ASX at the close

ScreenHunter_31 Jun. 04 16.42 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets Asia has been pinned on the latest HSBC manufacturing PMI print out of China – there was some nervous trading going into this reading after a string of disappointing data out of China recently. Contrary to pessimistic expectations, the private PMI print came in at 50.5, better than estimates of 50 and above the previous 50.2 reading. This instantly lit up the boards and saw sentiment pick up across regional equities. The composition of the reading was also fairly good, with new orders (52.3) and new export orders (53.9)...
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Experts react to competition policy review

looking ahead Cross-posted from The Conversation Restrictions on retail trading hours, taxis, pharmacies and parallel imports should be lifted according to a far-reaching draft report by the Competition Policy Review. Professor Ian Harper’s new report also advocates the introduction of yet another regulatory body, the Australian Council for Competition Policy. This Council would push for new competition rules and financially incentivise states that implement competition reforms. A separate pricing regulator should also be introduced to oversee industries regulated by the Commonwealth such as gas,...
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ANZ talks its own book on macroprudential

ScreenHunter_4342 Sep. 23 14.32 By Leith van Onselen ANZ Bank has stepped-up its attack on macro-prudential curbs on high risk mortgage lending, claiming that they have been a failure in New Zealand, forcing-up home prices at the lower end of the market. From The AFR: The chief executive of New Zealand’s largest bank says limits on low-deposit home loans introduced by the country’s central bank a year ago have actually increased house prices at the lower end of the market and do not address the key driver of rising house prices – the lack of supply. David Hisco, the chief executive of ANZ Banking Group in New...
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Sandgropers take iron ore denial to the next level

ScreenHunter_29 Aug. 22 11.42 by Chris Becker This is not funny - from ABC News: West Australian Treasurer Mike Nahan says the plunge in iron ore prices is getting to the point of serious concern, after it slid below $US80 a tonne. The benchmark price hit a fresh five-year low of $79.80 overnight, after the Chinese government indicated it was unlikely to implement an aggressive stimulus policy to prop-up construction. It is more than $40 less than the figure WA Treasury used to calculate expected revenue for this financial year, which has led to a state budget hole in excess of $1.5 billion. Dr Nahan said he never...
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Steam in US stocks diverges

USA Muscle by Chris Becker Last night's 0.8% fall on the US S&P500 index hid a greater down move on the small-cap biased Russell 2000, losing 1.5% with more than half of the stocks below the closely watched 200 day moving average. Is this a sign the US bull market is over? Not quite - but the divergence between big cap and small cap stocks is growing giving some pause to the breadth of the market move as absent volatility starts to raise its ugly head. The CBOE Volatility Index gained over 13% to 13.69, a one-week high. This comes on the back of a large drop in monthly volatility, but we're nowhere...
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Draghi mulls QE to revive deflating Europe

Euro by Chris Becker The ECB President, Mario "whatever it takes" Draghi is letting the QE cat out of the bag stating last night that he wants governments to do some heavy lifting on restructuring while he grabs the "unconventional" printing lever: The ECB stands ready to use additional unconventional tools and tweak its existing efforts to spur inflation and growth in the euro zone if needed, ECB President Mario Draghi said on Monday, speaking to the economic and monetary affairs committee of the European parliament. Lower than expected take-up of the initial tranche of loans last week has fuelled...
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Health spending growth at 30-year low

ScreenHunter_05 Mar. 12 11.39 By Leith van Onselen The Australian Institute of Health and Welfare (AIHW) has released a new report revealing that Australian health spending growth has fallen to lowest level on record (in at least 30-years), driven by reductions in spending on the Pharmaceutical Benefits Scheme (PBS), public health, dental services and e-health: ...total spending on health goods and services in Australia was estimated at $147.4 billion in 2012-13 (9.67% of GDP). This was just 1.5% higher than in 2011-12. 'This is the lowest growth the AIHW has recorded since it began the Health expenditure Australia...
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Coal mining job losses roll on

ScreenHunter_12 May. 01 18.48 By Leith van Onselen The Abbott Government's plan to reboot the mining boom by cutting taxes has received another reality check today, with pressure from falling prices and the stubbornly high Australian Dollar leading to another 700 job losses across BHP's Queensland coking coal business. From The Canberra Times: BHP is the biggest employer in central Queensland... Costs across BHP's coal division are under the microscope, with every operation being pushed to operate as independently profitable. The cuts are part of an ongoing review and represent about 8 per cent of of the 6000...
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Does the Coalition have the balls to take on pharmacies?

ScreenHunter_4322 Sep. 22 13.44 By Leith van Onselen You can't keep a good rent-seeker down. Following the release yesterday of the Draft Report of the Harper Competition Policy Review, which sensibly recommended the government free-up rules restricting the location of pharmacies and preventing non-pharmacists from owning a pharmacy, the Pharmacy Guild has hit back, rejecting the Draft Report's recommendations and warning that it would endanger health care consumers: The Pharmacy Guild of Australia rejects the Competition Policy Review’s draft recommendations that regulations governing the ownership and location of...
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China flash manufacturing PMI lifts

Manufacturing by Chris Becker The HSBC monthly flash manufacturing PMI has printed at 50.5 for September. The August print was 50.2,  with the September print forecast to be 50 - indicating no expansion or subtraction - this is a slightly better result than expected. The Aussie dollar bounced over 20 pips up on the release and is threatening the 89 level, while Aussie stocks have retraced most of this morning's losses. Heres a link to the full report at Markit - looks like new orders, including exports are increasing while price pressures are...
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There goes 2014 for stocks

Flatline by Chris Becker Well, there goes 2014 for the ASX200 - all nominal price gains wiped out as the market falls nearly 1.5% to 5350: With dividends, you're up about 2% according to the accumulation index: The iron ore players are mixed, with FMG only down 1.5% while Atlas Iron (AGO) was smashed (possibly on a broker downgrade to 40c target - ouch) down over 6%, but its the big boys BHP and RIO pulling the broader market down, over 1.5% each. Theres a few months left of course and Chinese stimulus is coming isn't it? Isn't...
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ANZ-RM consumer confidence rebounds

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index rose in the week ended 21 September, up 1.6 points (1.4%) to 112.9, taking it just below its long-run average reading of 113.2 (see next chart). As usual, ANZ chief economist, Warren Hogan, summoned the confidence fairy and wealth effect from rising housing prices: "While we expect soft income growth to weigh on consumer confidence and spending going into 2015, this should be offset to some extent by wealth effects from rising house prices". The below chart plots the most recent Westpac-Melbourne Institute...
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More confirmation of China restructuring

PandaRunning by Chris Becker Some more jawboning - RBA oligarchs get out of your Martin Place palace and take some notes - from Chinese authorities as it pushes "China 21st century" into the spotlight once more: Zhu Min, vice president of the IMF and ex-deputy governor of the PBOC had this to say today (via Forexlive): China can accept a GDP growth of between 7-7.5%, said China will avoid going back to the old investment-driven growth model, particularly reducing reliance on the property sector, and push reforms to develop the economy Said China cannot rely much on monetary and fiscal stimulus if it...
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Aussie gets crushed by Dr Doom and iron ore

dating-dr-doom-20061010114337164-000 by Chris Becker When the crowd turns, get out of the way - or better yet - be prepared in advance. Last time I was here regularly at MB I considered short AUD (against pretty much everything, even NZD) to be not just a sensible hedge, but for me at least, a prudent long term investment. The fortunes of this economy are tied irrevocably to that of China - which means commodities, which means iron ore and coal. The simple dynamic between a burgeoning seaborne supply of iron ore (from everywhere) and a peak in demand at the end of a price bubble spelled an inevitable collapse. The only thing...
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Competition policy must not ignore land costs

ScreenHunter_3712 Aug. 12 07.03 By Leith van Onselen Business Spectator's Callam Pickering is on point today questioning why the Draft Report of the Harper Competition Policy Review has largely ignored Australia's sky high land costs, which have eroded competitiveness and productivity across the economy: ...the elephant in the room remains land prices. High property prices are, for whatever reason, celebrated in Australia, but they go a long way to explaining our lack of competitiveness. High house prices equal high land prices, which equal elevated business costs. The higher our property prices go, the less competitive...
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Kiwi to fly on National election win?

flyingkiwi by Chris Becker Over the weekend, NZ Prime Minister  John Key's incumbent National party won the general election in a clear majority. The effects of a third term for the conservative (ish) party on the South Pacific nation are being felt and discussed already, with the consensus rising that budgetary and social welfare reforms will continue and probably expand into other areas in a pro-business, conservative sense. From a worldview, that is - according to the multi-trillion dollar FX market - this stability in government and policy are likely to underpin the direction of the inflated...
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IMF shows Australia how to tax for growth

ScreenHunter_4330 Sep. 23 08.20 By Leith van Onselen The International Monetary Fund (IMF) provided a useful blueprint for tax reform to the G20 finance ministers and central bankers meeting in Cairns, which hopefully should assist the Abbott Government in framing its upcoming tax reform white paper. Central to the IMF's reform blueprint is shifting tax bases away from less efficient sources, such as personal income and company taxes, to more efficient sources, such as consumption, resources and land/property: The focus of growth-friendly tax policies depends on the tax structure and taxation levels of a country. Few...
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Iron ore daily update ($80 floor gone)

floor collapse by Chris Becker Continued bad news if you've accidentally tied your company or indeed, your economy, to an iron ore price above $80USD per tonne. First, the complex price update, with spot falling over 2%, below $80, back to September 2009 price levels: The spot iron ore and 12 m swap chart tells the story does it not - now down over 40% for the year (including in AUD, pity we didn't manage that a bit better isn't it Captain Glenn?) Rebar is plumbing new lows: The rationale for the continued falls? The Chinese economy is restructuring and is not punting on round robin...
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Industry slams proposed new foreign property laws

ScreenHunter_4329 Sep. 23 07.27 By Leith van Onselen Industry groups representing accountants and real estate agents have slammed a proposal outlined last week by Liberal MP, Kelly O'Dwyer, to extend the penalty regime for illegal foreign investment in Australian residential property to those that aid and abet such purchases, such as accountants, lawyers and real estate agents. From The Australian: Real Estate Institute of Victoria chief executive Enzo Raimondo questioned the need for change. “If you put in a system where you are fining accounts, lawyers and agents in an attempt to stop foreign investment or people skirting...
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Macro Morning

marketmorning by Chris Becker Monday nights with no real data releases are always fun on macro markets - not. But at least last night we saw the broad return of volatility, with a relatively big slide in the S&P500 down 17 points to below 2000 at 1993. This "slump" (I love how the negativity on reporting on stocks goes to the moon in a bull market - it was only a minor pullback) was on the back of a few things, namely poor existing US home sales, some comments by Mario Draghi on the "sluggish" Eurozone recovery (ha!) and some broader risk aversion throughout the FX and commodity complex mainly because...
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Bob Day is wrong on negative gearing

ScreenHunter_4036 Sep. 05 09.01 By Leith van Onselen Over the past year, I have heaped praise on Family First senator for South Australia and former HIA president, Bob Day, for continually advocating for affordable housing and lobbying for much-needed fundamental reforms to Australia's constipated urban planning system, which has precluded affordable housing from being built in response to rising demand. Not today. The AFR this morning features an article with Day backing the HIA's warnings that limiting negative gearing would worsen Australia's housing supply situation and somehow make homes less affordable: ...negative...
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Charting Australia’s population ponzi

ScreenHunter_4324 Sep. 22 14.19 By Leith van Onselen Late last week, the Australian Bureau of Statistics (ABS) released data on Australia's historical population growth, which revealed some interesting truths about Australia's turbo-charged immigration system. The key chart pertaining to the release is shown below, which shows the historically high level of population growth in Australia since the mid-2000s: As shown above, Australia's population has grown on average by 172,000 per annum since 1900. It also grew by 219,000 on average between 1949 and 2004. However, between 2005 and 2013, Australia's population grew...
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Credit bubble collapses in Handan

China-Bubble-300x200 Cross posted from Investing in Chinese Stocks Handan's housing crisis is centered on illegal fundraising. Earlier this year, banks that used illegal fundraising collapsed, and now developers are going down. Ten of thousands of residents and roughly ¥10 billion is at stake. The local government has formed work groups to deal with the situation, with at least 13 companies already in trouble. One person who helped raise the money said 10% of Handan households may be involved, and in the case of one developer alone, there are more than 10,000 lenders. Investors were offered high interest rates...
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Links 23 September 2014

reynard Global Macro / Markets / Investing: They do ring a bell at the top - Alibaba IPO proves the rule - Zero Hedge Is there an Obama Doctrine? The Diplomat Dr Doom warns on 20% drop in AUD - The Age (h/t Gunnamatta) Bubble in US bonds to end in bad way - Bloomberg (like Japan?) Volatility finally raises its head - CNN Would a 1987 style crash really be that bad? PragCap (would be great for some, bad for most) Iron ore at five year low - is this a bottom? FT Video America: Existing home sales in August unexpectedly drop - Calculated Risk Textbook case of price gouging - The...
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ASX at the close

ASX_logo by Chris Weston It will be an interesting week for short-term-focused traders, with a number of markets that have recently seen better trending conditions exerting clearly overbought or oversold conditions. The sell-off that has materialised in the US bond market of late is coming at a time when we have seen some fairly bearish dynamics in other economies and, as a result, we’ve seen some strong trends in AUD/USD, EUR/USD and USD/JPY. These trends have led to some one-sided positioning, with the 14-day RSI on USD/JPY at the highest level since 2001. We seem to have got to a point where we could...
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