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Speaker 1: Good morning and welcome to the Daily OS. It's Wednesday,

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Speaker 1: the eleventh of May. There's going to be a new

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Speaker 1: premier in the Northern Territory. In today's Deep Dive, we're

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Speaker 1: chatting about what is happening on the stock market. Sam

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Speaker 1: is going to take us through what that all means

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Speaker 1: and why it's happening. But Sam to the North now

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Speaker 1: and what's happened with Michael Gunner.

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Speaker 2: He resigned yesterday, effective immediately. Northern Territory Premier Michael Gunner

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Speaker 2: released a statement saying the birth of our second child

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Speaker 2: the week before last confirm something for me. My head

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Speaker 2: and my heart are no longer here. They are at home.

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Speaker 1: Queensland Premier Anastasia Palichet has announced Queensland will introduce new

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Speaker 1: laws to better protect people from domestic and family violence,

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Speaker 1: including establishing coercive control as a criminal offense. The state

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Speaker 1: government will introduce a bill to criminalize coerceive control before

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Speaker 1: the end of twenty twenty three.

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Speaker 2: A content warning this story might be distressing for some people.

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Speaker 2: Scott Morrison has defended his Parties candidate in Waringa after

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Speaker 2: Catherine Deeve's claims transgender people were quote mutilated by medically transitioning.

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Speaker 2: When I asked yesterday about these comments, Morrison suggested, quote,

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Speaker 2: what we're talking about here is gender reversal surgery for

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Speaker 2: young adolescents. We can't pretend this type of surgery is

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Speaker 2: a minor procedure.

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Speaker 1: Just some good news now, and preparation has begun on

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Speaker 1: the setup of Europe's largest floating solar park. The park,

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Speaker 1: which will open in July, is expected to assist Portugal

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Speaker 1: to cut reliance on imported fossil fuels. Okay, So moving

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Speaker 1: on from the day's news to what is happening with

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Speaker 1: the markets? And yesterday the ASX closed one percent lower,

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Speaker 1: recovering in the final hour of trading from a shaky

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Speaker 1: start to the day. It was the latest in a

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Speaker 1: string of days where markets have tumbled. In fact, the

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Speaker 1: market hit its lowest since January this week, and the

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Speaker 1: US market has now clocked up far i consecutive weeks

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Speaker 1: of declines and is down nearly seventeen percent since the

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Speaker 1: start of the year, which makes this the worst period

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Speaker 1: for the markets in the US since June twenty eleven.

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Speaker 1: But what has led to the panic? Sam start from

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Speaker 1: the beginning? What's the short answer?

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Speaker 2: Well, I think the first thing to say is the

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Speaker 2: realization that June twenty eleven was more than ten years ago,

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Speaker 2: so this is a big moment for the markets. The

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Speaker 2: short answer is this markets have been dragged down by tech,

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Speaker 2: mining and the energy sector as global investors worry about

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Speaker 2: the impact of COVID in China and rising interest rates.

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Speaker 2: That's a lot to deconstruct, and we're going to do

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Speaker 2: that now. But keep in mind that when we talk

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Speaker 2: about the stock market, a loss of more than two

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Speaker 2: percent is a very significant day. It's one that will

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Speaker 2: inevitably be discussed by news media as a cause of concern.

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Speaker 2: Now we are dangerously close to hitting that mark now

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Speaker 2: for a number of days in a row. Now, a

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Speaker 2: two percent hit to the Australian stock market represents sixty

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Speaker 2: four billion dollars in losses for that day, So it's

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Speaker 2: big money we're talking about.

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Speaker 1: Let's look at the factors one by one. First, talk

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Speaker 1: to me about China and doesn't have anything to do

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Speaker 1: with what we were talking about on the pod yesterday.

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Speaker 2: It has everything to do with what we were talking

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Speaker 2: about yesterday. China's pursuit of COVID zero, which is zero

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Speaker 2: COVID cases in the country has massive economic impacts, everything

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Speaker 2: slowing down. Factory production and logistics chains are extremely slow,

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Speaker 2: and China's export growth so how much they're exporting to

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Speaker 2: the rest of the world is at a two year low.

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Speaker 2: Export growth in March, so how much they exported compared

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Speaker 2: to the month before was fourteen point seven percent. In

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Speaker 2: April it was only three point nine percent. That is

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Speaker 2: really bad news. There's a lockdown that captures the Shanghai Port,

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Speaker 2: which is one of the biggest ports in the world,

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Speaker 2: and interestingly, drivers from outside the city are not taking

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Speaker 2: up work because they fear being caught in lockdowns, so

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Speaker 2: they're actually not turning up at the port to transport product. Now,

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Speaker 2: let's play all that out for a public company in Australia,

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Speaker 2: say your favorite clothing label. The company is going to

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Speaker 2: struggle to get products made and transported from China at

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Speaker 2: the rate that they need at the rate that we

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Speaker 2: want to buy from them, which means that their sales

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Speaker 2: are going to go down. That means they're going to

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Speaker 2: have to tell their investors they didn't make as much

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Speaker 2: as they thought they would, especially when they forecasted some

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Speaker 2: big sales in the post pandemic boom that's going to

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Speaker 2: make investors want to sell the stocks.

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Speaker 1: And this is all being made worse by the horrific

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Speaker 1: events in Ukraine, I would.

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Speaker 2: Presume absolutely, And even if we stick with the Chinese context,

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Speaker 2: China's growth is being more threatened by the geopolitical and

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Speaker 2: financial tensions flowing from Russia's invasion of Ukraine, and this

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Speaker 2: has resulted in the soaring costs of energy and food

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Speaker 2: all generated from this war. China is reliant on imported

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Speaker 2: energy and food. So if we play that scenario out,

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Speaker 2: the factories in China that have been running on imported

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Speaker 2: petrol from Russia have to now pay more for their fuel,

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Speaker 2: which is a cost that they onto a supplier, which

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Speaker 2: is the cost of the supplier, like the fashion label

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Speaker 2: we talked about before, passes on to us now as

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Speaker 2: a consumer, this either means we don't buy the goods

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Speaker 2: or the cost of living for us goes up. And

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Speaker 2: that might sound familiar. It's what we've been talking about

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Speaker 2: a lot this election. Now, outside of the Chinese context,

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Speaker 2: the threat of an escalated war in Ukraine is making

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Speaker 2: markets all around the world extremely shaky. European markets are

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Speaker 2: tumbling on the back of very localized fears of conflict.

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Speaker 2: They're also dealing with a high number of refugees and

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Speaker 2: the changes to energy supply across Europe. Now, many countries

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Speaker 2: in Europe are trying to diversify the supply of oil

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Speaker 2: and gas so they're not reliant on Russia to supply

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Speaker 2: them with these commodities. But that's expensive and it is

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Speaker 2: showing now on markets.

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Speaker 1: Are we about to see a stock market crash?

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Speaker 2: Then I definitely don't want to be sensationalists, so I'm

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Speaker 2: not sure we're ready to call a crash, but we're

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Speaker 2: definitely seeing what economists and market observers call a cooling

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Speaker 2: of conditions. There was one US analyst from black Rock,

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Speaker 2: which is one of the world's best investment firms, that

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Speaker 2: caught my eye yesterday. He said, we also see little

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Speaker 2: chance of a perfect economic scenario of low inflation and

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Speaker 2: growth just humming along. So in other words, we've got

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Speaker 2: some big factors here we're going to have to deal

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Speaker 2: with as an economy. If we look back at history,

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Speaker 2: the recent spike in inflation that we're talking a lot

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Speaker 2: about this election suggests that we are due for a contraction,

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Speaker 2: which is not the same as a crash. It's kind

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Speaker 2: of a mini speed bump. The big fact that we

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Speaker 2: turn to when making this prediction is that, only with

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Speaker 2: one exception, every recession since World War II has been

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Speaker 2: preceded by soaring prices, which is what we're experiencing right now.

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Speaker 1: So it feels like we need to get our heads

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Speaker 1: around what a recession is Again, how do we know

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Speaker 1: we're in one?

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Speaker 2: This is kind of the third time we've talked about

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Speaker 2: the recession since the beginning of the COVID pandemic in

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Speaker 2: twenty twenty, so quite a compact period for podcast listeners

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Speaker 2: have been with us for a while. But a recession

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Speaker 2: is a period of economic decline, and that means there's

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Speaker 2: two consecutive quarters, so six months in total, of negative growth.

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Speaker 2: The indicators we look at for a recession are things

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Speaker 2: like rising unemployment, falling retail sales, slowed manufacturing growth, and

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Speaker 2: a decline in personal income wages. Australia was extremely lucky

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Speaker 2: to escape a recession in the two thousand and eight

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Speaker 2: global financial crisis. We were actually the only major economy

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Speaker 2: to avoid a recession during that time, and that was

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Speaker 2: mainly because of the demand from China for natural resources.

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Speaker 2: Now this is important. The demand from China is not

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Speaker 2: something we can count on this time. More recently, only

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Speaker 2: in the last eighteen months or so, Australia experienced a

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Speaker 2: recession due to the COVID pandemic. Twenty twenty's recession was

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Speaker 2: Australia's first in almost thirty years, but by the end

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Speaker 2: of twenty twenty Australia was technically out of a recession.

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Speaker 2: Now we have to name the elephant in the room.

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Speaker 2: We are two weeks out from a federal election, so

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Speaker 2: I would expect to see the last part of this

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Speaker 2: very long campaign dominated by talk about economy.

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Speaker 1: Last thing, and I'll tell the audience that Sam has

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Speaker 1: fed me this question. Wouldn't normally be asking about crypto markets,

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Speaker 1: but I remember when we have talked about crypto over

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Speaker 1: the years, it's always been treated as a bit of

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Speaker 1: a safe haven from volatility, at least that's what its

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Speaker 1: supporters say. Is that happening now?

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Speaker 2: I really wanted you to ask me this question because

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Speaker 2: the answer is super interesting. As you said, crypto has

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Speaker 2: been seen as this hedge against global stock markets. They

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Speaker 2: have been seen as a safe way to keep your

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Speaker 2: money in recent times if there's volatility on global traditional markets,

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Speaker 2: but now the cryptocurrency sector is slumping at the same

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Speaker 2: rate as traditional markets. Bitcoin is actually at its lowest

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Speaker 2: level in nearly a year since last Friday. The value

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Speaker 2: of one bitcoin is down thirteen percent, its lowest level

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Speaker 2: since last July, and it's fifty percent down since its

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Speaker 2: peak in last November. This tells us one super important fact.

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Speaker 2: Crypto isn't a safe haven against broader market falls, and

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Speaker 2: now it's kind of more closely aligned with broader stock portfolios.

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Speaker 2: More of us have it as part of our broader

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Speaker 2: investment strategy. Lots of the institutional funds and expert investors

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Speaker 2: have some exposure to it, so in a way, it's

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Speaker 2: kind of a victim of its own success. It was

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Speaker 2: such an attractive investment offer that now all the traditional

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Speaker 2: investors are getting behind it and it's feeling the same pain.

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Speaker 1: Crypto or not. It's certainly something that a lot of

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Speaker 1: our audience members will be keeping a keen eye on,

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Speaker 1: as it affects everybody, regardless of whether you are playing

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Speaker 1: the stock market or not. That is all we have

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Speaker 1: time for today on the Dally Ods. However, if you

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Speaker 1: want to keep up to date with everything, that's happening

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Speaker 1: in the lead up to the federal election. Come follow

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Speaker 1: us on Instagram at the Daily Ods, so wherever three

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Speaker 1: hundred and fifty thousand Aussies get their news every day,

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Speaker 1: and we will be posting an exclusive interview with Anthony

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Speaker 1: Alberesi later this week. We're sitting down with him today

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Speaker 1: and it'd be great to have you over there with us.

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Speaker 2: Have a great day,