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The Hermit Kingdom

Good morning! Qantas cancelled all of its international flights until 20 December, with the "tourism sector... suggesting Australia could become the 'hermit kingdom of the South Pacific'".

Aren't we already? 🤔 In more positive news, yesterday Australia signed up for 25 million Moderna vaccine doses: 10 million this year, and 15 million of its variant booster candidate in 2022. Better late than never!

Market Wrap

Daily % change

AUD/USD

77.3

-1.4%

10Y Bond

1.73

2.9%

ASX200

7,045

-0.7%

Brent (bbl)

69.0

0.6%

Gold (oz)

1,814

-1.3%

Iron ore (t)

226.8

2.2%

Bitcoin

54,482

-4.2%

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

There was carnage on Wall Street last night, with the S&P500 falling 2.14% amid an "inflation tsunami". The more interest-rate sensitive Nasdaq index fell 2.67% but the reason was the same: the US consumer price index was released last night and it showed a rise of 0.8% in April, or 4.2% year-on-year, the fastest pace since 2008. The Fed better hope it's right about this being "transitory" or it'll soon find itself between the devil and the deep blue sea.

Fat bankers: CBA announced a cash profit of $2.4 billion in the March quarter, almost double what it was during the same period in 2020. Deposits were up 13.9% on last year, suggesting there are plenty of people still sitting on cash.

Durable goods rebound: Toyota's March quarter profit nearly doubled, with unit sales down just 4% over the past 12 months despite the hugely negative impact of the pandemic in the middle of the year. It was also relatively unaffected by chipageddon, "thanks to its practice of monitoring small suppliers and stockpiling chips".

Ether rising: Ethereum, the second largest cryptocurrency, hit a fresh record high yesterday (before falling along with US equities). Unlike Bitcoin, the Ethereum blockchain was designed with smart contracts in mind. When you hear of DeFi (decentralised finance), it almost certainly involves ether.

Taiwan worries: Surging coronavirus cases in Taiwan and the potential for tougher restrictions on activity caused a huge equity sell-off yesterday, with the Taiwan Stock Exchange closing 4.1% lower. At one point the index had traded down 8.6%, which was the worst intra-day loss since 1969.


Travel Wrap

The Hermit Kingdom of the South Pacific

We need ~145k/day – more than double the current rate – to vaccinate all adults by 20 Dec.
We need ~145k/day – more than double the current rate – to vaccinate all adults by 20 Dec.

Qantas announced that it will cancel most of its international flights scheduled for the remainder of 2021 (excluding New Zealand). It is the third time Qantas (down 3.4% yesterday) has had to delay the return of international flights, having previously planned to fly abroad from 1 July, then by the end of October – which at the time was the Australian government's 'all adults fully vaccinated' target.

Stepping back: In Tuesday's budget, Treasury used an assumption that international travel would effectively be on hold until the middle of 2022, followed by "a gradual recovery in international tourism". Even though a Treasury assumption isn't government policy, the writing has been on the wall for some time and so Qantas had to act (as the chart above shows, Australia's rate of vaccination remains stuck in second gear).

The outlook: Qantas now expects – implicitly, given flights after 20 December were not cancelled – that travel will resume by the end of 2021. We think that's optimistic given the poor vaccine rollout and small chance that there will be enough Pfizer doses in the country to vaccinate every adult by the end of 2021. As we wrote earlier this week, "we're probably looking at the first half of 2022 as a best case scenario for vaccinated [international] travel".

That said, yesterday's addition of 10 million Moderna vaccine into Australia's arsenal does mean that it could now be possible. Provided, of course, Australia's vaccine regulator (Therapeutic Goods Administration) gets around to approving it and that the doses arrive in a timely manner.


The Wrap Up

  • Genomic sequencing confirmed the Victorian man who tested positive for COVID-19 this week contracted the virus while in hotel quarantine in Adelaide. Yet we refuse to even consider alternative options...
  • Seychelles may have a Sinovac problem – 62.2% of its population have received at least two doses of Sinovac/AstraZeneca, "yet active cases more than doubled in the week to 7 May. Of the reported infections, 37% occurred in people who were fully vaccinated, according to the health ministry". No word yet on whether severe disease (i.e. death) is prevented.
  • Hamburg's privacy authority issued a three-month emergency ban on Facebook, preventing it from collecting data from its German WhatsApp users. The move is to prevent Facebook from gobbling up data after 15 May, which is when WhatsApp users have to accept a new privacy agreement or have their app's functionality crippled.
  • UK GDP contracted by 1.5% in the March quarter of 2021, with the economy still 8.7% smaller than where it was before the pandemic.
  • An 'independent' panel set up by the World Health Organisation (WHO) found that the WHO was "under-powered". Moar powah! That'll fix a corrupt governance structure. 🤣

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