Weekend Links March 7-8, 2015

labor-day-eight-hours ....Sorry I was out last night, and will add to these as possible on a busy day today.... China 'China likely to end up as a former would-be superpower', says Goldman partner who called Japan's demise – SCMP PBOC needs to get ahead of market curve as crunch persists - SCMP Chinese FX intervention could be due a comeback – Reuters China’s lower growth target is missed opportunity – Reuters China Loses Millionaires as Wealthiest Tempted Overseas - Bloomberg China's Factories Are Building a Robot Nation – Caixin Gov't Plans Budget Deficit of 1.62 Tln Yuan, Finance Ministry...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets Asian markets have been mixed in the closing session of the week. There doesn’t really seem to be any significant concern from traders around the upcoming US payrolls report (090:30 AEDT), although clients have been net buyers of USD/JPY, which will be one of the cleaner ways of playing a strong payrolls report. The market actually feels quite sanguine considering the ramifications could be far reaching and will almost certainly set expectations for next week if there is a reasonable miss (either way). Many of the G10 currency pairs are...
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Fitch says NZ macroprudential credit positive

you_sir_are_and_idiot_sticker_p217859012305401417qjcl_400_xlarge What is Fitch on about? Fitch Ratings views positively the Reserve Bank of New Zealand's (RBNZ) consultation on the capital treatment for mortgages to residential property investors. Higher capital requirements for investor loans combined with the existing loan to value ratio (LVR) limit could help protect banks against material losses in the event of a property price correction. The RBNZ proposes to modify existing capital rules by requiring banks to include investor mortgages in a specific asset sub-class, and hold appropriate regulatory capital for those assets. Investor mortgages in New...
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Once more for dummies: RIO is not a yield play

12065738771352376078Arnoud999_Right_or_wrong_5.svg.hi From the SMH, apparently following ECBQE: One of the immediate beneficiaries should be mining giant Rio Tinto, according to analysts at Societe Generale. The mining company will attract investors looking for high-yielding stocks as the central bank’s QE program weighs down bond yields, Societe Generale’s Roland Kaloyan and Kevin Redureau said. The dual-listed miner is forecast to pay nearly 6 per cent dividend yield on the ASX, and 5.1 per cent on the London Stock Exchange. Back in Australia, investment bank Citi today upgraded the price target for Rio Tinto to $71 per share, up from $67,...
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Comrade Colin’s royalty cheques arrive

dfsgrw1-200x200 From The West Australian: The WA Government has injected first financial aid for the State's embattled iron ore juniors, with the Chinese-controlled magnetite producer Karara Mining receiving almost $2 million in royalty rebates. It comes as the Government considers whether to defer the royalty payments due from small hematite miners, such as the embattled Atlas Iron and BC Iron. Arise, ye workers from your slumber, Arise, ye prisoners of want. For reason in revolt now thunders, and at last ends the age of cant! Away with all your superstitions, Servile masses, arise, arise! We'll change...
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Corporate greed is killing investment

dean-morris-i-have-your-diagnosis-coaster-3000530-0-1344696616000 We all know that the RBA has been pushing a line for years that the missing link in the Australian recovery is business investment owing to poor "confidence". I've railed against that any number of times noting that the actual problem is structural in that our competitiveness is shot owing largely to the consecutive booms in banking and mining. From the Roosevelt Institute comes another piece of the structural puzzle: This paper provides evidence that the strong empirical relationship of corporate cash flow and borrowing to productive corporate investment has disappeared in the last 30 years and has...
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Iron ore miners hemorrhage as futures teeter

2 The carnage is back across the spectrum as iron ore miners adjust once more to China's new normal. The majors are both down 2% and FMG is down 6%. To the indexes: It is a measure of how quickly the bull's charge towards a new iron ore Nirvana has reversed that the idiocy spreads (which are 7 day moving averages) have yet to fully turn: My the gap now is huge! Meanwhile , in junior land, it's wall-to-wall red ink with special treatment dealt out to AGO, down to 16 cents its crash low and seemingly marked first for death: The good new is that Dalian six month futures have opened flat...
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‘Straya goes long dumb

stupid-im-with Cross-posted from The Conversation. The sorry saga that is funding for Australia’s most crucial national research infrastructure has dragged on for too many years. It is now at crisis point. We should never have found ourselves in the situation that has become very public this week: the imminent closure of much of the crucial machinery and large-scale equipment that makes Australian science possible. There was a collective sigh of relief last year when the government provided assurances in the federal Budget that it understood the importance of providing ongoing operational support for...
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Bank funding costs fall with ECBQE

Capture I keep a regular eye on the major Australian banks wholesale funding costs as guide to how markets are perceiving Australian risk. Since mid last year we have seen a rising trend which pitched sharply upwards as Grexit concerns took centre stage. But the last week and more has seen those concerns evaporate and we can see the result in the CBA CDS price (a proxy for funding costs) which has dropped 20bps since the January high at 76bps to 56bps yesterday:   The question now is well they keep falling a resume post-Draghi downtrend, especially as European QE gets underway buying bonds...
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Goldman: LNG contracts to fade way

2 From Goldman comes new analysis with which I completely agree: Rising spot supply shifts the balance of power to consumers LNG trade is set to exceed US$120 billion in 2015, overtaking iron ore to become the second most valuable physical commodity after oil. Growth will continue as new liquefaction plants come online, but the correction in energy markets under the New Oil Order is resetting price expectations and the LNG market is entering a period of structural change. In particular, the imminent arrival of US supply will link LNG to the world’s largest gas market, increase the volume of...
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Are Perth property prices already falling?

url Gotti at Dad's Army spends time inventorying house price headwinds this morning: ...the Reserve Bank is urging the government and the regulator to curb the flow of funds to those bidding up house prices... David Murray is urging a series of measures to curb the flow of funds into housing, including not allowing the deficit on investor dwelling investment to be offset against other income -- so called ‘negative gearing’. The ability of superannuation funds to borrow to invest in housing is also under pressure. But in Melbourne and Sydney one of the biggest source of funds is the buying by...
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Macro Morning: Bye bye Euro

marketmorning-200x200 By Chris Becker Last night the ECB released details of its QE program, which starts in a few days time with €60 billion Euro purchases each month. Alongside, the BOE announced no changes to its interest rate or its own QE program while in the US, factory orders slipped as initial jobless claims surprised slightly on the upside. The bond markets were happy to say the least, with all European bond yields falling 2 to 10 pips, while the US 10 year Treasury was unchanged. European bourses were happy too, with the Eurostoxx Index up 1% reflecting broad gains across the continent, led by the...
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Construction PMI sags further

2 From the AIG comes the third of its PMIs for February: The seasonally adjusted Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI®) registered 43.9 points in February 2015 (readings below 50 points indicate contraction). This was a decrease of 2.0 points from January, indicating a slightly steeper rate of decline for the construction industry and a fourth consecutive month of contraction, in response to a further weakening in new orders.  Falls in activity, employment and deliveries from suppliers continued in February,...
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Hockey: Immigration a “lazy” way to grow

ScreenHunter_6423 Mar. 06 08.45 By Leith van Onselen Finally, a senior member of Australia's main political parties, Treasurer Joe Hockey, has admitted that relying on endless population growth (immigration) to juice the economy is a "lazy way to grow": Mr Hockey said the government was forecasting a drop in immigration as a percentage of the total population. "Immigration is a rather lazy way to try to grow your economy," Mr Hockey told ABC radio. "What we've got to do is increase our output per hour." Hallelujah. Not only is it a lazy way to grow, but excessive levels of immigration can also lower living standards for...
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Daily iron ore price update (smash)

anvil-200x200-200x2001-200x200 Here are the iron ore charts for March 5, 2015: Another day, another bearish milestone for iron ore. Yes, we've fallen into the $50s, for the first time since, well, as long as it matters. Qingdao fell 3.6% to $59.73 yesterday. Benchmark fell $2.80, or 4.5%, to $59.30. Paper markets were caned as well with Singapore 12 month swaps in free fall and Dalian six month futures sitting right on the their lowest price ever in a bearish descending triangle pattern that is surely going to break. Rebar average resumed its endless falls with futures hinting at more to come. Bloomie has...
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You can’t be too bearish on iron ore miners

bly_gummy_bears_board The one thing that never changes as the iron ore price falls is the bullishness of the Australian press on iron ore miners. The two I have in mind are RIO and FMG and there is virtually nothing of coverage today that makes any sense  at all. On the one hand we have FMG busy increasing its debt, a sure sign that it's in deep trouble vis it's program of deleveraging but the coverage is all glowing. Bartho at Dad's Army is typical: After its flirtation with something unpleasant in 2012, Fortescue has focused intently on reducing costs and lowering leverage and risk, with considerable success. So...
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Daily LNG price update (Goldman bear)

1 Not much news for oil overnight and Brent traded modestly higher at $60.69. The indicative LNG contract price rose to $8.89mmBtu: In news Goldman is spot on via Bloomie: Competition will increase because the spot market is expanding and buyers are less reliant on long-term contracts, analysts including Jeff Currie in New York wrote in an e-mailed report on Thursday. ...“As contract and spot prices diverge, oil-indexation will continue to lose its appeal,” Goldman said. “There is a window for LNG to grow and become a normal commodity that is priced according to its own fundamentals...
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How long can household incomes defy gravity?

ScreenHunter_4044 Sep. 05 12.36 By Leith van Onselen The Reserve Bank of Australia (RBA) yesterday released real household disposable income (HDI) data, derived from the December quarter national accounts (released Wednesday), which revealed that real per capita HDI rose by 0.2% over the quarter and was up by 0.1% over the past year (see next chart). As shown above, Australian households are experiencing the biggest income shock since the early-1990s recession, with per capita real HDI falling since June 2012, down 0.7% over that period. However, real per capita HDI has held-up much better than national disposable income...
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IGR unmasks Australia’s failing retirement system

ScreenHunter_6346 Mar. 04 10.06 The Fourth Intergenerational Report (IGR), released yesterday, contained some interesting tid-bits which help to illustrate why Australia's retirement system is failing, despite its massive (and growing) cost to taxpayers. First, superannuation (my emphasis): In 2013-14, around 70 per cent of people of Age Pension age were receiving the Age Pension. Of these, 60 per cent were in receipt of the full-rate pension. As Australia’s superannuation system matures, and compulsory contributions increase, many Australian workers will retire with much larger superannuation balances. The proportion of...
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The true drivers of intergenerational theft

ScreenHunter_08 Feb. 03 14.45 By Nicholas Reece Intergenerational theft is the new slogan being used by the Abbott government to sell the intergenerational report and convince Australians of the need for tough budget cuts. But if Prime Minister Tony Abbott and Treasurer Joe Hockey want to have a good look at intergenerational inequity they don't need a new report from the Commonwealth Treasury, they need a mirror. Because when it comes to enjoying the largesse of government the Prime Minister and Treasurer are part of the Baby Boomer generation born between 1946 and 1965 - a group that has benefited more than any other in...
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Australia’s “historical low” skills shortages

ScreenHunter_6416 Mar. 06 07.27 By Leith van Onselen The Department of Employment has released a bunch of new reports on skills shortages, which reflects research undertaken between July and December 2014 by the Department. The results, which build on the Skill Shortages Statistical Summary, released in January, significantly undermine the Abbott Government's sweeping changes to the foreign worker visa program, which will make it much easier for Australian businesses to import foreign workers. According to the Department of Employment, "employers continued to recruit skilled workers with little difficulty in 2014",...
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RP Data weekly Australian house price update

ScreenHunter_15 Mar. 05 15.42 By Leith van Onselen In the week ended 5 March 2015, the Core Logic-RP Data 5-city daily dwelling price index, which covers the five major capital city markets, rose by 0.23% - the second consecutive weekly rise (see next chart). The rise in home values was driven entirely by Sydney and Melbourne, which more than offset falls in Adelaide and Perth (see next chart). Since the beginning of the year, home values have risen strongly in Sydney and Melbourne, are up slightly in Brisbane, and have fallen elsewhere (see next chart). However, over the past 12 months, home values have...
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Links 6 March 2015

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Why This Tech Bubble is Worse Than the Tech Bubble of 2000 - blogmaverick.com Mark Cuban: We’re in a Tech Bubble—and It’s Worse Than 2000 - Bloomberg Why The Low-Volatility Anomaly Exists - Alpha Architect Goldman Sachs On The Rise And Danger Of Shadow Banking - Value Walk Negative Interest Rates Yield Positive Results—So Far - Wall Street Journal North America: Washington Strips New York Fed’s Power - Wall Street Journal Los Angeles Sees Health Benefits as Its Smog Haze Clears - Wall Street Journal U.S. Companies Are Stashing $2.1...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets Looking around the Asian region today, the ASX 200 is 0.1% lower, the Nikkei is 0.1% higher and the China CSI is down 1.5%. We were provided a fairly negative lead from Wall Street and price action as detailed yesterday is starting to look a little more vulnerable. Despite this lead, the two clear highlights in the Asian session have been reports that China has lowered its growth targets to ‘around 7%’, and narrative from Reserve Bank of Australia member Philip Lowe. Reports are that China have lowered its GDP (to ‘around 7%), retail...
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RBNZ to deepen macroprudential

keep-calm-it-will-be-sweet-as-bro-6 From Interest.com.nz: The Reserve Bank says it's mulling three ways mortgage loans to residential property investors could be defined as it works to establish a new asset class for such lending within trading banks' capital adequacy requirements. The move is partly to facilitate the introduction of a macro-prudential property investor policy should that become necessary, the Reserve Bank says. The three possible alternatives under consideration include: · if the mortgaged property is not owner-occupied; or · if servicing of the mortgage loan is primarily reliant on rental income (with...
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