No end in sight

Delivered on By Justin Pyvis

Good morning! Sydney has officially recorded more rain in the 97 days of 2022 (1,226.8mm) than it normally gets in an entire year (1,213.4mm).

According to the Bureau of Meteorology, that trend looks set to continue:

“So unfortunately we continue to be in a La Niña event which we know for New South Wales means that we can expect to see higher-than-average rainfall conditions which is exactly what we have seen over the past couple of months and we are expecting La Niña to continue throughout the remainder of April.”

Have a great weekend and try to stay dry! ☔

Sydney smashes an unwanted record.
Sydney smashes an unwanted record. Source

Reading the tea leaves

Daily % change







AU Bond



US Bond









Brent (bbl)



Gold (oz)



Iron ore (t)









Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries.

After being down for much of the session the US S&P500 eventually ended its run of recent losses, gaining +0.43% in a late rally led by the likes of Microsoft (+0.62%) and Tesla (+1.10%). US weekly jobless claims were just 166,000 last week, the lowest since 1968, indicating just how tight the US labour market is at the moment.

A notable mover was HP Inc, which added 14.8% after Warren Buffett’s Berkshire Hathaway disclosed a roughly 11.4% stake in the company, worth some $US4.2 billion prior to last night’s surge.

Locally, the ASX200 fell -0.63% with only consumer staples (+0.55%), real estate (+0.27%) and utilities (+0.53%) gaining ground. Tech fell the most (-3.42%), following the US lead from the night before after the Fed appeared to be more of an inflation hawk than markets initially expected.

Food for thought

China's health system would quickly come under pressure if COVID was allowed to spread among its largely unvaccinated elderly population.
China's health system would quickly come under pressure if COVID was allowed to spread among its largely unvaccinated elderly population. Source

The lockdown in Shanghai – initially denied by the government, then declared for just 4 days each for the eastern and western sides, before being extended to the entire city (26 million people) – has no end in sight.

Earlier this week we took a look at why China is still locking cities down over two years into the pandemic when effective vaccines are widely available (TL;DR: the government failed to adequately vaccine the elderly, the most vulnerable cohort).

But what about the potential fallout from this lockdown, the next one, and then the one after that? Of course there’s a large human cost – people on the ground in Shanghai are reporting a of a lack of services, such as rubbish not being collected for “several days” and closed supermarkets making it “hard to order food online”:

“Fears over food shortages and living conditions have escalated as the crisis looks set to continue without any end in sight. Public fights over food among the city’s residents have been video documented as well.”

But there’s also a large economic cost. A recent estimate by the Chinese University of Hong Kong found that China’s rolling lockdowns as it pursues its foolhardy “dynamic zero-COVID” strategy costs 295 billion yuan a month, or around 3.1% of its gross domestic product.

The Chinese government prides itself on economic growth – it’s targeting “around 5.5%” this year – and a contraction would be a bitter pill to swallow for President Xi Jinping, who has been in charge since March 2013 and presided over a declining annual growth rate ever since.

While much of the slowdown in China’s growth was out of Xi’s hands – so-called ‘catch-up’ growth doesn’t work as well once you start to catch-up – a lot of the current malaise can be traced back to him.

The bloated real estate sector? It has only grown larger under Xi, used as a tool to prop up growth in times of trouble. But that lever has diminishing returns:

“For too long China excessively relied on real estate construction to prop up growth and is now running into late Soviet era style decreasing returns problems in this sector… instead of Japan’s ‘bridges to nowhere’, might China be headed towards ‘houses nobody lives in’ or ‘office buildings nobody occupies’ (or significant rent and price declines to clear the market).”

Xi has also done nothing to reform the country’s growth-sapping, inefficient state-owned enterprises – if anything he has moved policy in the opposite direction, strengthening the sector to help consolidate his power.

It all leaves China’s government with limited options going forward. The country has a rapidly ageing population, is battling a slow-moving property market collapse (itself the result of prior government policy), and now is persisting with an economically harmful “dynamic COVID-zero” strategy, with which it must persist to save face and showcase the supposed superiority of China’s political system.

Until the time comes for China to “live with COVID”, Xi will almost certainly resort to the trick he has used every other time growth has slowed too much: pump credit towards real estate acquisition and construction.

That means we should expect more announcements akin to the one released earlier this week, which pledged to use “a variety of monetary policy instruments such as re-lending to increase support for the real economy”.

Chewing the fat

Bits and bytes

🚢 Now the RBA also has to offset a supply shock to bring inflation down: Australia’s trade surplus fell to $A7.46 billion in February, due to a surge in the price of imported fuel, industrial supplies and a broad-based increase in the price of consumption goods.

🍁 Canada’s government will “make it illegal for foreigners to buy any residential properties in Canada for the next two years”.

🍉 “The Clive Palmer-backed United Australia Party will preference the Greens above the two major parties in the lower house at the upcoming election.”

🕵️‍♀️ The Senate Select Committee on COVID-19 recommended that the federal government establish a Royal Commission into the pandemic response.

🤔 “A senior RBA official is about to jet off on an all-expense taxpayer funded trip to London to check that Australia’s 80-tonnes of gold bullion is still in the Bank of England’s vaults.”

📉 Deutsche Bank became the first major bank to call for a US and euro area recession “within the next two years”.

💉 A new study from Israel found that a fourth shot of the Pfizer vaccine was effective against infection and severe disease, although protection against infection is only temporary and actually fell below those in the group with three vaccine doses.

⚔️ According to US intelligence, “Russian forces near Kyiv and Chernihiv have completed their withdrawal from the area to re-consolidate and refit in Belarus and in Russia,” adding that Putin “has achieved zero of his strategic goals”.

✈️ Hong Kong’s government banned six airlines from flying to the city within four days “for carrying passengers who test positive on arrival even though they were negative before… creating havoc for travellers and further undermining the city’s role as a financial hub”.

👮‍♂️ John Lee, Hong Kong’s pro-Beijing former deputy police commissioner who helped crack down on the 2019 pro-democracy protests, will become the city’s new Chief Executive.

🌊 Two days after rejecting a co-funding request from the Queensland government for its $A700 million flood support package, ScoMo did a backflip and said the federal government will pick up half the tab.

🛢️ Oil giant Shell will write off between $US4 and $US5 billion as a result of its Russia exit.

🏡 UK house prices hit a record high in March, rising 1.4% from February and 11% from a year ago, “the fastest pace in six months as the property market continued to defy the cost of living crisis tightening its grip on household budgets”.

🗳️ Only 48% in favour: Russia was suspended from the UN Human Rights Council after 93 of the 193 members voted in favour, 58 abstained, 24 voted against and 18 left the room prior to the vote.

🛣️ Peru’s government deployed its army to the highways for the next month, “amid crippling protests nationwide over rising food and fuel prices”.