ASX at the close

ScreenHunter_31 Jun. 04 16.42 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets Equities continue to consolidate recent gains in Asia with some optimism we’ll see further action from key central banks. Global central bank action has been a key theme all year and it seems we’ll finish 2014 in exactly the same way we started. While Fed policy expectation continues to pop up everytime US data shows signs of faltering, the spotlight at the moment certainly seems to be on the ECB and the PBoC. The ECB has been increasingly vocal in recent weeks, as a sombre economic picture has forced it to consider buying...
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Poll: Should pollies disclose negatively geared property?

ScreenHunter_5190 Nov. 27 14.55 There's an online survey running over at Easy Poll asking whether "members of the Australian House of Representatives and Senate should be forced to disclose whether they own a negatively geared property?". The survey comes in the wake of revelations that Australia's federal members of parliament hold a combined $300 million property portfolio, creating clear conflicts in relation to housing policy. Go on, make your views known. The survey can be accessed...
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Brent/LNG crash to four year lows

dfge Markets have conclude that OPEC isn't going to cut and oil is falling out of bed: Taking LNG contract prices with it, now at $11.47mmBtu: $70 looks like the next support level. Energy stocks are getting creamed with BHP down 1.6% at $32, Santos down 3% at $11.62, Origin dropping 3.3% to $13.16, Woodside falling 2.3% at $38.64 and Oil Search down 2.3% at...
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Pascometer burns red on foreign property buyers

imgres30 Weeoo, weeoo, weoo. The counter-contrarian signal generator known as The Pascometer is screaming "sell" to foreign property buyers: After all the hearings and submissions, the House of Representatives Economics Committee Report on Foreign Investment in Residential Real Estate boils down to this sentence on page 86: "Conflicting evidence has been received by this inquiry, although on balance it is the committee's view that the benefits of foreign investment outweigh the negatives." ...There is a need for politicians to be seen to be doing something about "barbeque stopper" issues, particularly...
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Chaos overtakes $7 medical co-payment

ScreenHunter_5189 Nov. 27 13.57 By Leith van Onselen Will they or won't they? Confusion is running wild today on whether the Abbott Government will abandon its $7 co-payment on medical visits, with Treasurer Joe Hockey seemingly contradicting Prime Minister Tony Abbott on the issue. Last night and this morning, it seemed as if the $7 co-payment was on the chopping block, with the Canberra Times (and other outlets) reporting the following: Prime Minister Tony Abbott has privately conceded defeat on his controversial budget proposal to introduce a new $7 co-payment on bulk-billed GP visits and will formally shelve the policy...
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Official: China to hit peak steel in 2017

images14 From the AFR: Li Xingchuang, president of the government-linked China Metallurgical Industry Planning Association, said steel consumption would peak at 740 million tonnes in 2017. This is well below the 1 billion tonne forecasts of Rio Tinto, BHP Billiton and Fortescue Metals Group, who all broadly believe Chinese steel consumption will not peak until beyond 2030. “I really don’t understand how the big mining companies made that forecast,” said Mr Li at a Platts steel conference in Shanghai. Group think, my man. To be honest, I reckon this forecast is optimistic. Li sees 1.7%...
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Big cuts to NSW power bills as death spiral looms

fig11.1 From the AFR: NSW power customers will see their power bills fall 10 percent, more than after the scrapping of the carbon tax, thanks to a landmark regulatory decision that reins in “gold plating” at electricity networks. AER chairman Paula Conboy said: “We estimate that our draft decisions, if implemented, would reduce annual electricity bills for a typical residential household living in NSW, on average, by $219 (10 per cent) in 2015–16. The AER decision will force the networks to slash costs to adjust for the slower growth in power demand and lower financing costs. Capital expenditure will...
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Iron ore miners hold up as futures rally

Capture There's life in the old dog yet. Glencore hot air levitated miners this morning with FMG flat, RIO down a bit and BHP down a bit more despite another record price plunge. Here is the comparative index: The idiocy spreads are widening even further with RIO now a minor nation away from good sense, BHP threatening new wides and the moron cross closing in on both: RIO looks wildly overpriced, so say these blokes at Barrons: Axiom analysts Gordon Johnson II and James Bardowski have been bearish on Rio Tinto(RIO) for some time, but today lowered their target price on the stock by $5,...
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ALP dill opposes foreign property buyer regime

ScreenHunter_16 May. 13 15.31 By Leith van Onselen If you want a textbook example of just how useless the federal Australian Labor Party (ALP) has become, look no further than the member for Chifley, Ed Husic, who noted the following in parliament in response to the Parliamentary Committee's eminently sensible recommendations to actually enforce the rules governing the purchasing of pre-existing dwellings by foreigners. From The ABC: The committee's Labor deputy chairman Ed Husic has condemned much of the report as a "new tax grab" on foreign investors, prompted by racially charged media reports. "While some good might have...
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S&P endorses Australian macroprudential

cgn4e6r Fresh from S&P: Australia's strong growth in residential property prices over the past 18-24 months has triggered a growing debate around the heightened risk to financial system stability. In particular, the debate has centered on whether additional regulatory intervention in the form of so-called macro-prudential tools are required to stem the growth in property prices. Standard & Poor's considers that a sustained and strong increase in property prices adds to the imbalances in the economy, in that it increases the risk of a rapid downturn in property prices, which could eventually...
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Actual capex records surprise lift

ScreenHunter_5182 Nov. 27 11.43 By Leith van Onselen The Australian Bureau of Statistics (ABS) today released data on capital expenditures (capex) for the September quarter of 2014, which registered a surprise 0.2% seasonally adjusted lift in capex over the quarter but a 5.9% decrease over the year. The result beat analyst’s expectations of a 1.9% fall over the quarter (see below table). While Houses and Holes has covered the more important capex intentions survey, which covers industry’s forward-looking capex plans over the coming years, below are some backward looking charts showing actual capex up to the September...
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Expected capex holds up

0 The Australian Bureau of Statistics (ABS) has released the fourth estimate for expected capex for 2014/15 for the September quarter and the result is a slight positive with expectations firming a little. Estimate 4 for total capital expenditure for 2014-15 is $153,210m. This is 7.5% lower (-$12,492m) than Estimate 4 for 2013-14. The main contributor to this decrease was Mining (-$17,355m). Estimate 4 is 2.2% higher (+$3,262m) than Estimate 3 for 2014-15. The main contributor to this increase was Other Selected Industries (+$2,594m). MININGEstimate 4 for Mining for 2014-15 is $86,253m. This is...
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WA spike saves HIA new home sales

kuyvb HIA new homes sales for October are out and are clearly past the peak, other than a freakish spike in WA that looks rather like a one-off: Total seasonally adjusted new home sales increased by 3.0 per cent in October 2014 following a flat result in September. Detached house sales recorded a healthy increase in Victoria (+4.7 per cent) and a very strong rise in Western Australia (+24.8 per cent), which drove total detached house sales up by 6.0 per cent in the month. Multi-unit sales dropped by 10.5 per cent in October, following growth of 11.0 per cent in September. After a...
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What will the new foreign buyer regime do to property?

unnamed2 Assuming the recommendations of the Parliamentary Committee on foreign property purchases are followed by the Government, which seems likely given Abbott needs a lift and Liberal rising star Kelly O'Dwyer ran the inquiry, what impact will the greater transparency have on the property market? One way to look at this is to examine the market dimensions of the trade. If a Chinese investor is buying Australian real estate but remains in China then the critical calculation is the value of the property in Chinese yuan. Here is the chart comparing the AUD/CNY and house prices over the past two...
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Parliament acts on dodgy foreign property buying

ScreenHunter_5115 Nov. 24 09.52 By Leith van Onselen The Parliamentary Committee examining foreign investment has released its report, and if I had to sum it up in one word it would be "transparency". Here is a summary of the recommendations: Retaining the current framework applying to foreign purchases of Australian housing to encourage foreign investment in new dwellings and increase housing supply. Improving the internal processes at Treasury and the Foreign Investment Review Board (FIRB) and removing barriers to enable adequate audit, compliance, and enforcement of the foreign investment framework. Applying a modest...
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Morgan Stanley: 45% chance of rate cut

dfveq From Morgen Stanley: RBA loses another friend in the ‘hold’ club: The RBA is increasingly standing out as a pillar of monetary stability, with the PBoC becoming the third major economy to join the ECB and BoJ’s 2H14 easing, in addition to Korea in the region. Outside of high-inflation India and Indonesia (which recently hiked rates to 7.75% following the fuel subsidy cut), it is only the RBNZ that has been charting a course towards tighter monetary policy – but even here, market pricing of further rate hikes over the next 12 months has fallen from 40bp to 20bp. Imported deflation, and...
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Murray review a boon for smaller banks?

ScreenHunter_01 Aug. 01 06.58 By Leith van Onselen The head of Suncorp, Patrick Snowball, has claimed that the recommendations of the Murray Financial System Inquiry are likely to make it much easier for smaller authorised deposit-taking instritutions (ADIs) to compete against the Big Four banks. From The Australian: “The inquiry has fuelled a robust level of discussion and debate about capital and what levels should reasonably be expected to improve financial system stability"... “It seems a very real possibility that one outcome of the inquiry will be that Australia's largest banks will need to increase their capital...
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Uren: Throw FHBs to foreign wolves

snarling-wolf By Leith van Onselen The Australian's David Uren has produced a half-baked defence of foreign investment into pre-existing dwellings, arguing that concerns about foreign investment are a fallacy and that there is "little economic justification" for tightening enforcement of the foreign ownership rules. Let's examine Uren's arguments. If I am selling a house, and a Chinese buyer wants to pay more than an Australian, I make a larger capital gain and can use the additional proceeds to buy the house of my dreams — possibly a new one — or add more to my superannuation, or spend it on consumption,...
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Macro Morning: Australian dollar touches 84s

marketmorning by Chris Becker Good data prints - or more importantly, positive reaction to data - all round helped risk markets inch higher last night with the S&P500 achieving another record high in its secular bull market: The data mix from the US at first glance was mixed, with the closely watched durable goods order for October headline print being higher than expected, but core data coupled with a rising trend in initial jobless claims and lagging home sales point to a cooling US economy. Coupled with a slightly weaker Chicago PMI (but still very high) this didn't stop US bond markets strengthening...
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PBO describes Budget carnage

small-red-ink-splash-md By Leith van Onselen Following Macroeconomics' forecast earlier this month that Federal Budget revenues would be slashed by $52 billion over four years courtesy of slumping commodity prices, falling mining investment, and weak income growth, analysis by the Parliamentary Budget Office (PBO) has released a new report predicting big increases in the Budget deficit if labour productivity is not improved and if world commodity prices fall by 30%. Key extracts from the report, which analyses the "sensitivity" of three main drivers of the Australian economy -  labour productivity growth, the labour...
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Oil wars as GFC 2.0

imgres Today we return to the loneliest man in Davos from Oliver Wyman who predicted in early 2011 that the next GFC will spring from a commodities crash in 2015: During phase 1 we distinguish between two sources of demand affecting commodities prices: demand for use in the production of other goods (“real” demand) and demand for the purpose of price speculation (“speculative” demand). There are three major groups of players in our scenario. Firstly, there are economies, such as Latin America, Africa, Russia, Canada and Australia, which are the largest commodities producers. Secondly, there is China,...
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Daily iron ore price update (Titanic deck chairs)

anvil6-200x200 Here are today's iron ore price charts: Slightly better price action in paper markets. But who cares. Physical is now tumbling with benchmark leading Qingdao and also down hard to $68. The CISA high frequency steel output data for mid November was also poor. It will still be a little APEC affected but it didn't rebound at all suggesting demand is getting worse heading into winter. Effectively, steel production is back to 2012 levels, which only make things worse for iron ore. Reuters has texture: Sucden Financial analyst Kash Kamal said "a glut of material from Western Australia and...
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Daily LNG price update (no cut)

fh45e The news for the oil price is more weakness, from Reuters: OPEC leader Saudi Arabia signaled on Wednesday it was unlikely to push for a major change in oil output at the producer group's meeting this week, a day after Russia refused to cooperate in any production cut. Saudi Oil Minister Ali al-Naimi said he expected the oil market "to stabilize itself eventually." Iranian Oil Minister Bijan Zangeneh said some OPEC members, although not Iran itself, were gearing up for a battle over market share and insisted that non-OPEC producers needed to participate in any OPEC-led output cut. "The most...
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Gittins: Australian house prices are different

economists-carmen-reinhardt-and-ken-rogoff-explain-why-growth-wont-cure-debt By Leith van Onselen Fairfax's Ross Gittins has produced a thinly veiled defence of Australia's exorbitant housing costs, arguing that housing values are inflated "because Australians have an unusual relationship with their homes". In making his case, Gittins draws on a recent research report from Saul Eslake, which provided six reasons for Australia's expensive housing. Much of the explanation comes from the insights of economic geography, the study of how we're affected by the spatial dimension of the economy and, in particular, of the way big cities work... Almost 60 per cent of Australians...
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Links 27 November 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Cheap energy is the new cheap labor - Financial Times Oil prices won’t stay low forever - Alliance Bernstein Krugman: Keynes Is Slowly Winning - New York Times The brutal monotony of all-time highs - The Reformed Broker Bullish find assets double bears for first time - Dana Lyons The case for international stocks - Total Return The energy sector has been declining for some time now - Pension Partners Seven simple things investors don’t do - A Wealth of Common Sense How limits (or constraints) can actually make you a better trader -...
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