Courtesy of ANZ: Coking coal prices continued to fall, down to USD142/t, while iron ore prices remained flat. The preliminary HSBC PMI results set a bearish tone for industrial metals. Iron ore port stockpiles in China rose slightly last week to 72.5mt, but still remain significantly low compared to recent years. Iron ore traders are reportedly being targeted by banks keeping liquidity tight, which is why port stocks have not rebounded in any significant manner. The iron ore curve is also in backwardation, which is also keeping traders side-lined. On the flipside, Australian physical thermal coal...

Hot off the press, Fed mouthpiece Jon Hilsenrath of the WSJ is out with a new report: The Federal Reserve is having some trouble explaining itself. Fed Chairman Ben Bernanke told Congress on Wednesday that the central bank could start reducing its $85 billion-per-month bond-buying program at one of its "next few meetings" and cautioned that he was reluctant to move aggressively or prematurely. That straightforward message, however, has been muddled by a number of other signals sent by the Fed and Mr. Bernanke himself in recent weeks. ...Some observers say there is room for improvement....

The headline at the AFR today reads: And the story says: Goldman Sachs has singled out the falling $A as one of its top recommendations to global clients as the currency plunges to its lowest levels in two years and banks continue to slash their forecasts. After falling almost US6¢ since the beginning of the month to trade just under US97c on Friday morning, the investment bank reckons the Aussie dollar is headed for US90¢ within 12 months. HSBC turned bullish on the greenback, and lowered its $A forecast to US90¢ from $US95¢. UBS and Credit Suisse trimmed their forecasts on...

From the AFR our leaders are caught in their usual gas bagging, this time over the carcass of Ford: Australian manufacturers cannot compete with the cheap labour available overseas and must focus on high end markets and quality, opposition leader Tony Abbott says, as he signalled future Coalition industry assistance would be export-oriented. “That means lower taxes, less regulation, higher productivity and that gives manufacturing a fighting chance,’’ he said. ...”If you’re going to economically make cars in Australia, you’ve got to export the bulk of them and Ford never did...

Cross-posted from Mark the Graph. In today's charts we can see repeated overly optimistic Treasury forecasts for GST revenues compared with the less dramatic actual revenues. While the estimates in the Budget papers for 2008, 2009 and 2010 may have been plausible at the time, I have real doubts about the plausibility of the 2012 and 2013 estimates. I think we can have a reasonable conviction that nominal economic growth will not return to its pre-GFC, debt-fueled exuberance anytime soon. In the legend B stands for the Budget papers, and M for the Mid-Year Economic and Fiscal Outlook (MYEFO)...

Credit Suisse has a new note out on iron ore this morning that I agree with as an optimistic scenario for iron ore. First it sees the current breakneck pace of Chinese steel production to slow: Housing and construction activity already show signs of leveling out, not least because price inflation continues to bug Beijing and we expect further measures will be taken to keep price rises under control. The most recent price increases for new homes will most likely mean that Beijing will retain strict property controls, even if this drags on economic growth in H2. Infrastructure activity will...

It has been a wild last 24 hours with the Nikkei down 7%, USD/JPY trading through an almost 300 point range and the Aussie dollar breaching not only 97 cents but also briefly 96 cents yesterday. In my experience over the last 25 years I'd note that volatility begets volatility so we could have a very interesting weekly close and equally with the setup in teh S&P 500 and the Aussie we might actually see some reversals of recent moves. The job of markets and price discovery and price action in markets is to find the path of least resistance. Until yesterday below 96 cents and not far off the...

It's fascinating to watch the exit of Ford shake up commentary alliances and ideology. The loon pond that dominates Australian business media is out in force with soothing words that Australian car manufacturing needs to be let go gently into that good night. Bill Scales appears at the AFR to argue: ...while it will be tempting to see this as a sign of the demise of Australian automotive manufacturing, it’s not. This decision is a direct result of the well-recognised, well-understood and deliberate decisions by Ford in Australia and the US. However it does have important implications...

By Leith van Onselen In the week ended 23 May 2013, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, recorded a large -0.75% decline, which followed last week’s -0.45% fall. It was the biggest weekly decline in over a year (see next chart). All capital cities recorded falls over the week, with Brisbane fairing the best and Melbourne the worst (see next chart). Values are down -0.64% so far in May at the 5-city level, with all capitals except Perth experiencing significant declines (see next chart). Over the past 12...

By Leith van Onselen The Canadian housing market, ranked by The Economist as one of the world's most overvalued, looks to have finally hit the wall. After peaking in August last year, house prices have begun to fall, down -1.2% nationally (see next chart). More importantly, a new report from the Canadian Association of Accredited Mortgage Professionals (CAAMP) forecasts a dramatic slowing of housing construction across Canada as recently tightened mortgage lending criteria, which reduced amortisations on CMHC-guaranteed mortgages to 25 years from 30 year, start to bite. These changes,...

Another round of PMI data from the Eurozone overnight and once again, even though there are some minor improvements, the data is still poor. PMI signals ongoing recession in second quarter, though downturn eases in May Flash Eurozone PMI Composite Output Index(1) at 47.7 (46.9 in April). Three-month high. Flash Eurozone Services PMI Activity Index(2) at 47.5 (47.0 in April). Three-month high. Flash Eurozone Manufacturing PMI(3) at 47.8 (46.7 in April). Three-month high. Flash Eurozone Manufacturing PMI Output Index(4) at 48.2 (46.5 in April). Four-month high The Markit Eurozone PMI...

For those that don't know, the MB office has a red strobe light on the ceiling that we call the Pascometer. It is an impeccably reliable buy and sell indicator that relies upon doing the opposite of any Michael Pascoe column.  Recently it's proved its worth in marking the rolling over of the bank bubble and the dollar. Sadly for the nation it is wailing again, this time for stocks. From the SMH: Never mind the bulls and bears, it's the lemmings that continue to rule the market for many individual Australian investors – the mug punters taking themselves for a ride, buying high, selling low...

After getting a bath over two weeks since the budget, and being slapped in the face with the Ford operations closure announcement on Thursday, the mood around the Australian dollar is darkening. In today's broadcast, Deus Forex Machina and Gunnamatta chew over the backdrop and the outlook, the potential for an AUD bounce, key support levels, and cogitating over how the RBA may relate the upcoming mining capex data to it's next move. Join the Forum discussion on this...

Find below the iron ore price table for May 23, 2013: Rebar futures were down too and are tight on last year's lows. No news...

Global Macro/Markets: Austerity: the history of a dangerous idea - The New Yorker 'Recessions Hurt, but Austerity Kills': Study - CNBC The banking crisis as a giant carry trade gone wrong - VOX Don’t fear the bubble - Reuters Are we living in a time of asset bubbles? - Marginal Revolution Fears grow over EM sovereign bond bubble - Financial Times BRICS risk 'sudden stop' as dollar rally builds - The Telegraph North America: Why US corporations should pay more tax - The Economist How Apple dodges paying corporate taxes - New York Times Creative destruction goes MIA in...

Volatility is in full force today and nowhere more so than Japan. It doesn’t matter that asset class, traders are out to play today in a big way, with the Nikkei trading in a 1459 point or 9.2% range! It’s been an incredible move, and anyone wanting to see a full-scale liquidation of a hugely over crowded trade will use this as textbook. Japanese government bonds initially pushed up to 1% on the open, but that was a bit too much and buyers have stepped in, although it has hardly been convincing. Japanese Chief Cabinet Secretary Yoshihide Suga detailed that the BoJ has done a good job in...

By Leith van Onselen Earlier this month, I posted an article arguing strongly that Australia's state and territory governments should look to replace stamp duties on property transfers with a broad-based land values tax, levied on all properties: Broad-based land value taxes (LVT) would... assist in the provision of new housing via two channels. First, an LVT would help make infrastructure investments self-funding for governments, since any land value uplift brought about through increased infrastructure investment (e.g. new roads, trains, etc) would be partly captured by the government via...

By Leith van Onselen RP Data has today released a short note (below) on the state of the nation's rental markets, which it notes are posting solid (but unspectacular) gains, with both rents and rental yields rising: Across Australia’s capital cities over the past 12 months to April 2013, rental rates have increased by 3.5 per cent for houses and 3.3 per cent for units. While according to Mr Kusher this is a relatively measured rate of growth, it remains higher than inflation. Across the combined capital cities, median weekly rents are recorded at $474/week for houses and $440/week for...

The hapless AiG, the most ineffectual lobby in Australia, has responded to the Ford closure today thusly: "Today’s announcement by Ford that it will end production at its Broadmeadow and Geelong plants in 2016 is a watershed moment in Australian manufacturing," Ai Group Chief Executive, Innes Willox, said today. "The loss of 1200 jobs over the next three years is deeply concerning as are the implications for the many businesses and employees linked into Ford Australia’s assembly operations in Victoria. We welcome any support that can be given to those employees impacted both directly and...

China's May Flash PMI is out and the bad news keeps rolling with it sliding back into recessionary territory at 49.6 versus expected of 50.4. As you can see the internals are pretty lousy: Not disastrous but not great either. There was some interesting action in the dollar. It dropped 30 pips a minute before the release suggesting someone had an inside run, then rallied half of that back afterwards. Currently at 96.36 and still looking...

What is it, national MB day today? From the AFR, Warwick McKibbin is out with another warning that will be familiar to readers: Professor McKibbin said the expected massive expansion of shale gas in the US would reduce the price of world gas prices from 2016 onwards. This would cause manufacturers and other energy-intensive industries to switch to gas-fired power from coal-fired power and hurt Australia’s coal prices and export volumes. “From Australia’s point of view this shock in the US reduces Australia’s terms of trade by about 8 per cent over the next couple of years,”...

The Westpac monthly consumer expectations pack is out and shows well anchored inflation expectations: But a big jump in unemployment expectations: Still not quite a tend break but worrying nonetheless. Expectations Bulletin Pack May...

From the SMH: Ford Motor will close its local car manufacturing plants in 2016 after almost nine decades in the country. Ford, the smallest of the country’s three manufacturers after Toyota and Holden, will shut its assembly plant at Broadmeadows in northern Melbourne and an engine plant in Geelong to the west of the city, the company announced this morning. About 1200 jobs will be cut as a result of the closures, the company said this morning. ...‘‘Australian manufacturing can’t keep its head above water,’’ said Katrina Ell, an economist at Moody’s Analytics in Sydney....

In one promising development today, the arse is departing from the Australian dollar, currently trading down towards 96.5 cents. First it was Bernanke and then Ford in the two step: On a longer time frame the key levels are last year's low at 95.70/80 and then huge at 94 cents (h/t Deus Forex Machina): Having refused to keep the dollar down and successfully hollowed out the economy in the process, I can't wait to see the heroes at the RBA buying...