Weekend Links 31st Jan – 1st Feb 2015

reynard Global Macro/Markets/Commodities I Do Not Think That Number Means What You Think It Means - Krugman Worst-Case Scenario: Everything Can Go Wrong This Year - Bloomie Fanatics, Charlatans, and Economists - Project Syndicate Oil-Price Slide Hits LNG Markets - WSJ Asia/China China Further Tightens Grip on the Internet - NYT Chinese universities ordered to ban textbooks that promote Western values - SCMP New Rules in China Upset Western Tech Companies - NYT ‘US sleeping as China courts Thailand’ - Thai Visa Pakistan and India: the Tension Grows - NEO Europe/UK Russia...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets It’s a good day to be an equity bull. European and US markets look set for a renewed tilt at recent or all-time highs, while the Nikkei has found good buying and looks set to test the top of its recent range at 18,000. Even the Greek market has seen a modest rebound and, while there have been articles about Greece having no choice but to leave the monetary union, there is also an argument that the current program of structural reform will be maintained. ASX 200 looking strong Locally in Australia the ASX 200 is a pillar of strength and...
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Bill Evans: RBA to cut next week

unnamed Fresh from Westpac's Bill Evans: The Reserve Bank Board meets next week on February 3. Since we changed our view on December 4 last year we have consistently argued that the board will decide to cut the cash rate by 25bps at this February meeting. In the discussion below we set out the reasons why we have retained that view. In last week’s note we highlighted the relevance of the December quarter inflation report as an important input to the policy decision. The report showed a slightly higher quarterly print on both headline and underlying inflation. We expected 0.1% on the headline and 0.6%...
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Investors see rising mortgage risks

ScreenHunter_5841 Jan. 30 14.53 Cross-posted from MARQ Services Morgij Analytics has this morning released a survey of institutional investors and other financial market participants taken in the latter part of 2014 to gauge respondent’s views of the drivers for Australian housing and mortgage markets for 2015 and beyond. Survey participants were asked to rate 20 drivers of Australian housing and mortgage markets and the overall index showed a mild negative bias coming in at -1. A level below 0 reflects the likelihood of increased risks in Australian housing. Graham Andersen, Chairman and Founder of Morgij...
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Comrade Campbell to lose and launch coup?

images From Crikey: Barring a last-minute turnaround, it looks likely that Campbell Newman will lose his inner-city Brisbane seat of Ashgrove. However, as our very own William Bowe has predicted, his party looks set to win the election. And theoretically, that means he could remain premier of Queensland. A column in The Conversation by constitutional lawyer and Sydney University professor of constitutional law Anne Twomey has quickly made a splash after suggesting there was no legal reason Newman could not continue as premier. The argument goes like this: calling an election doesn't mean the position of...
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Bloxo wavers

Big_smile From the happy warrior: Australia’s rebalancing act is underway; low interest rates are already working and the lower AUD should lift growth At the same time, inflation is low, which leaves the RBA with scope to consider rate cuts, although the trade-off is the risk of over-inflating an already booming housing market We still see the RBA holding rates steady next week, but given recent cuts by other global central banks, it is a close call, and a rate cut is certainly a possibility To cut or not to cut, that is the question Whether the cash rate will be cut again or not is being hotly...
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Iron ore miners rally on as futures stall

123 The big miners are all up again today on the back of a rising market and ongoing FMG hope. BHP and RIO are up firmly but FMG has powered another 5%. Here are the indexes: The RIO idiocy spread is at lunatic wides: No change in the junior mausoleum: Dalian stable at plus 1...
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Lower petrol prices worth two rate cuts

ScreenHunter_04 Sep. 23 15.14 By Leith van Onselen There's a lot of commentary today suggesting that lower petrol prices are providing a benefit to households equivalent to up to two rate cuts. From The AFR: Deutsche Bank says households are receiving a $7 billion boost from lower petrol prices. "That's equivalent to more than 50 basis points of interest rate cuts, or roughly 2 per cent of retail trade and 1/3 the size of the Rudd government stimulus payments," Deutsche analysts write in a note... Bank of America Merrill Lynch's Saul Eslake [says] the fall in petrol prices equates to a sizable rate cut. "Retail petrol...
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Valemax welcomed in China

images From Reuters: Ships in the Valemax fleet of 400,000dwt fleet of ore carriers have been allowed to dock at five ports in China as a ban that had been in place since 2012 is relaxed. Vale investor relations chief Rogerio Nogueira said the Brazilian miner was working to increase the number of ports open to its ships. The Chinese port ban had stymied Vale’s efforts to reduce freight costs and compete with Australian based-rivals such as BHP Billiton and Rio Tinto. With oil and this, Vale is powering down the cost...
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Another bumper month for home loans

ScreenHunter_06 Jun. 26 22.42 By Martin North, cross-posted from the Digital Finance Analytics Blog APRA just released their monthly banking statistics, which provides a view of lending and deposit portfolios from the banks (ADI’s). Overall home lending by the banks rose $9.12 billion to $1.315 trillion. Owner Occupied loans grew by 0.59% and Investment Loans by 0.9%, with Owner Occupied Lending now accounting for 65.1% of the loan book (down from 65.2% last month). Looking in more detail at the individual bank data, we see that CBA maintains its leading position in the Owner Occupied sector, whilst WBC leads the Investment...
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PPI confirms lack of inflationary pressures

ScreenHunter_5834 Jan. 30 12.06 By Leith van Onselen The Australian Bureau of Statistics (ABS) today released Producer Price Index (PPI) data for the December quarter, which has registered a 0.1% quarterly increase in final (stage 3) prices and an increase of only 1.1% over the year: The 0.1% increase in final (stage 3) prices was driven primarily by increases in the prices received for building construction (+0.6%), other transport equipment manufacturing (+5.8%), and computer and electronic equipment manufacturing (+5.5%), partly offset by falls in the prices received for petroleum refining and petroleum fuel...
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Investor mortgage growth hits double digits

ScreenHunter_12 Sep. 23 12.54 By Leith van Onselen The Reserve Bank of Australia (RBA) today released its private sector credit aggregates data for the month of December: A chart showing the long-run breakdown in the components is provided below: Personal credit growth (0.0% MoM; 0.1% QoQ; 0.9% YoY) remains in the gutter, whereas business credit growth (0.5% MoM; 1.4% QoQ; 4.8% YoY) and housing credit growth (0.6% MoM; 1.8% QoQ; 7.1% YoY) continue to accelerate, but remain below their long-run average growth rates (although housing credit is still growing more than twice as quickly as wages and off a very large...
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Metadata: a honey pot for hackers and lawyers

ScreenHunter_5827 Jan. 30 10.10 By Leith van Onselen The Abbott Government's metadata legislation, which would require telecommunications companies to store detailed information about the calls and internet use of its customers for two years, has come under fire from Telstra's chief information security officer, Michael Burgess, who claims that a central data storage system would be an attractive target for hackers, including foreign spy agencies. From The ABC: "The issue here is now we're advertising that for a customer of Telstra, there's a whole range of data, depending on what services they have, that we made available, or...
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Can Turnbull fix the NBN?

ScreenHunter_5820 Jan. 30 08.50 Cross-posted from The Conversation: The rules around the NBN have moved rapidly over Christmas. On December 14th, the Minister for Communications, Malcolm Turnbull, released new rules requiring all providers of high-speed broadband services to be vertically separated. These rules were aimed at TPG, which was rolling out fibre-to-the-basement (FTTB) in urban apartment buildings. FTTB would compete against the NBN and potentially undermine the ability of the NBN to use high city prices to subsidise the bush. The new license conditions had their effect. They stopped TPG, at least...
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Aussies continue exodus to New Zealand

ScreenHunter_5821 Jan. 30 09.00 By Leith van Onselen Statistics New Zealand has today released its permanent & long-term migration figures for December 2014, which revealed that net migration from New Zealand to Australia is at the lowest level in around 21 years: According to Statistics New Zealand: The unadjusted figures for the December 2014 year showed New Zealand's net gain of migrants (50,900) exceeded 50,000 for the first time... The increase in migrant arrivals between the December 2013 and 2014 years was led by India (up 4,600), Australia (up 3,700), China (up 1,300), and the Philippines (up 1,200). The...
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Macro Morning: Golden crunch

marketmorning By Chris Becker Last night saw a repositioning in commodity risk to further downside as the currency proxies were slammed alongside the actuals, namely oil, copper, gold and iron ore. This wasn't a new move or anything unexpected (hyperbolic economists on twitter aside) but rather a stronger application of selling torque as technical levels were breached and more justifications were made to rejoin an overcrowded USD long trade. Among this, the US earning season continued as Alibaba was smashed, while Amazon surprised and Shell announced huge cuts in exploration spending (stranded reserves...
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Daily LNG price update (bomb Shelled)

5 The Brent oil price rose touch overnight to $ 49.07 as I write. The big news was a large capex cut from Shell, via the FT: Excluding exceptionals such as tax adjustments from the sale of certain assets, profits for the fourth quarter of last year were $3.26bn, lower than analysts’ estimates of about $4.1bn and down from $5.85bn in the third quarter. But earnings were up 12 per cent from a year ago. Ben van Beurden, chief executive, said the group would respond to the fall in oil prices by “stepping up our drive for stronger capital efficiency”. This would include lower capital spending this...
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Townsville bust harbinger for Perth?

ScreenHunter_5816 Jan. 30 06.53 By Leith van Onselen The AFR is reporting today that Townsville's property market is being hammered by falling prices and rents as the mining bust takes hold, and a flood of subsidised housing pushes up vacancy rates: Townsville... is struggling to cope with an increase in subsidised housing and rising unemployment, which are driving up mortgage arrears and vacancies. ...“Rents are now falling and investors are unable to find tenants due to the oversupply,” [Domain Group's Dr Andrew Wilson said]... Defence Housing Authority projects had added to the problem... Last year house prices fell...
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Will house prices fall on rising supply?

ScreenHunter_01 Mar. 03 22.48 By Leith van Onselen Stephen Koukoulas (aka "The Kouk") has penned an interesting piece in The Adelaide Review arguing that Australian housing could face a 5% to 10% 'correction' over the next three or so years as strong dwelling supply outstrips falling population growth: During 2014, there has been an important change in the supply and demand fundamentals. Australia’s population growth is starting to slow... [Yet] the most recent building approvals data show a sharp lift in new dwelling construction... The annual pace of new dwelling approvals rose to above 190,000 in April 2014, and in...
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RP Data weekly Australian house price update

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen In the week ended 29 January 2015, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, rose by 0.46% (see next chart). Home prices rose in all major capitals (see next chart). So far in January, home values nationally have risen by 1.18%, with the three biggest capitals rising and Perth and Adelaide falling in value (see next chart). Over the past 12 months, home values have risen by 8.16% at the 5-city level, with all capitals rising in value (see next chart). The next chart plots the daily...
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Australian dollar enters free fall

imgres Interest rates don't affect the currency. The RBA has no control over the currency. Nobody can forecast currency movements. On the excuses ran for years and years of macro mismanagement and hollowing out of the local economy. Well, guess what, they were all bullshit and today we have the proof. As markets embrace imminent RBA rate cuts, supported by a commitment to macroprudential tightening, the Australian dollar is in free fall, down 2% last night to the low $77s. This is despite European QE, despite Fed "patience" on tightening, despite wholesale rate cuts worldwide. Here's the...
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Stuck with Dead Duck another six months

sda From the AFR: Tony Abbott has until the second half of this year to turn around the government’s fortunes or risk losing his job, his colleagues say. Under a contingency plan being actively discussed within senior ranks of the Coalition, ministers and ­backbenchers are willing Mr Abbott to succeed. If not he faces being replaced, possibly by Julie Bishop with ­Malcolm Turnbull as deputy leader and treasurer. “There’s deep concern among the backbench,’’ said a senior member of cabinet. “The question is ‘can Tony turn it around?’ How much more damage can he do in six...
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McCrann pwned

87-terry-mccrann Cross-posted from Forexlive's Adam Button: McCrann is the RBA watcher at the Australian Herald-Sun and he dropped a bomb earlier saying it’s “almost certain” the RBA will cut rates on Feb 3. That report is largely responsible for the plunge in the Australian dollar today. It’s been a see-saw in AUD/USD since the Bank of Canada surprise. The Aussie initially tumbled because suddenly it felt like everyone was going to cut and the OIS market went to pricing in a 40% chance of a cut from 10%. A day or two later, the market began to realize Australian and Canada are different countries and...
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Cross Kouk blames all but himself

Capture From our old friend the Kouk, who MB served up a shellacking for much of the last two years for his uber-aggressive bullishness, hawkish interest rate forecasting and surplus-drive budget ruminations: Kouk officially forecast four rate rises for last year. Here is another sample of his musing from only 10 months ago: The question now being discussed with gusto within the RBA is whether a 2.5 per cent cash rate is appropriate. The answer is obviously a resounding no given the facts that inflation is picking up, exports are booming, consumer spending is strong, dwelling construction is...
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Fortescue blusters and baffles

123 The press has gone FMG hog wild today following yesterday's Q4 production report but the following from the ABC captures much of the picture nicely: NEV POWER: Well there's a wide range of forecasts around where the iron ore price might go. We're in sort of Chinese new year holiday period at the moment, so it's traditionally a time of quite soft market, but there's usually a strong rebound after Chinese new year. So, I suspect we might see a bit of firming post-Chinese new year. SUE LANNIN: Do you blame the big miners like BHP Biliton and Rio Tinto for the current situation, prices that are at...
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