Macro Morning: NASDAQ 5000!

marketmorning-200x200 By Chris Becker On the back of an interest rate cut by China, the American bulls returned to risk markets last night, sending the NASDAQ Composite to its previous 2000 bubble high of 5000 points, as the latest ISM manufacturing report was solid amid higher consumer purchases across the US. This good news was shadowed by a mixed series of secondary reports from Europe with EZ core CPI still hovering at 0.6% while headline rate remains in the deflation zone. Some very minor good news on the job front with the EZ wide unemployment rate down to 11.2% as European peripheral bonds continued to rally as...
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Deloitte describes Australia’s Budget nightmare

ScreenHunter_6311 Mar. 03 09.16 By Leith van Onselen Deloitte Access Economics has prepared detailed analysis for the Business Council of Australia, which shows how commodity prices have already fallen to a level which, at the beginning of this decade, Treasury did not think they would reach before 2020 (see next chart). It also shows how the Budget deficit could be $76 billion higher than forecast over the next four years in the event that the terms-of-trade falls back to its long-run average (see next chart), or $114 billion worse-off if the terms-of-trade fall is accompanied by a slowdown in the real economy. From...
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The dumbest bubble in history

PatrickStar With warnings suddenly flying thick and fast, the history of bubbles has never seen the likes of what is unfolding in Australian property now. Some bubbles have sprung from unlikely sources such as tulips. Others have inflated around bright ideas that held little reality such as the South Sea Company. In stock markets bubbles have certainly been destructive but equity can handle that and they have also left historic legacies of technological advancement. The Roaring Twenties was one, built upon expanding railroads. The millennial tech bubble was another, launching the internet. On the other hand,...
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RBA shadow bolts door on ivory tower

Ivory_Tower_by_Hideyoshi From the RBA's infamously wrong shadow today: Contrary to the CAMA RBA Shadow Board, which on balance recommended a policy of no change, the Reserve Bank of Australia at its February meeting lowered the cash rate from 2.5% to 2.25%. The RBA pointed to a likely fall in economic growth over the next 12 months – around 2.25%, well below trend of 3% – as the main reason for lowering the cash rate. Weak labour market data confirms the soft economic outlook, and financial markets are anticipating another possible rate cut during the next few months. The CAMA RBA Shadow Board, however, on balance...
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Leading UK property economist done for crack

Doug1 The recent revelations of orgies and pimping around Dominic Strauss-Kahn of the IMF have surprised few given that august institution's record of debauched policy. And today we get further confirmation that contemporary economics is largely high with one the UK's most prominent economists, in his own words "world leading", getting done for smoking crack, from Zero Hedge: A leading economist is to step down as executive chairman of an influential City think-tank amid drug abuse allegations. Professor Douglas McWilliams, 63, revealed last night that he is to leave his role at the Centre for...
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TPP pimps grog and ciggies over medicine

Smoking-effects-on-human-body By Leith van Onselen A comprehensive review of the proposed Trans-Pacific Partnership (TPP) trade agreement - the US-led trade deal between 12 Pacific rim nations (including Australia) - has found that the agreement would force-up Australian medicine costs, stop some Australians from taking their medicines, and make it harder for the Government to regulate against tobacco and alcohol. Here's Fairfax's Peter Martin: The so-called health impact statement, compiled by the Centre for Health Equity Training Research and Evaluation at the University of NSW relies on leaked texts of draft chapters of...
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Australia dollar levitating as bond spreads collapse

Levitaatio In advance of the RBA meeting today, Australian short end bond yields have plunged to record lows. The 2 year yield is at 1.81%, almost fully pricing two more rate cuts, the 5 year yield is at 1.98% and the 10 year is at 2.49%, still 20 pips above its recent low: RBA easing has also reversed the curve flattening that's been in play for a year, indicating better hopes for growth:   And the US/Australia bond spread has completely collapsed: The last time the short end spread was at these levels the Australian dollar was trading at 50 cents and under. So which period is...
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Peak coal in China last year?

CO2-thumb-500xauto-18763-thumb-500x356-18764 From the Huff Post: Good news! China's coal consumption fell by 2.9 percent in 2014, the first drop in 14 years, according to official Chinese energy statistics released yesterday. Glen Peters of the Global Carbon Projectcalculates that China's CO2 emissions have also fallen, by 0.7 percent, for the first time this century. So contrary to grumbling in the U.S. Congress about the strength, or even existence, of China's climate commitments, it's clear that China's efforts to cut its coal consumption and carbon emissions are not only real but already producing results. There is a debate about...
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How Lang Hancock found the Pilbara

1234 From the archives, this is quite entertaining in various ways, not least the accents. How the Pilbara was...
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AWU demands irony ore cartel inquiry

irony-shirt From The Australian: An Australian Workers' Union resolution demanding a parliamentary inquiry into Rio Tinto and BHP's iron ore practices is baseless grandstanding, the Minerals Council of Australia (MCA) says. The Australian Workers' Union's national meeting on Monday passed a resolution condemning the companies for what it claimed was "unconscionable market conduct". The AWU accused the mining pair of flooding the iron ore market while demand is falling to drive smaller, higher cost suppliers out of the sector. It's not often I agree with the Minerals Council of Australia but its description...
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Daily iron ore price update (cut schmut)

anvil-200x200-200x2001-200x200 Here are the iron ore price charts for March 2, 2015: Qingdao lifted a touch but benchmark fell 20 cents to $62.80. Paper was very cynical, quite rightly, about the Chinese rate cut. Singapore 12 month swaps are on right at the verge of breaking down and Dalian still has a bearish descending triangle pattern. In another hit to the bulls, port stocks rose 3 million tonnes over the Chinese holiday period to nearly 100 million tonnes. At least rebar average has bottomed for now. In news, India has jacked iron ore and coke import tariffs from Platts: India has hiked its customs...
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Daily LNG price update (convergence)

elephant-clipart-black-and-white-13285-cartoon-elephant-clip-art-design-200x200 The Brent oil price took a caning last night as reality dawned that the glut is not yet over. As I write the price is down nearly 5% to $59.70. The news flow was nearly all negative. From CNBC: Iranian Foreign Minister Mohammad Javad Zarif said a deal on Iran's nuclear program could be concluded this week if the United States and other Western countries had sufficient political will and agreed to remove sanctions on Tehran. ...Analysts say Iran could increase its oil sales fairly quickly if sanctions were lifted and may eventually be able to raise exports by up to 1 million barrels per day. A...
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Chinese rate cuts are behind the curve

china-bubble-balloon From UBS's Wang Tao via FTAlphaville: Today’s move came as no surprise following the particularly weak prints of January inflation, and another soft reading expected for February. Both CPI and PPI slipped to a 5-year low in January, to 0.8%y/y and -4.3%y/y respectively. Although the shifting timing of Chinese New Year was to blame, underlying sequential momentum of core inflation (e.g., seasonally and CNY adjusted 3-month growth) did sink to the slowest pace since global financial crisis. We expect February inflation to have not rebounded above 1% either, adding further deflationary...
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Links 3 March 2015

ScreenHunter_01-Apr.-02-06.192 Global Macro / Markets / Investing: The 15 Most Miserable Economies in the World - Bloomberg A Financial System Still Dangerously Vulnerable to a Panic - Wall Street Journal The Negative Way to Growth? - Project Syndicate Nasdaq hits 5,000 after 15-year absence - Financial Times Buy-and-hold fund prospers with no new bets in 80 years - Reuters Warren Buffett’s Value Investing Isn’t for Everyone - Bloomberg View North America: U.S. Inflation Undershoots Fed’s 2% Target For 33rd Straight Month - Wall Street Journal Wells Fargo Puts a Ceiling on Subprime Auto Loans - New York...
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ASX at the close

ScreenHunter_31-Jun.-04-16.424-200x200 Chris Weston, Chief Market Strategist at IG Markets It’s another big week for markets, with the perception of future central bank action firmly driving market price action. Asia has started in earnest and is seeing traders in rather bullish mood. Easing of benchmark interest rates from the People’s Bank of China have helped, although the AUD is not finding any real solace here, as traders seem to be positioning for 25 basis point cut tomorrow from the Reserve Bank of Australia. The cut to both the deposit rate and lending had been largely speculated on in local media for some time, so it...
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Joye: Housing “out-of-control freight train”

ScreenHunter_6302 Mar. 02 14.07 By Leith van Onselen The AFR's Chris Joye has this afternoon issued a stark warning that the Australian housing market is out-of-control: The bottom line is that Australia's housing boom is racing away like an out-of-control freight train... Some folks argue that this boom is nothing to lose sleep over because it is limited to these two cities [Sydney and Melbourne]. Yet New South Wales and Victoria represent almost 60 per cent of Australia's total population, and if you add in Queensland (where property values are rising at 2.3 times the rate of wages), the east coast accounts for 78 per cent...
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Time to choose the tax system we want

ScreenHunter_6278 Mar. 02 09.13 Cross-posted from The Conversation Five years ago the Henry Review undertook a detailed examination of Australia’s tax and transfer system. Today, the Tax and Transfer Policy Institute at ANU’s Crawford School has revisited the Henry Review, as the Australian government prepares to release its tax white paper. Tax reform should not be piecemeal, but should be considered across the system as a whole. Australia raises less tax overall than many comparable countries, including Canada and New Zealand. There is scope, and likely the budgetary need, to increase Australia’s tax take. As the...
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Krugman: Greece won

Capture From Mr Krugman:   How easy will it be to explain that 'victory' to the Greek...
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Minerals and petroleum exploration rises

ScreenHunter_07 Nov. 26 16.13 By Leith van Onselen The Australian Bureau of Statistics (ABS) today released its Mineral & Petroleum Exploration data for the December quarter, which revealed rises in both minerals and petroleum exploration expenditure. Nationally, expenditure on minerals exploration rose by a seasonally-adjusted $6.4 million (1.5%) over the December quarter. The rise was driven by Queensland, where exploration expenditure rose by $9.1 million (10.6%): The various components, presented below in non-seasonally adjusted raw terms, rose over the quarter by $4 million or 0.9%. Iron ore exploration...
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Teflon miners rise as Dalian fades iron ore

2 There's no doubt about financial repression. The price of the only thing that you sell can crater yet your own equity value can still soar. It's magic! RIO is covered in such fairy dust today as it marches higher 2% on the Chinese rate cut and BHP is up a little less. Alas for FMG the truth will out and it is unable to rise as Dalian iron ore futures fall 2 points in the knowledge that China's structural adjustment remains fully on track. Here are the...
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How will the Aussie react to RBA cut?

d0hdrk2awqd6iglcwdcrxkd3.300x299x1 From BofAML via Forexlive: A Cut This Week But It's A Close Call: "It is uncontroversial to expect that the RBA will cut rates again in 1H15; the question remains when. We  expect it will cut again at its March meeting this week but the uncertainty is high. This is because although we accept that the short-term economic outlook warrants further easing, the RBA has provided no communicated forward guidance. And while a more dovish stance seems implied by its downgraded growth outlook, it does not seem to be holding a strong easing bias at all. This uncertainty is also reflected in the...
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New home sales plateau

ScreenHunter_18 Jul. 05 10.22 By Leith van Onselen The HIA has released its February New Home Sales Report, which is a survey of Australia’s largest volume builders, and it shows that home sales have plateaued - effectively treading water over the past year, despite a modest rise in January on the back of ‘multi-unit’ sales: Total seasonally adjusted new home sales increased by 1.8 per cent in January 2015, following the December decline of 1.9 per cent. The latest monthly increase was driven by a 9.9 per cent rise in ‘multi-unit’ sales, while detached house sales remained largely unchanged in January 2015 (up by 0.1...
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GDP partials weak

imgres The ABS has released "Business Indicators" which are partial inputs into this week's GDP figure and they portend badly: DECEMBER KEY FIGURES Sep Qtr 14 to Dec Qtr 14 Dec Qtr 13 to Dec Qtr 14 % % Sales of goods and services (Chain volume measures) Manufacturing Trend -0.3 -2.1 Seasonally Adjusted 0.0 -2.5 Wholesale trade Trend 0.3 1.1 Seasonally Adjusted 0.3 0.7 Inventories (Chain volume measures) Trend 0.4 0.4 Seasonally...
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Capital Economics issues Oz wake-up call

url From the SMH: Capital Economics has hit the local market with a bang, with the London-based economic research consultancy predicting the RBA’s cash rate will be 1.5 per cent by the end of the year and that the local economy will grow by a paltry 1.8 per cent this year with unemployment reaching 7 per cent by December, and potentially as high as 7.5 per cent next year. The bearish calls coincide with the appointment for the first time of a chief economist for Australia and New Zealand, Paul Dales, who believes that the RBA and economists will be forced to downgrade GDP and inflation forecasts...
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Some long overdue Glencore skepticism

AM-BH853_GLENCO_9U_20150301124206 From the WSJ: Days after Glencore PLC closed its 2013 purchase of Xstrata PLC in the largest mining deal ever, Chief Executive Ivan Glasenberg called it “a big play” on the commodity he arguably knew best: coal. “To really screw this up, the coal price has got to really tank,” he said in an interview. Since then, coal prices have fallen about 25%. ...China’s appetite for coal has weakened, with its consumption and production falling in 2014 for the first time in 14 years. U.S. demand is also waning as power plants shift to natural gas, and exports from coal-producing countries...
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