ASX at the close

ASX_logo by Chris Weston, IG   It’s been a strange day in Asia, with traders having to deal with a barrage of Asian economic numbers, as well as preparing for key upcoming events. The market was keen to look at the Japanese Q3 TANKAN report and, while the headlines will state that corporate Japan is happy to increase capital expenditure plans by 8.6%, there are some concerning numbers to focus on too. Some confidence was seen in large manufacturing but the same can’t be said for the outlook, with those surveyed painting a less rosy picture. The fact that we saw household spending (released...
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Governments must work together to solve housing supply

ScreenHunter_18 Jul. 05 10.22 Cross-posted from The Conversation: Is there a national housing supply problem? No, but there is a problem of access to affordable housing in certain regions. Last month, Reserve Bank Governor, Glenn Stevens commented on the need for “animal spirits” to respond to the exceptionally accommodative monetary policy setting and boost the supply of housing. More than 12 months have passed since the RBA last adjusted the cash rate to the current record low of 2.5%. This has stimulated investor demand, particularly in metropolitan Sydney and (to a lesser extent) Melbourne. Yesterday’s Reserve...
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Watch out for the super gouger “savings” meme

definitely no super for you by Chris Becker Uh Oh. Get your antennae up when the super-duper fund managers start using the "need to put more savings into super" meme to increase their ticket clipping activities. From news.com.au:   The head of the country's largest wealth manager has warned Australians will end up poorer and paying more tax to fund pensions if something isn't done to boost superannuation savings. AMP chief executive Craig Meller says a lack of savings will leave Australia with a fiscal challenge far more serious than the budget shortfall currently facing the Abbott government. "We...
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Australia’s “low” mortgage growth is still a big problem

ScreenHunter_86 Oct. 01 12.52 By Leith van Onselen Business Spectator's Alan Kohler has continued his schizophrenic take on Australia's housing market, today arguing that concerns about excessive speculative activity in the housing market are not warranted because credit growth is so low: There’s talk of macroprudential policies to limit investment lending, but no one is rushing into this, and for good reason: there isn’t really a problem. There were three booms in property investment during the 1990s, when investor housing credit grew at between 25 and 30 per cent per annum. The current growth rate is anaemic by...
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Aussie cracks 87 again to near four year low

cracked dollar by Chris Becker The anemic retail sales figures this morning which followed a good Chinese manufacturing PMI print has cracked the Aussie below 87 cents vs the USD again: Its now sitting on crucial support - just above the January lows of this year and near its four year low. Given the RBA meets on Tuesday next week, we could be at a critical juncture but I would caution theres a bit too much bearishness in the air (I'm going to cover my intraday short soon as its way oversold, but leave longer term positions open). Most funds would be happy with this level and not any further...
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Engineering construction hits mining cliff

ScreenHunter_08 Nov. 07 08.52 By Leith van Onselen The ABS has released engineering construction data for the June quarter of 2014, which revealed a 2.0% seasonally adjusted fall in the value of work done over the quarter, and a reduction in the construction pipeline. According to the ABS, the total value of engineering construction in real seasonally-adjusted terms fell by 2.0% in the June quarter and was down by 3.8% over the year, with both the private (-1.6%) and public (-3.5%) sectors falling over the quarter (see below chart). You can see the big uplift in activity from 2003 as the commodity price boom...
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Rio gambles on the long run

australia gambling luck dice by Chris Becker You've got to give Rio Tinto the gong for chutzpah, with reports this morning that in the middle of a price crash and a burgeoning supply glut, its looking to add to supply by opening a new iron ore site in the Pilbara. After its magnificent efforts in destroying the MRRT alongside its foreign owned allies like BHP, I'm sure they must make the urinals at their Perth offices low to the ground. From The Australian: In a move that will sustain pressure on smaller producers and the iron ore price, Rio has sought permission from federal regulators in recent days to build a new...
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QE to end like tears in rain

tears in rain by Chris Becker The circa $4 trillion experiment in monetary easing by the US Federal Reserve will finish (for now?) at the end of this month. The Fed published its schedule of purchases last night: In case you've been living on Mars, QE (rounds 1, 1.5, 2 and 3) has had a slight impact on the US stock market: I don't want to sound downbeat or prophetic, but the Fed wants to end this on a Tuesday - in...
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Retail sales disappoint in August

ScreenHunter_02 May. 25 22.30 By Leith van Onselen The Australian Bureau of Statistics (ABS) has just released retail sales figures for the month of August, which registered a 0.1% seasonally-adjusted rise in sales over the month, well below economist’s expectations of a 0.4% increase. Annual sales growth clocked in at a solid 5.1%: The below chart maps out seasonally-adjusted sales growth by state on a monthly and annual basis: At the state and territory level, positive monthly retail sales growth was recorded in Victoria (+0.7%), Western Australia (+0.1%), and the Northern Territory (+1.7%), whereas sales...
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China manufacturing PMI expands

China_PMI by Chris Becker Just in, the official China Manufacturing Purchasing Managers Index (PMI) for September, printed an expanding 51.0, bang on expectations and only just below last months reading of 51.1 The ASX200 has reacted positively, but the AUDUSD is not impressed. As David Scutt at Marketscuttlebutt points out, the acceleration in the PMI is at odds with the declining industrial production prints: Breaking down the gauge output, new orders and new export orders all continued to expand while backlogs and inventories contracted at a faster rate than August. Elsewhere employment...
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US energy production saves the day

stock-vector-red-stamp-saved-guaranteed-by-christ-63971605 by Chris Becker There's something to be said for the notion that what is saving the US's proverbial bacon at the moment is not monetary policy from the Fed but its huge internal oil/gas boom. The last couple of months have seen domestic production in the US almost equalling the powerhouses of Saudi Arabia and Russia, and is likely to exceed the former in the months ahead. This "revolution" goes beyond providing the domestic economy with lower energy prices, but has long term ramifications across the globe. From the FT: The US is overtaking Saudi Arabia to become the world’s largest...
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Chief scientist strikes appropriate balance on CSG

ScreenHunter_76 Oct. 01 10.14 By Leith van Onselen The New South Wales Chief Scientist, Mary O'Kane, last night delivered her Final Report of the Independent Review of Coal Seam Gas Activities in NSW, which apears to have struck an appropriate balance between the economic opportunities of CSG and health and environment concerns. The report, which is based on 19 months of investigation, found that most risks to health and the environment from CSG can be managed, although "unintended consequences" are also inevitable, due either to natural disasters, human error, or accidents, which necessarily requires that CSG activities...
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Manufacturing recession deepens

ScreenHunter_10 Mar. 29 12.46 By Leith van Onselen The Australian Industry Group (AIG) has released its Performance of Manufacturing Index (PMI) for September, which revealed an accelerating contraction in manufacturing activity, with the index declining by 0.8 to 46.5 (a score below 50 means that activity is contracting): - Respondents to the Australian PMI® indicated that despite a welcome depreciation in the Australian dollar since early September, it remains high and continues to support intense import competition and weigh heavily on exports. The winding down of Australian automotive assembly and the ongoing...
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Euro unemployment remains high

5733482-ski-resort-in-the-high-mountains-with-ski-lift by Chris Becker Last night saw the release of monthly unemployment statistics for the EU, and specifically Germany and Italy alongside the monthly CPI print. Although there has been almost no monthly change the readings are still way too high (even for the Germans): German unemployment (September) at 6.7% (no change on last month) Italian unemployment (August) at 12.3% (down from 12.6% last month) Eurozone unemployment (August) at 11.5% (no change on last month) No surprise and no change because there still remains no effective action on solving the structural unemployment situation...
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Macro Morning

marketmorning by Chris Becker We're getting into the juicy part of the week when some significant data prints are ramping up volatility across the markets along with the usual end of month/end of quarter shakedown. Its still all about USD strength as this chart of monthly performance shows (via Forexlive): It all began with a Euro smackdown from just below 1.27 to below 1.26 on poor data with a Similar action from Sterling when after a false break (got caught in that, bugger) we saw a large selloff and a confirmation of inherent weakness in Cable following the post-referendum elation. Here's...
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Is the RBA to blame for housing speculation?

ScreenHunter_12 Sep. 23 12.54 By Leith van Onselen Former RBA board member, Professor Warwick McKibbin, has delivered the RBA a serve, blaming the central bank's ultra low interest rate settings for fuelling unprecedented investor housing speculation, and blowing a potential housing bubble. From The Australian: Professor McKibbin said the bank had made the wrong call to cut interest rates so low and was facing the consequences. “A surge in investor borrowing for assets in relatively fixed supply such as housing was inevitable; yet cutting rates was never going to do much to boost business loans or weaken the currency...
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Iron ore daily price update (India and Brazil weigh)

steel by Chris Becker Not much of a change on the iron ore complex yesterday, as China gears up for the National Day holiday amid the Hong Kong Occupy situation. Spot drifted down slightly, with 12 month swaps lifting the same, but still below $78USD per ton, while rebar was flat and Dalian futures fell slightly:   Here's spot in chart form: And rebar and Dalian futures: Looks like the Indians are about to add to the seaborne supply chain, with speculation the export duty on iron ore will be lifted soon: "A meeting on the issue is expected in the Finance Ministry soon....
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The Coalition’s Budget aspirations look doomed

ScreenHunter_73 Oct. 01 07.35 By Leith van Onselen The Abbott Government has reportedly all but conceded defeat on around $30 billion of Budget measures, choosing instead to devise an alternative path to savings, which will be revealed in the mid-year economic and fiscal outlook (MYEFO) in December. As reported in The AFR today, the Government's planned higher education reforms appear doomed, with the Palmer United Party (PUP) insisting that it would block the deregulation of university fees, raising the loan repayment interest rate, of the 20% funding cut from the Government. PUP will also oppose the GP co-payment, as...
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End of Globalization 2.0

citi-were-at-the-end-of-the-commodity-supercycle Cross posted from Investing in Chinese Stocks The first wave of globalization lasted from 1870 to 1914. It ended with a war, an interwar period, and a second war. The second wave began in 1945 and lasted until 2001 or 2008 or a date yet to be chosen by historians. Socionomics predicted the end of globalization with the social mood peak in the year 2000. The generational theory of Strauss & Howe predicts a 4th turning, a period of great upheaval. Economists see the limits of free trade. Even solar cycles predict a rise in warfare, if a solar minimum is on the way: Michael Pettis...
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Australia’s empty homes

ScreenHunter_71 Sep. 30 17.30 By Catherine Cashmore, a market analyst, journalist, and policy thinker, with extensive industry experience in all aspects relating to property. Follow Catherine on Twitter or via her Blog. “The home, built in 1857, had been unoccupied for years” said the report of a dilapidated Victorian-era mansion in Sydney’s Balmain East. Situated in an exclusive residential pocket next door to Balmain East ferry wharf, and sporting bayside views of Sydney’s Harbour Bridge, the 457 square metre block of land attracted 200 people to the auction, 18 registrations to bid, and sold $830,000 above the...
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Chinese land sales down 50% in the year

CHINA-FINANCE-ECONOMY-ASIA-TRADE Cross posted from Investing in Chinese Stocks From a CREIS report, nationally, land sales in Q3 were 415.9 billion yuan, about equal to Q2, down nearly 50% yoy. Residential sales are down more than commercial. September land sales are down 70% yoy. The chart from the report below shows cumulative homes sales through the end of Q3, 10 major cities. Yellow line shows the change from last year. On the bright side, the report also shows many cities have seen sales volume pick up in the last week, ahead of the National Day week-long holiday. Still down yoy, but way up from the previous...
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Links 1 October 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: We are experiencing the flipside of 1970s-style inflation - FT Alphaville Commodities Are Crashing Amid Stock-Bond Disconnect Deja Vu - Zero Hedge Surging US dollar threatens emerging markets’ carry trades - Financial Times Not all bonds ar created equal - Pragmatic Capitalism How much money investors have pulled from formerly Gross-managed Pimco funds - Bloomberg Bill Gross, Calpers and the End of the Investment Guru - New York Times North America: Could Lehman Brothers have been bailed out? - Dealbook US home prices are rising at an...
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ASX at the close

ASX_logo by Stan Shamu, IG It’s been a fairly busy day on the economic calendar in Asia, with some key releases out of Japan and China. The risk-off tone in global markets has continued as investors focused on unrest in Ukraine, Hong Kong and data from the US for direction. As a result, not only are markets risk-off at the moment, but constant repricing of rate hike expectations are also at play. Emerging markets are the worst hit at the moment and the trend is likely to continue in the near term. Fed members have been growing increasingly hawkish and even some of the traditional doves have said they see...
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It’s Raine-ing elderly property investors

200236712-001 By David Collyer, cross-posted from Prosper Australia: Angus Raine of RE agents Raine & Horne burst into song about property taxes in a letter on page 55 of the Australian Financial Review today- and what a nice cartoon, Clement! Angus wants Stamp Duty tax breaks for empty nesters – people trapped in inappropriate housing by bad taxes. He wants capital gains concessions for real estate investors over the age of 60, saying, “tax constraints are making it very difficult for them to access the capital tied up in these assets.” The Raine & Horne agents will be walking tall today,...
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US inflation moderates as Europe deflates

deflated balloon by Chris Becker Last night saw the release of two key important metrics in the ongoing fight against deflation in the Northern Hemisphere by the ECB and the Fed. First, following some very lacklustre Euro-wide consumer confidence figures (something that's been repeated worldwide), the very closely watched German CPI print for September came in as dead flat - no change, with the yearly figure remaining at a paltry 0.8% Up next was the Federal Reserves preferred inflation gauge, the price index for personal consumption expenditures (PCE), which is up only 1.5% over the year to August, in a...
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