ASX at the close

ScreenHunter_31 Jun. 04 16.42 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets Global markets are now entering the eye of the storm as far as event risk is concerned. The first major event of the week has already brought some volatility, with the FOMC meeting resulting in the USD extending its gains. It has been all about the USD over the past 24-hours or so as investors reacted to the outcome from the FOMC meeting. While the initial comments were mostly construed as dovish, it is clear from the price action there has been a hawkish shift in sentiment. Initially, focus was on the fact the Fed maintained...
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Bill Evans says “no” to macroprudential

SMARTI INVESTOR 6TH August 2013  photo by louise kennerley Bill Evans Wespac From Westpac's Bill Evans today: The minutes of the Reserve Bank Board’s Monetary Policy meeting of September 2 have raised the level of concern that the Bank is now signalling around Australia’s residential property boom. Specifically the Board notes: “policy also needed to be cognisant of the risks to future growth that could accompany a large further build up in asset prices, particularly if that was associated with an increase in leverage;”and: “Credit growth for investor housing was running at around 10 per cent per annum. Housing prices were continuing to increase in...
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China launches breathtaking stimulus! (not)

images101-200x20011 More action from the PBOC this afternoon with the Chinese central bank cutting the 14-day repurchase rate by 20 basis points to 3.5 per cent. This is more easing though again questionable as stimulus. From ANZ via the SMH blog: We think the market should consider this as an important move as China has relied more on managing short-term market interest rates to push forward interest rate liberalisation. In our view, this is another policy easing effort following yesterday’s liquidity injection via Standing Lending Facility (SLF). However, none of the commercial banks or the central...
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Kohler’s housing shit sandwich hits the fan

SHIT-SANDWICH If you get five spare minutes today, make sure you watch the above tirade by Alan Kohler on Australian housing , whereby he cheers on Australian house prices and effectively tells first home buyers to eat shit. While there are many disgraceful quotes in the video, these ones below are perhaps the worst: "[Is it] all that bad if prices are high? Everyone's complaining that Australian houses are overvalued. And I'm saying 'yeah it's bad for first home buyers'... [My kids'] are complaining to me that they can't buy a house cause they are having to rent all the time. Well, actually is that so bad?...
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Can the Australian dollar save iron ore miners?

images With some currency relief finally apparent for Australian tradables, Citi offers a timely take on how that might affect the miners: The A$ leverage is surprisingly similar for BHP and RIO, which comes as somewhat  of a surprise given that RIO has historically been more levered to the A$ than BHP. This is due to the impact of the Alcan acquisition reducing the A$ exposure of the  overall group and the still-high margins in iron ore (bigger exposure for RIO) being less sensitive to a lower A$ than the tighter margin coal businesses (larger  exposure in BHP). Given we are bearish iron ore...
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The death of Australian manufacturing

ScreenHunter_10 Mar. 29 12.46 By Leith van Onselen Following on from my earlier post summarising the latest quarterly employment report from the ABS, below are some charts illustrating the dire situation facing Australia's manufacturing industry. First, total employment in manufacturing fell to the second lowest level ever in August, with only 919,100 Australians employed in the industry - just a whisker above the all-time low 916,900 jobs recorded in May 2013. Moreover, the share of total employment in manufacturing fell to an all-time low of just 7.9% - less than half the 16.8% of total employment in manufacturing in...
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Arrium rupture punishes miners

vghmt It's not going well for the iron ore miners today. The rupturing of Arrium, Chinese house prices sliding fast and Chinese markets selling again with rebar futures down 19 points and Dalian iron ore futures down 4 points.  The falling dollar can't put a dent in it. Here are the juniors with everyone at 2014 (and much longer) lows: The majors are down hard too with BHP and RIO off 1% and FMG down 2.5% having lost the $4 handle again: All things considered it's probably quite a good performance and thus the idiocy spread has sooooooo far still to close:   In the immortal...
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Where are the new jobs and where are they gone?

ScreenHunter_07 Nov. 26 16.13 By Leith van Onselen The Australian Bureau of Statistics (ABS) today released its quarterly labour force report, which breaks-down employment at the industry level. Below are some key charts, which present the changes in employment aggregates on a trend basis. First, the quarterly change in employment by industry: As you can see, science (+21,900) and construction (+13,900) were the big employment gainers over the August quarter, with mining (-13,100) and manufacturing (-11,000) the biggest losers. Public servant jobs also declined by 9,900 over the quarter, possibly reflecting...
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Chinese home price plunge deepens

dvw Fresh from China NBS, average new home prices fell in 68 of the 70 cities compared with July. In July it was 64 cities. Year on year home prices were only up 0.5% versus 2.5% in July. In month on month terms prices fell 0.6% after 0.8% in July. The bellwether cities don't look much better than lower tier jobs.  Shanghai new home prices were up 1.5% versus July's 4.1% and Beijing's new home prices were up 2.1%  versus July's 4.0%. It's awwn,...
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You can’t keep a good iron ore man down

grt Despite the clear and present warning presented by Arrium today, the froth just won't leave the iron ore market. From Fairfax: Iron ore's slump to a five-year low isn't expected to prevent the world's two biggest miners, BHP Billiton and Rio Tinto, returning cash to investors, a JPMorgan Chase fund manager said. "You have to remember the very large operating margins which can still be achieved within iron ore," James Sutton, a portfolio manager at JPMorgan's $US1.6 billion ($1.78 billion) Natural Resources Fund in London, said. There's "a lot of scope for shareholder returns," as Rio and BHP...
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Take’n it in the Arrium

gfhyth64 Freshly returned from its capital raising: It's only the beginning and I've already gone and lost my...
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New Zealand income booms

ScreenHunter_4277 Sep. 18 09.51 By Leith van Onselen Statistics New Zealand (Stats NZ) has released national accounts data for the June quarter, which revealed 0.7% growth in real GDP over the quarter and 3.5% growth over the year - the highest rate of growth since the year to September 2007. The growth was largely driven by the services sector: “Services make up about two-thirds of the economy and all 11 services industries increased this quarter,” national accounts manager Gary Dunnet said. “The biggest increases were in industries that include advertising, employment services, and software...
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Dollar-exposed industrials get set for launch

imgres It's been a good three years for my pet (theoretical) allocation of shares into dollar-exposed industrials. But the good times are only just beginning according to UBS today: Rising Bond Yields & Falling A$ - Reversing The 2014 Trend Investors have been confounded for much of this year by the unexpected resilience of the A$ and the unexpected fall in bond yields. However, some cracks have appeared in the last few weeks with the A$ falling and bond yields rising. We examine the potential impacts on relative stock and sector performance. Yield-Heavy Market Still Looks Vulnerable We think...
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Will the Scots or won’t the Scots?

images I can't say I have much more than a passing interest in Scottish independence despite some tartan heritage but no doubt some of you are of a different mind so here's a thread down the noo for  a wee doch and dorris. Will they take their...
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Deleveraging moves to China

imgres Yesterday I described some of the reasons why the People's Bank of China cash injection into banks was not stimulus, in part because declining credit demand is a part of the ongoing adjustment. The WSJ runs with that today: China's central bank so far has failed to lift the world's second-largest economy out of its doldrums, and that is in part because of businesspeople like Li Jun. ..."Banks are willing to lend to me, but I'm borrowing less because I'm not expanding my business that much," said Mr. Li, chairman of Jiangsu Haihao Agriculture Development Co. "The market is not looking good,...
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Will a falling AUD curb the population ponzi?

ScreenHunter_277 Nov. 14 12.57 By Leith van Onselen Rob Burgess has written an interesting post today at Business Spectator, which contends that a falling Australian dollar would curb immigration into Australia by reducing the pay-off from earning Australian dollars and raising living costs: Australia has been a very attractive destination for skilled workers from around the world, including developed nations such as the UK and US. Recruiting in such markets relies on several factors, but key among them is the ‘lifestyle’ that temporary migrants will enjoy and the remuneration paid in sky-high Australian...
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Why are governments so deluded about commodity prices?

Schlaegel_und_Eisen_nach_DIN_21800.svg One the more enduring features of the post-GFC political economy is the delusion that has taken hold our political elite when it comes to the usefulness of commodities. We have just sailed through an era when our macro managers decided it was a good idea to increase via strucutral adjustment  Australia's external exposure to volatile commodity prices. The hallmark of the same era was faith in endless Chinese demand that has now dried up and blown away like doggy dirt dried up in the sun. Time and again we are seeing forecasts for crucial commodity inputs into national welfare that don't bear...
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Who’d want to be an engineer right now?

ScreenHunter_05 May. 15 10.45 By Leith van Onselen If I was to pick a skilled occupation to avoid right now, it would be engineering. My Father and brother-in laws are both engineers working in mining-related areas. And through them, I also know a bunch of other engineers. For the past decade I have watched with amazement as their work boomed and huge pay rises flowed as the biggest commodity price and mining investment boom since Federation arrived on our shores. The story today has changed immensely. Engineering design work has all but dried-up. There's still construction and maintenance work, but these too are...
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Australian dollar murdered as taper tantrum 2.0 is go

imgres Taper tantrum 2.0 is go and it is aimed straight at Australia. As I write the dollar has been crushed 1.5% to 89.5 cents. Awesome. We are not alone. The US dollar is triumphant, roaring towards a 5 year high: Gold is sinking towards a retest of its post-GFC low: All emerging market currencies are taking it in the neck but none is out-plunging the South Pacific peso: And against developed nation currencies it's bombs away for the Aussie (though we have a lot of catching up to do):   So, what's the cause? The Fed meeting last night retained much of its dovish...
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Daily LNG price update (well, not every day…)

ghjet Today I'm launching another regular post to cover LNG prices and major developments. I'll provide the Japan/Korea LNG marker one month swap as a guide to spot pricing. It only moves a couple of times per month so it won't be every day but I do expect that as global price convergence advances so will more dynamic pricing. Here it is today at $14.7ommBtu: Prices are recovery entering the North Asian winter but are still down 10% year on year and on the long term chart you can see how unusual the recent price crash was: It appears likely that we'll see a lower high this winter and with...
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Daily iron ore price update (Aurongzon)

anvil Here are the iron ore ore charts for September 17, 2014: Paper is stalled and physical bleeding. CISA major steel mills output data for early September rebounded from the August crash. That's a good news bad news story. Demand worries can ease a little but steel pricing pressure will resume. Texture from Reuters: A surge in Chinese spot steel prices over the weekend helped fuel iron ore's surge on Monday. But prices have since retreated, with billet in China's key Tangshan area dropping 20 yuan a tonne on Tuesday, "fast removing the fragile industry confidence that had been building...
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China’s unhappy real estate of affairs

images101-200x20011 Cross-posted from Investing in Chinese Stocks. SOCAM SLASHES CHENGDU PRICES BY 30% IN SCRAMBLE FOR CASH Socam Development, an affiliate of Shui On Land cut prices by 30 percent at a housing project in central Chengdu last week as the troubled real estate company struggles against slumping sales and falling prices. YUEXIU PROPERTY PLANS $495M RIGHTS ISSUE IN CHINA CASH CRUNCH Yuexiu Property announced last week that it plans a HK$3.84 billion ($495 million) rights issue, becoming the second major Chinese real estate developer in a week to turn to the equity markets as slowing home sales...
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Links 18 September 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Why the media loves calls for a market crash - Above the Market The buyback boom is slowing - Pragmatic Capitalism How is the Global Market Index doing? - Capital Spectator Peter Thiel on diversification - Reading the Markets North America: Key measures show low inflation - Calculated Risk Fed renews zero rate pledge, but hints at steeper rate hike path - Reuters Fed keeps ‘considerable time’ guidance - Financial Times Business Cycle Index points towards steady growth - The Big Picture U.S. considering options if oil export ban...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets Asia has been fairly subdued, which is expected given the magnitude of the overnight risk event, although the same can’t be said for the ASX 200 which has been sold off fairly aggressively . The reaction in US trade to the speculation that the People’s Bank of China was planning to inject RMB500 billion (US$84 billion) into the five largest commercial banks may have been initially met with good buying in bloc currencies, copper and A50 futures, however Asia-based traders have been more measured. There will be an increase in base money...
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Thermal coal damage looks real

Capture From ANZ: A general restriction which applies to all coal limits ash content to 40% and sulphur to 3%, with more rigorous conditions according to energy content and coals which travel beyond 600km from either port or mine. Lignite consumed within the 600km threshold will need to have ash below 30% and sulphur below 1.5%. The document also spells out limits on other chemical content such as mercury, arsenic, and chlorine. Coal which travels beyond 600km across the mainland will need to meet more stringentconditions – ash content can be no greater than 20% and sulphur no more than 1%. On...
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