ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets We enter a new and crucial stage in the multi-year equity cyclical bull market, with the S&P 500 now commanding a two handle and showing little sign the bulls will let their grip slip. If you want to point to a negative from yesterday’s US cash session, it has to be the awful volumes, which were 30% below the 30-day average and 11.5% below the five-day average (on the S&P 500). If you believe it’s not always about getting from A to B in the markets, but the quality of the journey, then the recent volumes would be a concern. However,...
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S&P warns WA budget on iron ore

Travel-Warning From Standard and Poors this arvo: Standard & Poor's Ratings Services said today that its 'AA+/Stable/A-1+' issuer credit ratings on the State of Western Australia are not immediately affected by the recent fall in iron ore prices to less than US$90 per ton. The potential loss in the state's iron ore royalties would not by itself lead to a lowering of the ratings. We anticipate the Western Australian government's operating balance will remain in surplus after considering the potential earnings loss, at between 0% and 5% of operating revenues. At the same time, we project the state's...
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Hope persists for miners as iron ore futures fall

dfgwr You can't keep a good dead company down! Iron ore juniors and majors are mostly up today, even as Dalian iron ore futures fall 3 points to their Monday lows and rebar futures stall in China: The idiocy spread hasn't deteriorated much yet (remember these are one week moving averages) but remains at a record wide:   Clearly markets are still reckoning on a rebound soon. Some sort of Q4 restock will probably still come but at the current rate of decline in Chinese housing data it ain't going to be much chop. I remain of the view that equities are not sufficiently discounting this...
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China bank loans still slow into August

l8yfig-660x424 From Shanghai Securities News via Forexlive: The Big Four state-owned banks extended CNY131 billion in new loans in August through the 24th, up from CNY56 billion a week ago, unidentified sources said. Banks’ credit officials said some banks, especially small and medium-sized ones, are reluctant to lend due to concerns about rising non-performing loans A report by Shenyin Wanguo Securities said some banks have tightened lending approval to privately-owned enterprises and small business while smaller lenders have resumed mortgage lending as it carries fewer risks. The newspaper also said...
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NBN cost-benefit analysis signals end of an era

ScreenHunter_26 Aug. 27 14.14 Cross-posted from The Conversation: The long-awaited cost-benefit analysis of the National Broadband Network suggests the days of politicians shooting from the hip with taxpayer dollars are numbered. As Labor’s NBN unfolds amid reviews and revelations, it’s apparent the NBN was a political move based on romantic notions of policy-making ending in Labor’s electoral defeat in 2013. In government, the Coalition called for a strategic review of the NBN, revealing a number of problems with the project’s implementation. Malcolm Turnbull also promised to deliver an independent...
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Shock horror! Super funds are gouging members

ScreenHunter_25 Aug. 27 12.57 By Leith van Onselen Australian Super chief executive, Ian Silk, has bemoaned that the financial services industry is using the compulsory superannuation system to enrich themselves, rather than look after their members. From The AFR: As pressure grows on super funds to cut fees, Mr Silk on Tuesday warned there was a risk that savings from the funds becoming more efficient were not being passed on members. “The biggest concern as the superannuation sector grows is that the financial benefits from the economies of scale are being captured by the agents and not ordinary Australians,” Mr...
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Mining unwind drags construction activity down

ScreenHunter_03 Jul. 23 09.31 By Leith van Onselen The ABS has released data on the value of construction work done for the June quarter of 2014, which registered a seasonally-adjusted 1.2% fall in total construction activity over the quarter and a 0.6% decline over the year. The result disappointed analysts' expectations for a 0.5% fall over the quarter. The 1.2% quarterly decline in construction activity was driven entirely by a 3.1% fall in engineering construction, which more than offset the 2.2% rise in residential construction and the 0.5% increase in non-residential construction (-1.5%): Residential...
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Chinese consumer confidence frays

zdfgwe Fresh from Westpac: The Westpac MNI China Consumer Sentiment Indicator, hereafter the Westpac MNI China CSI, fell modestly to 113.3 in August from 114.8 in July, a –1.3% change over the month and –2.4% over the year. The August outcome is 6.8% below the long run average. The survey indicates that the anxieties gnawing away at the Chinese consumer through the first half of the year remain in evidence, and have arguably strengthened. We noted at the time of the July release that a head-to-head comparison with the manufacturing surveys implied that households were less impressed with...
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Labor’s NBN gold-plated

ScreenHunter_17 Aug. 27 10.44 By Leith van Onselen The Coalition's 196-page cost benefit review into the National Broadband Network (NBN) has been released and finds that Labor's plan for fibre-to-the-premises (FTTP) broadband is markedly ($16 billion) inferior to the Coalition's multi-technology mix (MTM) solution. The study compares four main scenarios: leaving things as they are with no further progress; an unsubsidised rollout of hybrid-fibre coaxial (HFC) and fibre to the node (FTTN); a full fibre to the premises (FTTP) rollout with wireless and satellite in high-cost areas; and a multi-technology mix...
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Big banks generously embrace competition

imgres From the AFR: Global rules forcing smaller banks to hold twice as much capital against mortgage lending as the big four is distorting home loan competition, The Australian Bankers Association has said. In its second submission to the Murray inquiry, the ABA argues the Australian Prudential Regulation Authority should recognise efforts by regional banks to improve their systems and reduce the amount of capital they must hold against mortgages. The major banks are deemed “advanced” by regulators as a result of their investment in information systems so are able to use their own...
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Lifting Chinese home puchase restrictions fails

.jbjb From BofAML's excellent David Cui: Housing market, still a key risk in 2H Many in the market expect housing sales volume to recover in 2H, helped by a loosening of home purchase restriction (HPR) and mortgage policy, among others...Our conclusion: it’s still debatable whether the removal will have any sustained impact on local volumes (on balance, probably not) but it’s reasonably clear to us that the impact nationally is weak at best. Soufun provides some weekly transaction volume data on 89 cites; of the 89, 45 had/have HPR; of the 45, 33 had loosened HPR in recent months; of the 33,...
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Abbott too slow to give ground on PPL

ScreenHunter_03 Jun. 26 21.56 By Leith van Onselen The AFR has revealed today that Prime Minister Tony Abbott has finally conceded to the Coalition party room that he needs to give ground on paid parental leave (PPL) if the policy is ever to come to fruition: Coalition MPs are predicting Tony Abbott will water down his paid parental leave scheme in order to salvage it after the Prime Minister confided with colleagues that more change to the policy should be expected... According to details of the conversation now circulating throughout the Coalition, Mr Abbott told the gathering “there’s been some water under the...
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Car industry’s job losses will be worse than forecast (members)

ScreenHunter_10 Mar. 29 12.46 By Leith van Onselen The Productivity Commission has released a new report on the closure of the car industry. It concludes: Australia's automotive manufacturing industry is undergoing significant change. Motor vehicle producers in Australia have not been able to survive in the highly competitive global and domestic automotive markets — Ford, Holden and Toyota have announced they will cease local manufacturing before the end of 2017. Component manufacturers face ongoing adjustment pressure and rationalisation. It is estimated that up to 40 000 people may lose their jobs as a result...
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How high for the S&P2000?

dfga Last night saw more Goldilocks US data. Case Shiller house prices are now rising at 6.2% in the 20 city index and will likely ease further into a soft landing. Durable goods orders went mad on a spike in aircraft orders for Boeing, up 22.6% in the month and roughly $50 billion above any previous peak!  Conference Board consumer confidence rose to the highest since late 2007. Gold and oil were flat, the US dollar firmed a touch, short end bonds were flat and the long end sold off a little. But all eyes are on the S&P500, which closed above 2000 points for the first time: How high can it...
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Bursting the banks’ “no bubble” bubble (members)

ScreenHunter_04 Apr. 15 22.05 By Leith van Onselen As noted yesterday afternoon by Houses & Holes, Australia's big four bank chief economists united for an interview with The AFR to declare that Australian housing is not a bubble. For a bit of fun, I thought that it was worth evaluating each of the banks' arguments to determine whether they hold water. First up is the ANZ's Warren Hogan: “Certainly no bubble,” said Mr Hogan. “The perceived expensiveness of our property market is as much as anything a social issue, affordability issues. We simply don’t have the speculative credit element there to describe...
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The politico-housing complex has turned on itself (members)

images Long term readers will recall that I see Australian property not as a "market" but a highly-distorted quango that has largely eaten the economy. Recall the 2011 post that laid out this view: When the baby-boomer generation first took power and reshaped Australia in the 1980s, the promise was for a new kind of meritocracy. The old “Australian Settlement” described brilliantly by Paul Kelly in the End of Certainty - a protectionist social contract between unions, industry, government and the people – was swept aside in favour of a neo-liberal vision. The new world demanded an open, more...
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Daily iron ore price update (2014 low) (members)

anvil Here are the iron ore price charts for August 26, 2014:   Paper markets rallied moderately, including rebar futures. Spot has formed a small contango with the 12 month swap, one signal that a reversal maybe at hand. However, it's tiny so not overly convincing. Prices of port stocks are rumoured to still be falling. The BDI cape is now reversing sharply. Steel First is reporting that both BHP and Rio have closed port berths for maintenance, which may be normal or playing silly-buggers. Reuters has texture: But China's raw iron ore output has continued to increase, with...
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LNG glut is now

imgres Reuters has great story telling you exactly where the global LNG glut is suddenly at: U.S. oil major Chevron is struggling to lock-in 20-year sales contracts for its Gorgon liquefied natural gas (LNG) export plant in Australia, the world's most expensive, as buyers spoiled for choice by new suppliers hold out for cheaper deals. ..."Buyers are being very cautious about firming up long-term import deals, especially since U.S. prices are undercutting Australian projects coming onstream around the same time," said a source at a large Asian LNG seller, who asked not to be named. ..."With the...
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China’s growth oxymoron

imgres Via FTAlphaville comes a question MB has asked many times. From UBS: To an extent, this gradual transition has already started, albeit at a very incremental pace. In the past few years, consumption has contributed more to GDP growth than investment, thanks in part to slower credit growth and cooler investment in both infrastructure and property. The official (under-estimated) consumption share of GDP has risen since 2011 to almost 50% last year, recovering to its pre-global financial crisis level and putting a stop to almost a full decade of decline. Of course, given that overall economic growth...
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Chinese developers slash and burn prices

images101-200x200 From the FT: In the latest sign of Chinese developers’ desperation to unload inventory into a weak property market, China Vanke Co is offering discounts of up to $325,000 to homebuyers who shop on Alibaba’s Taobao, an e-commerce platform. The country’s biggest developer will give discounts that match shoppers’ spending of up to Rmb2m ($325,000) on the eBay-like service. Homes in real estate developments in Beijing, Shanghai, Guangzhou and Chongqing, among other cities, will qualify, according to an advertisement on Taobao’s website. Developers began cutting prices this year but...
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Links 27 August 2014 (members)

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: 2008 Meltdown Was Worse Than Great Depression, Bernanke Says - Wall Street Journal OECD GDP growth up 0.4% in Q2 - OECD Never say never in the stock market - Brian Lund Successful investing is more about avoiding mistakes than anything else - ThinkAdvisor Pimco is going extend its active ETF business to equities - ETF Why are alternative asset mutual funds still so expensive?  - Morningstar North America: Where are we in the credit cycle? - Aleph Blog Case-Shiller house price growth slowing - Calculated Risk Blacks, Latinos Dominate...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets While US and European equities powered ahead, equities have been fairly mixed in Asia with some minor downside in play. The S&P topped 2000 for the first time and this is the headline that made the rounds. Driving sentiment across the globe at the moment are bets we will see further stimulus from some of the major central banks. As a result, bad data is likely to be taken as a positive for equities in the near term, particularly out of the US, Europe, Japan and to an extent China. Janet Yellen delivered a fairly...
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Losers riot over falling Chinese house prices

images101-200x200 Anyone that tracked the last downturn in Chinese property in 2011 will recall that riots broke out as developers discounted. It's begun again. From MarketWatch: In one case, scores of property owners surrounded a Shanghai sales office of Greentown China Holdings Ltd. 3900, +7.19% GTWCF, -33.19%  to protest the developer’s 25% cut to prices within a five-day period, according to a report on the NetEase NTES, +2.06%  news portal site 163.com. Protesters held banners with slogans such as “You cheated us!”... ...In the eastern city of Jinan, banner-carrying owners blocked a...
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Big bank economist’s unite in bubble denial

images Wow. The banks are spooked. At the AFR,  the economists of the big four banks have come together in a single voice: Australia’s four leading bank economists have a blunt message for Canberra: pass the budget or risk destroying already fragile consumer confidence. On the day Parliament resumed, with Treasurer Joe Hockey’s federal budget still up in the air, Bill Evans from Westpac, Alan Oster from National Australia Bank, Michael Blythe from Commonwealth Bank of Australia and Warren Hogan from ANZ found themselves in the same room at the same time and made it clear that a failure to...
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Come along to the 123rd Henry George dinner

ScreenHunter_10 Aug. 26 15.12 If you live in Melbourne, please consider attending the 123rd Henry George Commemorative dinner, hosted by Prosper Australia, on Wednesday 3 September at the Royal Society of Victoria, 8 Latrobe St, Melbourne. This year's guest speaker is Professor John Freebairn from Melbourne University, one of Australia’s most pre-eminent economists (and my first microeconomics lecturer). With the state election nearing, Professor Freebairn will be speaking on the reforms Victoria needs to keep on the move. Professor Freebairn holds the Ritchie Chair in Economics at the University of Melbourne, and has...
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