federal government will this week announce interest-free loans for many small and medium enterprises, modelled after the university student 'HECS' repayment system.

The Wrap: There are legitimate, profitable businesses that are still losing money due to the government's border controls. But how does the government help those businesses without also wasting money on no-longer viable ones, also known as the adverse selection problem? JobKeeper didn't, hence its likely evolution to targetted, repayable loans. However, it remains to be seen how the government will deal with 'phoenixing', where a company is "is liquidated, wound up or abandoned to avoid paying its debts... [and] a new company is then started to continue the same business activities without the debt". If this scheme is poorly designed, it could end up wasting significantly more resources than it saves.

Elsewhere:

  • Victorian Liberal leader Michael O'Brien will likely face a leadership challenge today, with Brad Battin expected to run against him. Panic stations, it seems – it surely can't be a coincidence that it's happening so soon after the WA Liberals were effectively wiped out over the weekend.
  • Attorney-General Christian Porter is seeking damages from the ABC.

Tech Wrap: Stripe's massive valuation

Up, up and away we go. Online payments processor Stripe is now the most valuable private company in Silicon Valley, after it raised $US600 million in a Series H funding round, effectively valuing the company at $US95 billion. That's a three-bagger in less than a year!

The Wrap: Company valuations are a function of risk, profitability and interest rates. Over the past year, monetary policy has been extremely loose. Records will continue tumbling for as long as interest rates remain suppressed.

Random Wrap: Maybe they're just tired?

Philadelphia fans have a reputation
Baseball and booze, an essential combo. Always Sunny in Philadelphia/Pinterest
"When there are extra innings and more game-time after the seventh inning alcohol sales stoppage crime declines significantly around the stadium. The crime reduction benefit of the last call alcohol policy is undone when a complex of sports bars opens in the stadium parking lot in 2012. The results suggest that alcohol consumption during baseball games is a contributor to crime."

That's from Klick and MacDonald, writing in the Journal of Quantitative Criminology (HT: Alex Tabarrok).

The Wrap: Professional baseball games can take forever. Fans in Philadelphia are also notoriously rowdy. An alternate explanation might be that when games stretch out after the 7th inning, people are exhausted, get tired and go straight home.

Elsewhere: New Orleans Saints quarterback Drew Brees announced his retirement from the NFL. Channelling his inner Winston Churchill, Brees – the most prolific passer in NFL history – said: "I am only retiring from playing football, I am not retiring from New Orleans. This is not goodbye, rather a new beginning."


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