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Not just crypto

Good morning! In the latest pandemic U-turn (we've sure had a few!), US President Biden's top health advisor, Anthony Fauci, said he's "not convinced" the coronavirus developed naturally and thinks "we should continue to investigate what went on in China until we continue to find out to the best of our ability what happened".

Fauci's comments came after a Wall Street Journal article cited a US intelligence report claiming three researchers from the Wuhan Institute of Virology sought hospital care in November 2019, a month before China reported the first cases of COVID-19.

So that's where we're at. Over a year into this crisis and we still don't know if the virus leaked from a Wuhan lab or from animals in a Chinese wet market. We'll get to the bottom of it though – the Chinese government is nothing if not open, honest and transparent. 🙄

Speaking of leaks, Melbourne reported four new community cases yesterday after Victoria's contact tracers mistakenly named the wrong Epping Woolworths as an exposure site last week, potentially allowing the virus to spread after a man who was infected in South Australian hotel quarantine returned home. 🤦‍♂️

Markets

Daily % change

AUD/USD

77.5

0.3%

10Y Bond

1.65

-1.8%

ASX200

7,046

0.2%

Brent (bbl)

68.5

3.2%

Gold (oz)

1,883

0.3%

Iron ore (t)

182.7

-4.5%

Bitcoin

38,989

15.6%

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

The US S&P500 was up 0.99% overnight with tech the big winners (the Nasdaq was up 1.41%) due to further declines in 10-year US Treasury yields to around 1.6%.

Inflation concerns: The gold price hit a five-month high yesterday. Gold is widely considered a 'safe haven' asset that holds its purchasing power against a depreciating dollar (inflation).

Kiwi retail: Total retail sales increased 2.5% in the March quarter 2021, with key gainers being work-from-home items such as electrical and electronic goods (+26%), motor vehicles and parts (+24%) and hardware, building, and garden supplies (+19%).

Elon does it again: How would crypto traders survive without Elon Musk's tweets? About an hour ago Elon caused the price of many cryptocurrencies, including Bitcoin, to shoot up over 15% with a single tweet:

"Spoke with North American Bitcoin miners. They committed to publish current & planned renewable usage & to ask miners WW to do so. Potentially promising."

And just like that, Bitcoin's back up near $40k.


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Analysis

Not just crypto

China's government has come down hard on more than just crypto.
China's government has come down hard on more than just crypto.

The price of iron ore fell again yesterday following the ninth consecutive working day decline in Chinese steel rebar prices. Prices for iron ore are now down 19% since peaking on 13 May, with steel rebar prices down 17% over the same period.

An iron fist: After its assault on cryptocurrencies last week, China's National Development and Reform Commission issued a statement early on Monday threatening to "closely follow the trend of commodity prices", with "zero tolerance" for "abnormal transactions and malicious speculation". 👊

Why it matters: Iron ore is Australia's largest export and a significant contributor to the economy and government's tax base. According to the Australian government, iron ore "is forecast to earn Australia around $A700 billion over the six years to 2025-26... [supporting] 45,600 direct Australian jobs".

The bigger picture: China's government is worried about rampant inflation and the impact it could have on domestic stability (i.e. the Party's power). It's effectively using a version of what we in Australia call 'macroprudential' to prick what it perceives are asset price bubbles driven by "speculation", whether it be commodity prices or cryptocurrencies.

Really, there's just a lot more money flowing around the financial system chasing a relatively unchanged number of goods. Supply is trying to respond but it takes considerably more time than does demand, which can turn instantly. The big risk going forward is that the surge in demand turns out to be temporary and suddenly the world is awash in steel (and houses and sawmills and railways and power plants and ... you get the picture) it can't afford and/or doesn't need.


The Wrap Up

  • Scotty from marketing really needs to lift his game. "Government ads generally don't set the world on fire, but the Australian government's have been particularly bad."
  • No doubt worried about his remaining 5% stake in Virgin Australia, Richard Branson wasn't too thrilled with Australia's current vaccination rate, saying: "It's a small country, I suspect most people should have been vaccinated. If not, (they) should have been."
  • Restrictions in greater Sydney were extended for another week as the "missing link between two local cases and NSW's hotel quarantine system remains unknown".
  • Trouble is brewing in Samoa, with Prime Minister-elect Fiame Naomi Mata'afa and her supporters locked out of Parliament, preventing the swearing in of the new government.
  • New COVID-19 cases continue to rise in Taiwan, with the government struggling to deal with a "traffic jam" in testing, which has caused delays in getting results out in a timely manner.
  • The US Centers for Disease Control and Prevention (CDC) reported that some adolescents and young adults had developed myocarditis, or inflammation of the heart, days after receiving an mRNA vaccine (Pfizer or Moderna).
  • Singapore approved a COVID-19 breath test using machine learning software that provides instant results, which it will use to screen incoming travellers from Malaysia. Anyone who tests positive will be sent for a more accurate PCR swab test.

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