ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets US and European markets have naturally taken heart from the raft of M&A deals (and speculation) in a number of geographies. With sentiment where it is, new all-time highs in the US benchmark look relatively assured. There will be a time to be tactically short US markets, but with the trend clearly higher, companies beating the relatively low earnings expectations, M&A activity lifting sentiment and the prospect that we get a decent weather-related payback in the economic data flow in the near term  all suggests that the time is not...
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Real Aussie house prices 1.8% below peak

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen RP Data’s Cameron Kusher has produced an interesting post this afternoon on Australian housing values in the wake of today’s March quarter CPI release from the ABS: Over the 12 months to March 2014, combined capital city home values have increased by 10.6% however, when you adjust for inflation the rise has been a lower 7.5%.  Across each city the rate of capital growth over the year is somewhat lower when you adjust for inflation and markets such as Hobart and Canberra which have recorded low levels of value growth have actually recorded value falls. Home...
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Joint Strike Fighter targets rent

unnamed From Crikey's Bernard Keane comes a tale of Lockheed Martin entitlement in Australia's quest to dominate SE Asian skies: The problem is, the F-35 program is not under control, even according to the US government. In September, thePentagon Inspector-General issued yet another in a long line of scathing reports about the program, having found over 700 separate problems with the program's administration that led to over 300 findings. "The F-35 Program did not sufficiently implement or flow down technical and quality management system requirements to prevent the fielding of nonconforming hardware and...
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Bassanese sees rate cuts!

imgres According to David Bassanese: As a result, the RBA is likely to remain comfortable in retaining its neutral policy bias. Indeed, if the Australian dollar remains uncomfortably high and business confidence continues to wind back, the RBA remains well placed to even consider a return to an easing policy bias. To my mind, the RBA has already been too spooked by the recent narrowly based rise in Australian house prices and was too quick to abandon its jawboning strategy of talking down the Australian dollar. The result is that there has been across the board strength in the Australian dollar so far...
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Roy Morgan consumer confidence bounces

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index has been released for the week ended 20 April, which registered its first rise in four weeks, jumping 3.4 points (+3.0%) to be above its long-term average (113.0) but well below the highs reached after last year’s Federal Election: The improvement in the week was driven by strength in consumers’ perceptions of ‘economic conditions next year’ and ‘financial situation compared to a year ago‘; with the latter sub-index most correlated with household consumption growth. Below tracks the ANZ-RM...
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PBOC: No change to “prudent policy bias”

china-slow-down-red-flag-sign From ForexLive: People’s Bank of China (PBOC)  will cut the deposit reserve requirement for rural financial institutions: 2% cut for rural commercial banks and a 0.5 percentage point cut for rural cooperatives Will take effect from Friday This takes the reserve requirement for rural commercial banks to 15%; rural cooperatives to 13% (compared to most large Chinese institutions, required to maintain a 20% deposit reserve ratio) Note: From MNI, quoting an unnamed source: “In 2010, the PBOC launched the differential management of the reserve requirement for banks. This reserve cut for...
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REIWA: replace stamp duty with land tax

ScreenHunter_2162 Apr. 23 13.54 By David Collyer, cross-posted from Prosper Yesterday REIWA president David Airey issued a call in the West Australian newspaper for the WA government to abandon Stamp Duty and fund this by removing the many wheezes from the tattered State Land Tax. Hooray! Airey says: “It’s time to recognise that stamp duty on property as a means to raise revenue is clumsy, inefficient and out-dated. “REIWA calls on the Government to have a serious look at broadening the land tax base to all property owners with a view to abolishing stamp duty altogether. “The benefit to property owners is the...
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Australian dollar timbeeeer!

imgres The Aussie is still falling now, down a cent on the day: This looks to me a pretty decent move in the making. After all, if there's no inflation then there's no expanded carry coming. On the downside, there are few serious supports before 92 cents: It would probably take more bad news or a turn in the global "risk on" phase to take it below 92 cents but here's...
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Rents continue to decouple from population

ScreenHunter_2154 Apr. 23 13.16 By Leith van Onselen The March quarter consumer price index (CPI) data, released today by the Australian Bureau of Statistics (ABS), revealed a continued moderation of rental growth at the national capital city level. According to the ABS, rents nationally grew by 0.7% over the March quarter of 2013 - up slightly on the 0.6% growth recorded in December - but moderated to 2.9% growth in the year to March - the lowest annual growth recorded since June 2006 (see below charts). The outlook for rental growth is unclear. On the one hand, population growth is running strong, which...
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Bill Evans on the CPI and interest rates

images Fresh from our Bill: This number will come as a positive surprise for the RBA. Recall that following the 0.9%qtr print for underlying inflation for the December quarter they raised their forecast for underlying inflation to 3%yr from 2.5%yr. That implied they expected a probable 0.8%-0.9% print for March quarter underlying inflation. The implication is that the Bank expected that there would be 2-3 period inflationary impulse from the fall in the AUD in 2013, as their view on the state of underlying demand would allow for the same sort of pass-through or margin widening they felt they observed in...
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Bullhawks strut their stuff

imgres From the Kouk: It would be a wild exaggeration to say that Australia has an inflation problem, but the March quarter CPI highlighted the fact that the strength of the domestic economy is spilling over into a somewhat uncomfortable acceleration in the inflation rate. While the March quarter inflation rates came in under market expectations (which says more about those expectations than it does about the actual hard data), inflation is moving higher. Whether it is the annual headline inflation rate – which has risen from a low of 1.2 per cent in the June quarter 2012 to 2.9 per cent...
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NSW wankers deserve higher gas prices

imgres From the AFR: NSW households are set to be slugged with an increase of up to $225 a year on their gas bills as of July 1 as the start-up of LNG exports from Queensland places a squeeze on east coast supplies. The price hikes recommended by the state pricing regulator IPART on Wednesday are lower than those sought by AGL Energy and Origin Energy, but represent a hefty annual increase of 17.6 per cent, the third straight year of price rises. IPART put the rises down to rising gas costs. The report goes on to quote one Phil Laird, national co-ordinator for the Lock the Gate Alliance: “Gas...
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Australian CPI in detail

ScreenHunter_01 Jun. 08 23.33 By Leith van Onselen As noted briefly by Houses & Holes, the Australian Bureau of Statistics (ABS) has released the Consumer Price Index (CPI) data for the March quarter 0f 2014, which registered a modest quarterly increase in prices, with the result also coming in well below economists’ expectations. According to the ABS, headline CPI rose by a modest 0.6% in the March quarter, which follows December’s strong 0.8% rise. The 0.6% increase in the March quarter was 25% below analyst’s expectations of an 0.8% increase over the quarter. On an annual basis, headline CPI growth...
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China Flash PMI remains weak

dsfgdw China's April Flash PMI is out and contained no real surprises with still quite sluggish conditions: Flash China Manufacturing PMI™ at 48.3 in April (48.0 in March). Two-month high. Flash China Manufacturing Output Index at 48.0in April (47.2 in March). Two-month high. The internals are still weak: About as expected with a little lift in the second derivative of local conditions but a disappointing deterioration in export business. Dollar fell another 10 pips, full report...
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Australian dollar smashed as CPI fizzles

imgres The Australian Bureau of Statistics has released March quarter inflation numbers and the bullhawks can flee back to their their dung-bottomed eyries with an undershoot on every measure, headline at 0.5% and 2.9% annual and trimmed mean at 0.5% and 2.6% annual: No rate hikes are coming. The dollar was smashed lower by a half cent: More to come from...
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RBNZ slams the population ponzi

ScreenHunter_07 Mar. 19 12.02 By Leith van Onselen The Reserve Bank of New Zealand's (RBNZ) Michael Reddell has written an interesting paper questioning the merits of New Zealand's high immigration program, which appears to have crowded-out (through higher interest rates and a high average real exchange rate) other productive investment, lowering living standards in the process: Over the last 50 years (and more) New Zealand’s population has mostly grown materially faster than the populations of other advanced countries... All else equal - and in particular for an unchanged savings rate - faster population growth...
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ASX hits post-GFC high

5500 The ASX200 is trading above 5500 points today for the first time since mid 2008. It's daily chart look bullish: It weekly chart looks bullish: Pretty much everything is up today with the exception of iron ore miners. That situation is unsustainable I'm...
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No v-shaped recovery for DEEWR job vacancies

vacancies2 The Department of Employment and Education (DEEWR) has released its March job vacancies index and the news is pretty average, falling 2.6%: There is only stabilisation, no recovery: It's broad based weakness by state: And occupation: Those expecting a  sharp jobs recovery are very likely going to be disappointed. Full report...
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Padbury’s mystery man revealed

imgres From the ASX, Padbury Mining has confirmed that Roland Bleyer  is the mysterious private equity player behind the $6.4 billion deal to resuscitate the Oakajee iron ore project. Padbury has extended its trading halt. From The Oz recently: It might have been just another TV interview, save for the fact that a well-lubricated Willesee slurred his words and used the phrase “bullshit artist” as he questioned Mr Bleyer, who at the time ran a chain of hair regrowth, weight loss and cosmetic surgery clinics. I should have offered to fund it...
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Japanese currency war to go nuclear

imgres From the AFR: Japan’s $1.26 trillion Government Pension and Investment Fund this week announced changes to its investment committee that would fast-track plans to shift money out of Japanese government bonds (JGBs) into equities and foreign bonds. ...GPIF, which is roughly equal in value to Australia’s institutionally managed superannuation assets, holds more than half its assets in ultra-low yielding JGBs but could reduce its holdings by 15 to 20 per cent to move into stocks and foreign bonds, with about $60 billion expected to flow into the latter as early as June. “It’s...
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John Hewson: End the superannuation rort

ScreenHunter_2139 Apr. 23 09.33 By Leith van Onselen Former federal Liberal Party Leader, John Hewson, has written a well-argued piece in The AFR today, joining the chorus to wind-back superannuation concessions granted to high income earners: It’s worth reconsidering concessions granted for super: they’re as costly as the age pension ($44.8 billion compared to $44.9 billion in age pension), but are growing more rapidly... Treasury estimates that from the combined support of superannuation tax concessions and the age pension, most people (about 80 per cent) receive around $270,000 support over their lifetime. In...
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Daily iron ore price update (weak)

images Sorry this is late today. Data issues. Here are the iron ore price charts for April 22, 2014:   Paper markets were weakish though rebar futures managed a small gain. Physical was weak too although the Baltic Dry capesize component finally climbed 1.5%. Nothing much to say today except prices look biased lower...
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Phat Dragon sees a slow China all year…

dfgwe Here is Westpac's Phat Dragon with his quarterly update: The end-2013 data described an investment cycle that was beginning to decelerate, with the softer elements beginning to out-weigh those that were still in good health. Clearly 2014 was beginning on a softer footing than the year that just closed, as Phat Dragon had long foreshadowed. The Q1 data, when it arrived, confirmed the slowdown in no uncertain terms. The weakness of nominal activity was particularly striking in the March quarter national accounts, consistent with the deterioration of survey measures of business conditions throughout the...
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It’s time to end pharmacy entitlements

ScreenHunter_2078 Apr. 16 12.28 By Leith van Onselen Following Janet Albrechtsen's cracking article last week attacking Australia's pharmacy racket, The AFR's Tony Boyd has written an detailed article today outlining the rorts taking place across pharmacies, as well as some of the pressures for change: There was a time when joining Australia’s $12 billion retail pharmacy industry was a passport to guaranteed wealth creation thanks to a stack of business-friendly factors. Territorial oligopolies were clearly marked, limits were placed on the number of pharmacies one entity could control and above all, there was a handsome...
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Swaggering unarmed in the global currency war

imgres The RBA appears to have rolled out board member John Edwards to counter yesterday's government leak that it was annoyed that the bank had allowed the dollar to rise beyond forecasts. From the AFR: Speaking after The Australian ­Financial Review revealed the government’s anger at the Reserve Bank’s ­decision to drop its easing bias, which has been blamed for boosting the­ ­dollar, Dr Edwards said Australia was in the grip of a “bountiful” mining and energy export-driven revenue surge. ...“It’s very difficult to expect rhetoric to have an impact on economic forces which are...
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Standards of living begin their fall

ScreenHunter_04 Feb. 08 21.40 By Leith van Onselen The Australian has published new research by the Canberra University’s National Institute for Social and Economic Modelling (NISEM), which sows that Australian wages rose by only 0.1% over the December quarter versus a 0.7% rise in living costs, meaning that real wages and living standards are going backwards. And NISEM sees no immediate relief in sight: AVERAGE living standards fell in the December quarter and the outlook for households is now weaker than at any time since the Hawke government in the 1980s... NATSEM principal research fellow Ben Phillips said the net...
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Australia’s supply-side squeeze continues

ScreenHunter_15 Mar. 05 15.42 By Leith van Onselen RP Data's Cameron Kusher has written an interesting analysis of recent supply-side trends in the Australian housing market, which points to ongoing constipation: Across individual capital cities, the 2011 Census reported that on average; Sydney, Brisbane and Darwin had 2.7 persons per household, Melbourne, Perth and the Australian Capital Territory had 2.6 persons per household and Adelaide and Hobart had 2.4 persons per household.  Returning to the original findings, over the year to June 2013, the capital city population increased by 313,387 persons and 114,825 dwellings...
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The banana republic parliament

imgres From Phil Coorey at the AFR: The Abbott government is considering scrapping plans to cut a welfare payment to children of war veterans in order to secure the support of Clive Palmer to repeal the mining tax. Senior sources told The Australian Financial Review that the government was “happy to negotiate” with Mr Palmer over plans to axe the annual payment of $211 to about 1240 children. The development came as the ­mining billionaire threatened to go on the rampage in the Senate after July 1, by blocking the repeal of the mining and carbon taxes and forcing the government to call a...
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Einhorn shorts the tech bubble

20140422_short_0 The recent reversal in the tech bust has been quite something to behold: This looks like a classic short squeeze following Janet Yellen's recent dovish speech. Zero Hedge has a useful chart for evidence: We are still a good way from any new high in the Nasdaq and the chances are that when US data warms up and rate hikes expectations return high-beta is going to resume its slide. David Einhorn of Greenlight Capital thinks so: We have repeatedly noted that it is dangerous to short stocks that have disconnected from traditional valuation methods. After all, twice a silly price is not twice...
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Tier 1 Chinese cities begin property discounting

imgres Cross-posted from Investing in Chinese Stocks. Prices and volumes are falling in Beijing and real estate agents are started to drum up sales by delisting homes listed at high prices. Lots of homes listed online now show price cuts, and volumes have picked up recently from depressed levels. Total listings are down about 50% in some parts of Beijing due to listings being removed. Online Prices Falling Everywhere; Real Estate Agents Cut Prices 30% (网上随处可见降价房 北京中介三成房源进入降价通道) "Two weeks ago the price fell 200,000 yuan," "6 hours ago the price fell...
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Pettis: 11 reasons China’s debt must be faced

china-slow-down-red-flag-sign Exclusively from Michael Pettis' newsletter: 1.   GDP growth has been implicitly increased by the amount of losses that should have been, but were not, written down. This means that China’s GDP today, compared to countries in which it is more difficult simply to roll over losses indefinitely, is overstated, and I suspect that it may be overstated by as much as 20-30%. 2.        In that case all GDP-related data is biased in a predictable way. Productivity numbers, for example, are biased upwards, and real worker’s productivity is lower than the numbers posted...
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The global gas price convergence

dsvgsd Capital Economics has a nice note out this morning on global gas price convergence. On the supply side: Based on current projections, Australia’s output of LNG will grow from a provisional 21m tonnes in 2013 to 82m tonnes by 2019. The country will overtake Qatar as the world’s largest producer. Less certain, but equally ambitious, are US LNG export plans. Assuming that the seven projects that have received EPA approval do eventually move to the production stage, US LNG exports could reach 78m tonnes per year by 2020. Meanwhile Russia is also pushing to increase its LNG export capabilities....
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World steel production rebounds

Production From the World Steel Association comes strong March production figures: World crude steel production for the 65 countries reporting to the World Steel Association (worldsteel) was 141 million tonnes (Mt) in March 2014, an increase of 2.7% compared to March 2013. In the first three months of 2014, Asia produced 274.0 Mt of crude steel, an increase of 2.6% over the first quarter of 2013. The EU produced 43.8 Mt of crude steel in the first quarter of 2014, up by 6.7% compared to the same quarter of 2013. North America’s crude steel production in the first three months of 2014 was 29.9 Mt, an...
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Links 23 April 2014

ScreenHunter_01 Apr. 02 06.19 North America: House Prices Are Important: A Simple Explanation for Why the U.S. Middle Class Has Fared Poorly - National Review Online U.S. Emission Rules Would Far Outweigh Impact of Keystone Pipeline - New York Times How the Internet Is Taking Away America’s Religion - Technology Review 50 Years Into the War on Poverty, Hardship Hits Back - New York Times Europe: Italian banks look to private equity firm for bad loans vehicle - Financial Times Under Russia, Life in Crimea Grows Chaotic - New York Times Ukraine peace deal falters as rebels show no sign of surrender -...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 By Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets It has been a good return to trade for Asia with markets riding positive sentiment from US earnings and economic data. In Australia it has been all about stocks hitting fresh highs with the likes of Woolworths, Westpac and ANZ trading at record highs. We’ve also seen cycle highs for other stocks like Woodside Petroleum trade at cycle highs. This is encouraging traders to add to longs as they take advantage of the price momentum on a technical breakout. While equities are enjoying some modest gains, major FX pairs have been...
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