ASX at the close

ScreenHunter_31-Jun.-04-16.423-200x200 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets Asia has managed to edge higher despite limited leads from overnight trade, with the US closed and Europe mostly sidelined. The Nikkei has taken off in Asian trade in a move triggered by a USD/JPY breakout. USD/JPY traded through August highs and seems to be heading towards January highs. The pair topped out at 105.44 in January and traders are likely to be eyeing this level in the near term. This move in USD/JPY seems to have triggered greenback strength across the board as risk currencies are also losing ground to the USD. With...
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A perfectly useless gas debate

imgres Former Labor stalwarts Greg Combet and Craig Emerson appear at Gina's iron ore newsletter today to mount another empty argument about gas: Without urgent new coal seam gas development in NSW the state’s industrial gas users will face uncertain supply and price volatility during peak usage periods from 2016. Gas-intensive manufacturing is already migrating from Australia to the United States to take advantage of cheap American shale gas. Supply uncertainty in NSW, combined with sharp price rises associated with the development of LNG export facilities at Gladstone, would cause plant closures and...
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Bill Evans on the RBA

SMARTI INVESTOR 6TH August 2013  photo by louise kennerley Bill Evans Wespac As expected the Reserve Bank Board decided to leave the cash rate unchanged at 2.50%. In the Governor’s statement he retained the key sentence “on present indications, the most prudent course is likely to be a period of stability in interest rates”. Surprisingly they changed the wording around the Australian dollar although the sentiment remains the same. Instead of describing the AUD as “high by historical standards” it is now described as “remains above most estimates of its fundamental value”. This description sits better with those of us who have observed the sharp fall in iron...
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A textbook case for broad-based land taxes

ScreenHunter_30 Jul. 02 10.28 By Leith van Onselen The Age is running an article today on how developers are buying up sites around Melbourne and flipping them for huge profits once development approval has been obtained from the planning minister: Flipping has long been a part of Melbourne's property industry, but the surge in skyscraper approvals in recent years has dramatically multiplied the worth of development sites in the CBD if they can be sold with an approved permit. Equiset bought 464 Collins Street last May for $10.5 million, and immediately began plans for a 55-level apartment tower on the tiny site, known...
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Joye bashes bubble again

image005 Nothing new but here you...
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Terms of trade hammered

dgeq From today's Balance of Payments release, the terms of trade fell 4% in the June quarter: Nominal growth is likely to be negative in Q2 national accounts. Income will be very interesting given wages were surprisingly firm yesterday but the ToT got whacked. This will hurt the Budget by year...
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RBA holds

images No surprises: At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent. Growth in the global economy is continuing at a moderate pace. China's growth remains generally in line with policymakers' objectives, with weakening property markets a challenge in the near term. Commodity prices in historical terms remain high, but some of those important to Australia have declined this year. Financial conditions overall remain very accommodative. Long-term interest rates and risk spreads remain very low. Volatility in many financial prices is currently unusually low....
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Mining tax goes, Budget hit

imgres From Gina's iron ore newsletter, the mining tax is gone courtesy of Clive Palmer: As a compromise, it will slow down dramatically the phasing up of the superannuation guarantee towards 12 per cent...It will keep the school-kids bonus until December 31, 2016 – although means-tested at a threshold of $100,000 – the income support bonus until the same date, and the low-income super contribution until June 30, 2017. The other five measures will be abolished immediately. These are axing loss-carry back provisions for small business, reducing the instant asset write-off threshold from $5,000 to...
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More sell side iron ore myopia

imgres From Gina's iron ore newsletter today: JPMorgan argues the focus on this deal risks over-shadowing one of the mining giant’s most important recent developments, its expanded iron ore production in Western Australia. ...Although JPMorgan has not lifted its rating on the stock, it has outlined a bullish scenario for the company’s WA iron ore business, calculating total export volumes could soar to 310 million tonnes per annum (Mtpa). ...The bank is also impressed by the potential returns from the US$3.2 billion expansion, pointing out that the internal rate of return (IRR) is likely to rise...
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Miners fall as iron ore futures bounce

dfgwr Today's midday iron ore update is an interesting turn of events. Junior miners are down today and I've added BCI given I can't really ignore it's ongoing crash: The majors are down too: And the idiocy spread is beginning to close: What's interesting is that Dalian iron ore futures are up 3 points today but rebar futures are taking a shellacking,  down 20 points. We're pricing off steel futures today, quite...
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Moody’s warns on growing bank wholesale debt

dfgwe The great flaw in Australia's economic model has Moody's exercised today: Data from the Australian Prudential Regulation Authority (APRA) highlights the trend that bank loans in Australia started to rise faster than deposits during 1H2014. As a result, banks could be pressured to increase their use of wholesale funding, a development which we would view as a key credit sensitivity for the Australian banking system. That said, any increased exposure to the wholesale funding markets is likely to be partly offset by higher holdings of liquid assets and improvements to maturity structures, supported by...
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Dwelling approvals lifted in July

ScreenHunter_01 Mar. 03 22.48 By Leith van Onselen The Australian Bureau of Statistics (ABS) has released dwelling approvals data for the month of July. At the national level, the number of dwelling approvals rose by a seasonally adjusted 2.5% to 16,318. The overall increase was broad-based, with the volatile unit and apartment segment rising by 5.9% and the more stable house approvals segment increasing by 1.4%. The result beat analysts’ expectations, who had expected a 1.7% rise in approvals over the month. In the year to July 2014, dwelling approvals rose by a seasonally-adjusted 9.4%, with house approvals up by...
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More mixed GDP partials

imgres More GDP partials out this morning from the ABS. Net exports is in worse than expected at-0.9%: The current account deficit, seasonally adjusted, rose $5,938m (76%) to $13,742m in the June quarter 2014. There was a turnaround of $7,258m on the balance of goods and services, resulting in a deficit of $4,691m in the June quarter 2014. The primary income deficit fell $1,275m (13%) to $8,605m. In seasonally adjusted chain volume terms, the surplus on goods and services fell $3,624m (25%) from $14,281m in the March quarter 2014 to $10,657m in the June quarter 2014. This is expected to detract...
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Roy Hill to ship early?

imgres Gina's newsletter may not report iron ore price collapses but the prospect of early shipments form Roy Hill makes a headline: “Roy Hill’s staff morale is high, and the hardworking team hope to be able to bring the first shipment due September 2015, ahead of time”, Mrs Rinehart said. The optimistic comments come despite the main engineering and construction contractor, Samsung C&T, winning a 46 day extension to its contract earlier this year. That rather suggests being behind...
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Why Australia’s governments are addicted to consultants

ScreenHunter_3957 Sep. 02 10.36 By Leith van Onselen The Australian's Adam Creighton has written an article today on the huge surge in the use of consultants, which is second only to the United Kingdom: AUSTRALIA has the second highest usage of consultants in the world, relative to GDP... Australian businesses and governments spent a total of more than $US4.2 billion ($4.5bn) on consultants last year — up 2 per cent from 2012 and ahead of an ­expected 5 per cent rise this year. This put Australia second only to Britain in the use of consultants, after allowing for gross domestic product, according to a survey to be...
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Beijing mulls iron ore pricing revenge

images From The Australian: ...BHP’s China boss, Chai Tan, met Chinese industry officials last week to update them on BHP’s proposed demerger, among other issues. After the meeting the National Development and Reform Commission issued a statement which raised the issue of iron ore prices...According to the report from newsagency PaRR, the department told BHP executives that “BHP and other iron ore suppliers should avoid abusing dominant market positions” and that there should be “a new pricing model” in the global iron ore market. Chai Tan met NDRC deputy inspector Li Zhong...
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AFG crocodile tears as FHBs collapse

ScreenHunter_30 Aug. 27 15.36 We'll have a full wrap on the latest AFG results tomorrow but today it's worth noting the tone of empathy in the press release: Fewer mortgages were arranged for first home buyers last month than at any time in the  past four years according to AFG, Australia’s largest mortgage broker. AFG Mortgage Index  shows that loans for first home buyers comprised only 9.5% of all mortgages processed in  August – the lowest such figure since June 2010. Of the total $3.9 billion of home loans  processed by the company, $324 million were for first home buyers. This contrasts sharply  with the $1.5...
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ANZ-RM consumer confidence falls

ScreenHunter_20 Apr. 10 19.28 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index fell marginally in the week ended 31 August, decreasing by 0.9 points (0.8%) to 112.6, taking it just below its long-run average reading of 113.2 (see next chart). This week's fall was driven by a 5.5% fall in household perceptions about their ‘financial situation compared to a year ago’ The below chart plots the most recent Westpac-Melbourne Institute Consumer Sentiment index against the ANZ-RM Consumer Confidence...
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Moody’s warns on investor mortgage bubble

dfgwrq From Moody's Credit Outlook: Last Tuesday, the Australian Prudential Regulation Authority (APRA) released its latest statistics on Australian authorized deposit-taking institutions’ (ADIs) exposure to residential property, which showed an increase in the proportion of higher-risk loans underwritten by Australian banks, including investment loans, interest-only (IO) loans and loans written outside normal serviceability criteria. The increase in higher-risk lending is credit negative for Australian banks because it weakens the credit quality of their portfolios. APRA’s data show three notable...
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Stock on market rebounded in August

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen SQM Research has released its stock-on-market figures for the month of August, which revealed a 3.8% seasonal rebound in the number of for sale listings over the month, although total listings are still 2.1% below August 2013 (see below table). According to SQM: Of particular growing importance [in these results], is the narrowing difference in the yearly decrease of stock on market, where an ongoing trend has now become evident. Indeed we are not seeing the large drop in stock levels year on year, as we were at approximately this time last year, when the market...
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What’s the the hit to iron ore miner profits?

gwreg Here's my chart of the quarterly average of the iron ore price (updated to September quarter to date): Major miners prices earned tend to follow this chart with a lag as contracts catch up. For instance, the last quarter saw Rio and BHP enjoy a $106 per tonne average rate, a little above the average price at $102. The current quarter average so far is $94. For some notion of what this will do to profits, here is UBS: Diversifieds: All else remaining equal, our BHP & RIO earnings estimates for CY 15  would be -5% and -13% (prev. -11% and -9%) respectively under a spot scenario....
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McGrath contradicts self on Chinese property boom

imgres By Leith van Onselen John McGrath from McGrath Real Estate has hit back at claims made yesterday by buyers’ agent, David Morrell, that "real estate agents and property lawyers are willingly helping foreign investors to illegally buy prestige homes in Melbourne and Sydney" and that this was "causing a domino effect" in the local market and helping to price-out locals. From The AFR: Prominent Sydney estate agent John McGrath says he hasn’t seen Asian buyers rorting foreign investment rules to buy blue-chip real estate. “I am not aware of any such practices,” said the founder and chief...
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D&B business expectations see boom, baby!

dfgwrew The Dun and Bradstreet business expectations index continues to trade in the Twilight Zone: Business earnings are expected to return to pre-GFC highs during the final three months of this year on the back of sustained levels of optimism and healthy sales forecasts, with retailers particularly upbeat about increasing their profits. According to Dun & Bradstreet’s latest Business Expectations Survey, the profits expectations index has lifted to 29.1 points, up from 19.9 in the last quarter and 21.1 last year. With 40 per cent of businesses anticipating higher profits during Q4 2014, compared to 11...
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Hockey’s super guarantee pause is good policy

ScreenHunter_3902 Aug. 22 15.25 By Leith van Onselen The Abbott Government has set to delay the planned increase in the superannuation guarantee - the amount that employers must contribute into employee's super accounts - by three years in a bid to ease pressures on the Budget. From Peter Martin: Superannuation contributions at present are set to climb from 9.5 per cent of salary to 12 per cent over the next five years. The Coalition wants to delay the next scheduled 0.5 percentage point increase for three years to ease pressure on the budget. Rushed through the House of Representatives on Monday as part of the mining tax...
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Daily iron ore market update (absolutely smashed)

anvil Here are the iron ore charts for September 1, 2014: Paper markets tanked, including rebar futures which are at new record lows. In physical, spot is at a new low for the move and just 50 cents above the post-2009 low. There's no contango any more and it's going to break. Worse, steel prices just keep falling indicating that the entire price deck is shunting lower with any rebound distant and likely very subdued. Texture from Platts: "The large international traders still have a lot of cargoes they have yet to sell off, and the medium and smaller ones don't dare to buy more because...
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