Mirabile dictu: Manufacturing expansion!

Capture The AIG manufacturing PMI is out and don't blink, we're above 50:   The internal look OK too: But a deeper look should reassure policy-makers that their hollowing-out campaign is still on track. Only wood and food are expanding: The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) moved into positive territory this month, following eight months of contraction between November 2013 and June 2014. The index increased by 1.7 points, to 50.7 points (seasonally adjusted), indicating broadly stable conditions across the manufacturing...
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The politico-housing complex is careening towards doom

buffaloes In early 2010 I wrote at Business Spectator that I did not think that the time had yet come for the reckoning of the Great Australian Housing Bubble. My rationale was simple. Although the bubble had been obvious for a decade and more, it was equally clear that authorities had the wherewithal to bail it out if trouble came. And so it has proven to be.   The commodity super-cycle came and went and housing eased and then boomed again. In 2011, I coined the phrase "politico-housing complex" to define the extraordinary capture of policy at all levels of government by the bubble, its ideologies...
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Senator Day declares war on developer rent-seekers

ScreenHunter_18 Jul. 05 10.22 By Leith van Onselen About the only person in federal politics that is willing to stand-up on the issue of housing affordability is new Family First senator, Bob Day. The AFR has revealed that Senator Day is in the process of selling-off his $80 million stake in Homestead Homes and Home Australia - building companies that he founded 40 years ago - so that he can concentrate on politics and attempt to "weaken the political influence of high-density property developers and land developers" who he claims have "created a housing affordability disaster". Senator Day met Treasurer Joe Hockey...
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The death of evidence-based policy

ScreenHunter_3572 Aug. 01 07.37 By Leith van Onselen What is it with the Abbott Government at the moment? Last week we learned via Treasurer Hockey's biography that Tony Abbott's universally condemned paid parental leave (PPL) scheme was nothing more than a thought bubble between Abbott and Rupert Murdoch, and that the Coalition party room had no input into the policy prior to its announcement in 2010. And while tony Abbott's declaration that he would be Australia's "infrastructure Prime Minister" is a worthy ambition, the Coalition's infrastructure policy has so far been governed more by ideology than robust...
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Turnbull measured on online piracy

ScreenHunter_3568 Jul. 31 15.40 By Leith van Onselen It seems the Coalition's draconian internet policy is being driven by Attorney General, George Brandis, with Communications Minister, Malcolm Turnbull, taking a far more measured approach is an interview yesterday on ABC Radio. While Turnbull stated in the interview that Australians should not steal online content, he did also acknowledge that Australians are being ripped off and urged copyright holders to discourage piracy by making their content readily available at prices similar to those offered overseas: ...there is an obligation on the content owners, if their...
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DFAT, US warn on Ebola

Diseased_Ebola_2014 From DFAT: The outbreak has prompted Australian embassy staff to defer travel plans to Guinea, Liberia and Sierra Leone. "We recommend Australian travellers do the same," the Department of Foreign Affairs and Trade said in its latest updated advice. There's a real risk that Australians travelling in the region could become stranded if the outbreak worsens, the department said. Liberia has already closed most of its borders to combat the disease and entry points that remain open are being used as ebola prevention and screening centres. DFAT warns that borders in the region could close and...
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Daily iron ore price update (Vale parley)

sdfwd Here are the iron ore charts for July 30, 2014:    Equilibrium persists across markets. The BDI cape is still becalmed. Reuters has texture: Iron ore would need to see aggressive restocking by Chinese mills for the price to break out of its current range, said Graeme Train, analyst at Macquarie Capital Securities in Shanghai. "I just don't think conditions are quite like this. Chinese steel demand is holding up okay, but I don't think it's getting much stronger. The mills are not in a mood to go out and do a massive restock just yet." "I don't really see any long-term support for...
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Chinese stampede property as blocks lifted

rdn_53d993eacc488 Cross-posted from Investing in Chinese Stocks.   Developers and local governments in China are rushing to sell amid a sudden rise in demand as property buying restrictions have been lifted in 30 out of 46 cities. Some sales are indeed jumping in Hangzhou and Wenzhou at the high end of the market, sparking big upticks in sales figures. No doubt there is some pent up demand, and it's logical that it would be at the high end due to limited supply. The question is how deep this demand goes and if we will also see buying pick up in the middle and low end of the market. The article...
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US applies LNG blowtorch with yet more projects

blow-torch_01 Uncle Sam is on an LNG tear. Overnight the US Department of Energy (DOE) approved another new LNG project for exports and this time it's a greenfields project in Oregon,suggesting even more could be in the pipeline OregonLNG will have a capacity of 9 million tonnes per annum (mtpa) and begin shipping in 2019. That takes the total of US approvals in the past eighteen months to 80mpta, just shy of the capacity of Australia's current wave of projects. As well, the Federal Energy Regulatory Commission (FERC) approved construction of FreeportLNG (it already has export approval).  Meanwhile,...
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Risk off on a thousand cuts

Employment Costs Occupation Group Last night's market action saw risk roar back to life. Stocks fell the better part of 2% in the US and the Australian dollar fell into the high 92s: The US dollar broke out of a one year trading range: Gold was dumped 1% but US bonds were flat at the long end but were bid at the short end. If you're confused then you're in good company. If this was  another taper tantrum then bonds would be selling. Still, there was data to support the move being result of rate rise fears. In the US,  the BLS released micro labour price data that showed inflationary pressures even if its macro data...
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A users guide to idiotic market commentary

image001 From Bespoke comes a useful guide to ignoring market...
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Links 1 August 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Why a tick up in Treasury yields shouldn’t be all that surprising - Sober Look Stocks and bonds are once again moving together - Afraid to Trade Financial sector internals point to possible decline - Andrew Thrasher Why emerging markets have more room to run - A Wealth of Common Sense North America: Weekly initial unemployment claims are solidly at pre-crisis levels - Calculated Risk Unemployment to Hover Around 6.2 Percent for the Next Six Months - Brookings Breaking down the Q2 GDP report - Econbrowser California comeback has a long way...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets Asia has capped off what has been a sensational month to be long Asian equities, although there are only modest signs of window dressing which seems confined to Australia and Japan. Yesterday I wrote about the huge outperformance in July by Asian markets relative to many Western markets, and I continue to hold a favourable bias to this region. After market yesterday it was detailed that international investors were the biggest buyers of Korean equities on the day since September 2013, so this was case in point. The ASX 200 has rounded off...
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China must slow, says IMF

images From Reuters: China should set an economic growth target of 6.5-7 percent for 2015 and refrain from stimulus measures unless the economy threatens to slow sharply from that level, the International Monetary Fund said on Thursday. Most of its directors hold that view, though some feel that an even-lower growth target is appropriate, the IMF said in the conclusion of its annual Article IV economic consultation with China. "Regarding the growth target for 2015, while most directors concurred that a range of 6.5-7 percent would be consistent with the goal of transitioning to a safer and more...
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Skills shortages at an “historic low”

ScreenHunter_2989 Jun. 26 08.16 By Leith van Onselen The Government's planned relaxing of 457 visa rules so that employers can hire an unlimited number of foreign workers under a temporary working visa, potentially opening the system to widespread rorting, is looking even more egregious following the release today of the Department of Employment's preliminary skills shortages report, which reveals that the number of occupations suffering skills shortages is at an "historic low": Employers continue to recruit skilled workers without marked difficulty, and the number of occupations in shortage is at an historical...
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Analysts wrong again on earnings

PC_wide_31Jul-DB-lessons-learned-620x349 From the SMH blog: Earnings have been forecast to grow by an average of 15% as the year begins, but end up growing by 6%. Excluding recessions, the initial 15% forecast drops to 11%. But in the past decade or so the downgrades have been smaller. The current picture: In recent months accelerating downgrades suggest limited EPS growth ahead, although improving global growth in 2H could improve this a little. As it stands, analysts forecast 7% for FY15 – a low number to start the year, and history suggests upgrades are uncommon. This leaves Australia not looking particularly attractive...
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Australia’s terms of trade to get hammered

ScreenHunter_3560 Jul. 31 13.44 By Leith van Onselen The Australian Bureau of Statistics (ABS) released export and import prices for the June quarter, which portends big falls in Australia's terms-of-trade when the national accounts are released next month. According to the ABS, export prices fell by 7.9% in June quarter and by 1.9% over the year. By contrast, import prices fell by a more moderate 3.0% over the June quarter but rose by 5.7% over the year (see below table). The fall in export prices were driven by the following factors: This [7.9% quarterly] decrease was driven mainly by falls in the prices received...
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Bloxo: Iron ore to soar!

anvilflying From Bloomie: Iron ore is heading for the biggest monthly increase this year on speculation that demand for imports in China may be improving, helping to absorb a global surplus as local supplies in the largest buyer are displaced. Ore with 62 percent content delivered to Tianjin rose 0.6 percent to $US95.90 a dry tonne yesterday, according to data from The Steel Index. The raw material climbed 2.2 percent this month, poised for the largest advance since November. Prices gained a similar amount in June, snapping six monthly losses. Iron ore rebounded last month from the lowest level...
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Kouk reverts to rate hikes!

imgres From the Kouk: Some mixed news on the economy today – it suggest that the strong start to 2014 may have edged off a little, but that a resurgence in credit growth and on-going house price inflation are issues that will test the RBA in the months ahead. For now, with the economy rolling along with uneven pressures, the RBA is set to keep interest rates on hold next week and probably for some months beyond. Credit growth was upbeat, with a monthly rise of 0.7 per cent in June, which was the largest monthly rise since March 2008. Borrowers are back in town! This means that annual credit growth leapt...
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Dwelling approvals tank in June

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 June. At the national level, the number of dwelling approvals fell by a seasonally adjusted 5.0% to 15,659. The overall fall was broad-based, with the volatile unit and apartment segment falling by 10.5% and the more stable house approvals segment falling by 2.2%. The result disappointed analysts’ expectations, who had expected a flat result over the month. In the year to June 2014, dwelling approvals rose by a seasonally-adjusted 16.0%, with house approvals up by 13.1% and...
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West Pilbara cheap as chips?

sdf From Reuters: Aurizon Holdings Ltd , which teamed up with Chinese steel giant Baosteel to gain a 50 percent stake in the West Pilbara Iron Ore project in Australia, expects the port and rail cost to come in well below a 2012 estimate of A$4.6 billion ($4.29 billion). "We can't quantify it at the moment. But our expectation is that the numbers will be very materially different, i.e. better, than the ones that were anticipated in those 2012 numbers," Aurizon CEO Lance Hockridge told Reuters in an interview on Thursday. And? If iron ore is at $70 then WP iron ore will be...
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Investors still pigging out on mortgage debt

ScreenHunter_05 Apr. 15 22.08 By Leith van Onselen The Reserve Bank of Australia (RBA) today released its private sector credit aggregates data for the month of June: A chart showing the long-run breakdown in the components is provided below: Personal credit growth (0.6% MoM; 0.4% QoQ; 0.7% YoY) and business credit growth (1.0% MoM; 1.5% QoQ; 3.5% YoY) continue to grow at a modest pace in annual terms, whereas housing credit growth (0.6% MoM; 1.8% QoQ; 6.4% YoY) is stronger, although is remains at fairly subdued levels relative to its long-run average growth rate. The below chart shows that housing credit...
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Adelaide to force housing into CBD

ScreenHunter_21 Apr. 10 19.29 By Leith van Onselen South Australian planning minister, John Rau, has announced that he wants to more than double Adelaide's CBD population within a decade, as well as house another one million people in the existing urban footprint. From News.com: “If we had the same density as is in North Adelaide through the existing footprint of the city, we could probably absorb another million people or something,” he said... “I think within the next 10 to 15 years we should aim for 50,000 in the city, maybe even that is a little modest and we could push that harder,” he said... “People...
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Coast-to-coast, Coalition mulls Keynsian romp

imgres From the quarterly Deloitte Access Economics Investment Monitor out today: Holding pattern As the Australian economy continues its transition away from growth led by investment in the resources sector, there are signs that investment in other sectors may lift over the coming year. Data from Deloitte Access Economics’ Investment Monitor database shows that the value of major projects is currently in a holding pattern. The total value of all projects has barely budged since June 2013, predominately due to the relatively static value of resources projects under construction. The resources...
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Deposit growth stable (members)

sdfq From APRA's June banking statistics out today. Monthly deposit growth is more or less stable: Year on year is the same around 8%: The components are showing stability for households and corporations but pressure for financial institutions as credit growth accelerates: I think it fairly clear that the current level of credit growth has already surpassed local deposit growth but the switch has coincided with the global dash for trash driving down bond yields. A presumably more accommodating APRA is allowing banks to resume offshore borrowing growth rather than drive up local...
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