Westpac sees rising inflation

ScreenHunter_30 Sep. 19 10.36 Westpac has released its March quarter consumer price index (CPI) forecasts, with the bank seeing inflation edging-up to a headline 0.9% QoQ/3.2% YoY (from 0.8% QoQ/ 2.7% YoY) and an underlying 0.7% QoQ/ 2.8% YoY (from 0.9% QoQ/ 2.6% YoY): Our Q1 headline CPI forecast is 0.9%qtr/3.2%yr. Core inflation, as measured by the average of the trimmed mean and weighted median, is forecast to rise by 0.7%qtr/2.8%yr. March is traditionally a seasonally strong month and has historically been worth about +0.2ppts on the CPI. We see this seasonality again this quarter which is part of the reason for the...
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Asia’s richest man dumps China assets

imgres From Sovereign Man: Here’s a guy you want to bet on– Li Ka-Shing. Li is reportedly the richest person in Asia with a net worth well in excess of $30 billion, much of which he made being a shrewd property investor. Li Ka-Shing was investing in mainland China back in the early 90s, way back before it became the trendy thing to do. Now, Li wants out of China. All of it. Since August of last year, he’s dumped billions of dollars worth of his Chinese holdings. The latest is the $928 million sale of the Pacific Place shopping center in Beijing– this deal was inked just days ago. Once...
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Super Janet saves high-beta

IPMar2014 (1) Last night's US saw some mediocre data but it was overshadowed by Janet Yellen and the return of uber-dovishess. It's no wonder stocks, and high-beta in particular, roared back above 1%. On the data front, it was a night of hits and misses. There was a firm Fed beige book and industrial production sprang out of winter even as it slowed (all charts from Calculated Risk): Industrial production increased 0.7 percent in March after having advanced 1.2 percent in February. The rise in February was higher than previously reported primarily because of stronger gains for durable goods manufacturing and...
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Why tax deductible childcare is a bad idea

ScreenHunter_2006 Apr. 10 10.24 By Leith van Onselen The Australian's Particia Karvelas has produced a good article today explaining why making childcare tax deductible and removing the $7,500 cap, as proposed by several submissions to the Productivity Commission inquiry into childcare, would be a bad deal for lower-to-middle income families: The chief executive of advocacy group Early Childhood Australia, Samantha Page, says the “regressive” measure being considered would impact heavily on low-income families and should be ruled out... ECA’s analysis shows that all families would lose from tax­deductibility,...
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Daily iron ore price update (FMG fire sale)

trebtr Here are the iron ore charts for April 16, 2014: And so the paper market weakness rolls on. None of these charts look especially comforting and may all be forming head and shoulders top patterns. Rebar futures fell sharply too. In physical it's increasingly as bad with the rebar recovering stalling and the Baltic Dry capezise component crashing 6.5%. Basically, the restock is over, supply is abundant, demand mediocre and the prospects of greater stimulus slim. Not a very nice combination. I will draw attention to the last few days of major iron ore miner production reports and...
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Highrise Harry to sell-out to Chinese?

ScreenHunter_19 May. 16 15.12 By Leith van Onselen "Highrise Harry" Triguboff is reportedly considering selling Meriton Apartment's development business to a Chinese developer, in a deal that would net him close to $3 billion. From The AFR: Triguboff told AFR Weekend he re­ceived an offer for his business on a trip to China two weeks ago from the owner of a property developer that builds 200,000 dwellings there annually... “It is very early stages, but I could be prepared to sell the development part of the business and then the family could continue to collect the rent on the units I already own"... He [the...
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Apartment construction booms

ScreenHunter_06 May. 06 09.27 By Leith van Onselen Yesterday's dwelling construction data, released by the ABS, revealed a fall in actual completions over the December quarter, but a big pick-up dwelling commencements, which are following approvals upwards. The below chart, presented below in rolling annual terms, summarises the situation well, with approvals and commencements finally beginning to catch-up to the recent strong population growth, with actual completions set to follow later this year: What is most interesting about the current cyclical upswing in housing construction is the extent to which it is...
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Melbourne’s rental market tightens

ScreenHunter_02 Apr. 09 08.45 By Leith van Onselen SQM Research has released rental vacancies data for March, which revealed a 0.1% monthly fall in the national vacancy rate to 2.0%. Year on year, vacancies are also down 0.1%, bucking the trend for the first time in several months where we have witnessed a loosening of vacancies when compared to the corresponding period of the previous year: According to SQM: Melbourne’s vacancy rate continues to tumble, now currently recorded at 2.1% - a figure it has not reached since September 2010. The capital city recorded both the largest monthly decline (0.3 percentage...
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Asia’s growing importance in the global economy

ScreenHunter_02 Jun. 20 09.39 Cross-posted from Tom Conley at the Big P Political Economy Asia's rise has been Australia's economic gain. The rise of Japan, followed by South Korea and Taiwan, Singapore, Malaysia, Thailand and other non-communist countries of Southeast Asia had provided significant export markets for Australian commodities, though not a sustained structural increase in their value. Then along came China, changing everything. Not only did rapid Chinese demand increase the prices Australia received for its exports, but also Chinese manufacturing production helped to decrease the price of Australian imports....
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Links 17 April 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets: What Drives the Complexity and Speed of our Markets? - SEC Watch new documentary: "Bitcoin Uprising" - CNBC Bitcoin Creator ‘Satoshi Nakamoto’ Unmasked–Again? - Wall Street Journal The problems of HFT - Reuters North America: Obama, Michigan in talks to free up $100M to aid Detroit pension deal - Freep.com Housing Starts at 946 Thousand Annual Rate in March - Calculated Risk Construction vs manufacturing re(-re)visited, and the US labour market - Financial Times Tight Job Market in U.S. Cities Prompts Higher Pay - Bloomberg Yellen says QE...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets Asia has shown less caution to Ukraine concerns than Europe, with big volatility seen in DAX futures. The market is still keen to watch developments here, with operations underway to regain Ukrainian facilities, with various sources suggesting that Russian Special Forces have been aiding the separatists. The interesting dynamic was a collapse in the gold price, but a heavy bid in German bunds, with the 10-year trading down to 1.47% and the lowest level since May 2013. Revisions to the March eurozone inflation print are due today, however it is...
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Bassanese: Small city bubbles will save big

imgres David Bassanese has a questionable analysis of house prices this afternoon: As should be clear, house price cycles have differed across states. Relative to average weekly earnings per worker in each state, the peak in Sydney house prices came in 2003, followed by peaks in Hobart, Brisbane and Perth just before the financial crisis in late 2007. Melbourne and Darwin’s peaks did not come until 2010. All up, interest rate driven cycles have tended to be led by Sydney – to be then followed by other States. The resource boom has added an extra dynamic to price trends in Perth, Brisbane and...
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Japanese fund to buy Australian dollars

images From Bloomie: Japan's second-biggest bond fund is looking to buy the Australian dollar on dips, predicting a slowdown in China won't derail the global recovery...Kokusai Asset Management Co. had 1 percent of its Global Sovereign Open Fund invested in Aussie-denominated assets on April 10, down from 4.5 percent at the end of September, data on the company's website show. Kokusai is looking to add to its Aussie holdings and is increasing its investments in New Zealand debt. "We don't think risks in China will have a long-term impact on the global economy," Masataka Horii, who runs the 1.18...
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Kohler laments Australia’s expensive land

ScreenHunter_18 Jul. 05 10.22 By Leith van Onselen Alan Kohler has published a good post today at Business Spectator warning that increasing credit availability, brought about partly from the resurgence in securitisation, is combining with Australia's constipated land use/planning system to raise house prices, to the detriment of younger Australians: We are seeing two quite different markets being mixed together: one for credit that is active and plentiful (call this one nitro) and one for land that is short (call it glycerin)... There simply isn’t enough land being released in Australia to match either the demand for...
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Phat Dragon on the Chinese slowing

china Fresh from Westpac's Phat Dragon and check out that chart. It looks to me like an economy very quickly going "ex-growth": Looking at the breakdown of real activity from the production side of the accounts, primary output decelerated (3.5%ytd from 4.0%ytd in Q4) while both secondary (7.30%ytd from 7.85%ytd in Q4) and tertiary activity (7.8%ytd from 8.27%ytd in Q4) shed altitude. Tertiary activity growth had been very stable through 2013, despite considerable volatility in the business surveys. The somewhat abrupt Q1 adjustment remedies that historical lack of movement to some extent in a levels...
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Big coal buries itself on Twitter

BlLeQQaCUAEl3ui Earlier this week I noted that a great coal whinge had begun in the mainstream media and now it is clear why. From Crikey: When the brains behind the Minerals Council launched an advertising campaign to defeat Labor's mining tax, they nailed it. The tax was gutted, and the PM who dared propose it -- Kevin Rudd -- lost his job. Miners spent $22 million on the ads and saved billions in tax they never had to pay. Now the Minerals Council has a new multimillion-dollar ad campaign, this one to defend the coal industry. But "Australians for Coal" doesn't seem destined for the success of the...
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Is employment the real stimulus trigger in China?

shibor Ever since Chinese authorities committed to higher growth earlier this year, they've largely backtracked and fudged by emphasising quality over quantity, as well as the importance of the labour market over headline growth. Premier Li Keqiang has said China can tolerate lower growth as long as employment figures are solid. Today the Chinese National Bureau of Statistics did so again. From MNI: The government's response to this report is the key question for investors. Premier Li Keqiang said last week that his government won't respond to short-term economic volatility with major stimulus measures....
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Bye bye Barry

images Excerpted from Crikey's Bernard Keane: For three years Barry O'Farrell has been an excellent premier of a state that desperately needed both good government and an end to the blatant corruption that became a feature of New South Wales Labor's last years in power. Like any politician, he was not above compromise and deal-making -- his pandering to Legislative Council crossbenchers like the Shooters Party and Fred Nile was faintly sordid. The circumstances in which James Packer was given his way on Barangaroo -- enabled by both O'Farrell and Labor -- leave a particularly unpleasant taste in the...
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The pharmacy racket must end

ScreenHunter_2078 Apr. 16 12.28 By Leith van Onselen  The Australian's Janet Albrechtsen has written a cracking article today attacking the Abbott Government for refusing to free-up competition in the pharmacy industry, which she argues is one of the nation's biggest entitlement racket: So here we are again. A Coalition government is back in Canberra, with the same union-busting, free-market messages in addition to one heck of a new target — ending the age of entitlement. Yet, in a case of deja vu, one union behind one industry in Australia has done a clever job of removing itself from the dartboard of reform... [The]...
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FMG misses big on production

search Fortescue's March production report is out is clearly the worst of the big three: Completion of US$9.2 billion expansion of port, rail and mining operations to achieve production capacity of 155mtpa. • The 40mtpa Kings Valley project was opened in March 2014 following commissioning of the ore processing facility (OPF) which was constructed in record time, taking only 179 days from assembly of first steel to completion. • Achieved targeted 155 million tonne (mt) per annum annualised rate during March 2014. • Record shipments of 31.5mt achieved in the March 2014 quarter, lifting financial...
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Chinese growth is falling fast

china-slow-down-red-flag-sign China has released its combined Q1 GDP and March data today and, again, it's weakened. GDP fell sharply to 1.4% for the quarter and  7.4% for the year versus 7.3% expected: For March data, industrial production fell  to  8.8% versus 9% expected: Fixed asset investment was bashed lower to  17.6% versus 18% expected: Finally, chalk one up for rebalancing with retail sales coming in at 12.1%, as expected. If you annualise that quarterly figure you get 5.6%! The upshot is that China needs some non-stimulus quickly to prevent growth falling well below 7%. The dollar popped 40...
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Dwelling completions fell in Q4

ScreenHunter_01 Mar. 03 22.48 By Leith van Onselen The ABS has just released dwelling completions data for the December quarter, which registered a 2.0% seasonally-adjusted fall in the total number of dwellings completed over the quarter, with the 3.3% rise in detached house construction more than offset by a 9.9% slump in unit & apartment construction (see next chart). The decline in dwelling completions nationally was driven by a big 10.9% fall in Victoria, where unit & apartment construction slumped by 21.3% and house construction fell by a more moderate 1.3%. The fall in Victoria more than offset increases...
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Chinese developer forecasts collapse

4cc59bb27434a63 Cross-posted from Investing in Chinese Stocks: The string of bad housing news out of Zhejiang province keeps on going. This is a paper napkin story: the situation is so bad that an executive can calculate disaster by adding up all the area under construction and dividing it by the population. Selected portions of this Google Translated article follows. (cleaned up in parts to convey meaning) 浙江海宁1.6万套库存压顶消化需8年 房企称就要崩盘 Similar to the recent housing crisis broke in Yuyao, the same as the Chinese economy Haining county, in 2013 Haining ranked No. 21 in...
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Housing sentiment lifts on record foreign demand

ScreenHunter_05 Jul. 07 22.22 By Leith van Onselen NAB has released its Australian Residential Property Survey for the March quarter of 2014, which revealed a small rise in sentiment nationally amongst property professionals, with house price expectations also strengthening is all states except Victoria. Concerns about rising interest rates are starting to rise, whereas employment security continues to be viewed as the biggest impediment to buying property in most states. The Survey also found that foreign buyers were significantly more active in both the new and established property market, accounting for a record...
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McAleese warns again

images Aside from the anti-Midas touch of Mark Rowsthorn, this is worth noting because McAleese's difficulties appear to go to demand as much as ineptitude: The McAleese Group, owner of Cootes Transport, has issued its second profit warning in two months, saying trading in the March quarter has been more difficult than expected due to safety breaches and falling demand for its heavy haulage services. The wholesale sector has been consistently more weak than other sectors in the NAB survey over recent months and has suggested the underbelly of the cyclical bounce was soft. This may also be the result of...
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Leading Index stuck sub-trend

refvaes From Westpac: The six month annualised deviation from trend growth rate of the Westpac Melbourne Institute Leading Index which indicates the likely pace of economic growth three to nine months into the future rose from –0.15% in February to –0.09% in March. Read...
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Barry O’Farrell resigns over Obeid gratuity

images NSW Premier Barry O'Farrell has resigned after a handwritten note  in which the premier thanked the head of a company linked to Eddie Obeid for a $3000 bottle of wine was tendered to the Obeid ICAC inquiry. The wine was sent during negotiations for a $1 billion government contract with Australian Water Holdings. O'Farrell had previously denied any such gratuity. Here's the note he could not recall: Not looking too good Arthur Sinodinos...
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Why incomes will bear the brunt of rising taxes

ScreenHunter_1797 Mar. 25 08.08 By Leith van Onselen The Australian has published a neat article today citing Parliamentary Budget Office (PBO) analysis warning of big rises in personal income taxes unless the Government embarks on widespread tax reform: PERSONAL income tax is the only prospective source of revenue growth for the federal government, with all other major taxes either falling or about to fall. ...company tax has come off its record high while other important sources of tax revenue including superannuation, fringe benefits and consumption taxes all look weak... “In the absence of explicit government...
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BHP iron ore production beats

images BHP has shown up Rio's thin weather excuse yesterday with boom quarter of iron ore production on good weather and annual output upgrade: BHP Billiton maintained strong momentum in the nine months ended March 2014 with record production achieved for four commodities and at 10 operations. Strong operating performance throughout the period, the relatively limited impact of the wet season and the continued ramp-up of Jimblebar underpinned record production at Western Australia Iron Ore of 163 million tonnes (100% basis). Full-year production guidance has been raised by a further five million...
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Coalition should tread carefully in Medicare rejig

ScreenHunter_2066 Apr. 16 08.37 By Leith van Onselen The AFR is reporting today that Health Minister, Peter Dutton, is planning major changes to Medicare in order to reign-in costs, including introducing a co-payment on GP and emergency hospital services, as well as introducing "private sector efficiencies" into the public hospital system and greater private health insurance involvement in chronically ill care: Mr Dutton says private sector efficiencies must be introduced in the public hospital system, the primary care system needs to be improved, and private health insurers should be involved in the care of chronically ill...
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US bond flattening rolls on

images   Last night's market action saw a decent bounce in stocks with the S&P up 12 points. However, the more important action was in bond markets which, despite the rise in stocks, remained strongly bid and again threatened to break yields down to new lows. Data for the night was modestly positive. The NAHB Builder Confidence Index rose slightly to 47, the Empire State manufacturing index fell slightly to 1.5 points and inflation data rose slightly (all charts from Calculated Risk): The upshot for bonds was that at the short end yields rose 1% on the two and five year and both...
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Coalition embraces the grey gouge

ScreenHunter_90 Oct. 24 08.28 By Leith van Onselen The Coalition's vow to "end the age of entitlement" has taken a serious hit, with Prime Minister Abbott seemingly ruling-out making changes to Aged Pension arrangements until after the next federal election. From The Australian: “If there is one lesson to be learned from the political quagmire that the former government got itself into, it is: keep your commitments. So we will keep them,’’ Mr Abbott said. “But one of the most fun­damental commitments of all was to get the budget back under control, to put the budget back on to a path to a sustainable...
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The Chinese pain you must position for

sdfvdsv Capital Economics has produced a little note on China with which I entirely agree. It examines the slowing growth base case, as well as very plausible Chinese hard landing scenarios if reform has a little accident on the way. China’s changing growth model Before getting into what a hard-landing would look like, it is important to stress that this is not how we see things playing out. We expect growth in China to ease over the coming quarters, as policymakers try to strike the right balance between structural reform and supporting short-term growth. Slower growth that is less reliant on...
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China’s local government bubble exposure

china-slow-down-red-flag-sign Cross-posted from Investing in Chinese Stocks. China Economic Weekly (中国经济周刊) and China Economic Research Institute (中国经济研究院)teamed up to study China's 23 provinces' exposure to land prices. Zhejiang topped the list as most exposed. First some background. China $3 trillion local government debt stirs alarm Analysts said this suggested China is not on a verge of a fiscal crisis - the figure is less than half the debt burdens in Japan and Greece where public finances are strained - but warned the world's second-biggest economy needed to urgently reduce debt...
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Ukraine battles begin

search From Bloomie: Ukraine unleashed an offensive to dislodge militants from cities in the eastern Donetsk region as authorities in the capital Kiev said Russian special forces were identified among the anti-government groups. From four to 11 militants were killed and two wounded when Ukrainian troops stormed an airfield in Kramatorsk, taking it under control, Russian state television reported...The government in Kiev is taking the battle to the restive east of the country after armed pro-Russian activists occupied administrative buildings in cities including Donetsk, a regional center about 100...
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