Yield trade in AUD is under threat

Stock Traders Trading Stocks and Securities Chris Weston, Chief Market Strategist at IG Markets Since the start of the month, Australian banks have come under strong selling pressure, with the financial sub-sector falling just over 5%. Heavy volumes have accompanied the selling. Given the 25% weighting the big four banks have on the broader ASX 200, it’s easy to understand why the index has found strong selling pressure of late, breaking key trend support lines in the process. Since around mid-2012, price action in the banks changed significantly. This was perhaps aided by European Central Bank (ECB) governor Mario Draghi’s...
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One-third of ASX companies risk “financial catastrophe”

ScreenHunter_07 May. 06 10.48 By Leith van Onselen A report released today by CPA Australia on the health of Australia's 1,600 ASX-listed companies claims that nearly one-third are facing the risk of a "financial catastrophe", with the danger even greater now than during the depths of the Global Financial Crisis. The companies most at risk are in the mining and energy sectors, which are primarily exposed to the ending of the once-in-a-century mining investment boom and slowing growth in China, which is lowering commodity prices. From The SMH: The report shows that almost a third of ASX-listed companies attracted "going...
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Foreign buyer fee unlikely, says government sources

ScreenHunter_3949 Sep. 02 08.10 By Leith van Onselen "Senior sources" within the Abbott Government have reportedly thrown a wet blanket over the plan to charge foreign property buyers an application fee to purchase Australian property, for fears that it would inflame relations with China and stymie negotiations for a free trade agreement. From The AFR: A backbench proposal to slug foreign property buyers with an application fee to fund a crackdown on illegal purchasing is unlikely to be taken up by the government, senior sources said... Widespread community concern about the impact of foreign buyers in markets such as...
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The value of iron ore

ScreenHunter_07 Nov. 26 16.13 by Chris Becker Much has been made not just here at MB, but everywhere of the 40% fall in iron ore prices this year at nearly 60% since their peak in 2011. Some noise, mainly from the Pascometer, has also been made that its nothing to worry about, given the huge increases in volume over the same period and it will all sort it self out in the long run. But what does that dynamic actually look like? David Scutt (follow him here on Twitter and his blog MarketScuttlebutt) has done exactly that with these 3 great charts. First heres the massive change in volume in percentage...
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Macroprudential is coming, it’s only a matter of time

ScreenHunter_06 Jun. 26 22.42 By Leith van Onselen It was only five weeks ago that Reserve Bank of Australia (RBA) governor, Glenn Stevens, labelled macro-prudential controls on high risk mortgage lending as "dreaded" and the "latest fad" in parliamentary testimony. Since that time, the landscape has changed immensely. Not only has investor mortgage demand hit another all time high, led by unprecedented demand in both Sydney and Melbourne, fueling further fears of a housing bubble, but several notable figures have lent their support to macro-prudential controls, effectively urging the RBA and APRA to implement such...
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Goodbye low cost uni, hello USA fee for all

school-for-the-gifted by Chris Becker The cat is out of the bag for all you future students (or parents on average incomes) with the Oz reporting: THE first university to set fees under the government’s controversial deregulation plan will charge a flat price of $48,000 for a three-year undergraduate ­degree, a steep rise in what students currently pay. The University of Western Australia, the nation’s fourth-highest ranked on some international standings, revealed it would charge an annual fee of $16,000 for the five basic undergraduate courses it offers. That's a pretty steep starting price (given...
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JPMorgan goes bullish on Aussie v Kiwi

Air_New_Zealand_737_ZK-NGH_Dunedin_Airport by Chris Becker JP Morgan has a trading note out this morning with some "interesting" ideas to go long AUD against the Kiwi (AUDNZD) Via Forexlive, here's the short shrift: We recommend going long AUD/NZD The underperformance of AUD is notable since it is one of the three G10 countries where interest rates actually increased relative to the US The weakening in AUD likely reflects the rich valuations from a couple of weeks ago—at that time, it was screening as one of the richest currencies on our short-term fair value models, particularly vs. NZD However the recent weakening has...
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You can’t feed your family on GDP

ScreenHunter_4281 Sep. 18 10.44 By Leith van Onselen The New York Times last week published a great article on the folly of using GDP as the primary measure of economic advancement. The essence of the article is captured in the next chart, which shows how real median household income in the US has fallen since the late-1990s, despite reasonable growth in per capita GDP: From the article: The 2013 median income remained a whopping 8 percent — about $4,500 per year — below where it was in 2007. The 2008 recession depressed wages for middle-income Americans, and they haven’t recovered in any meaningful way. And 2007...
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Macro Morning

marketmorning by Chris Becker A swathe of PMI releases in Europe and the US moved markets as much as the new airstrikes in Syria. The story was all US dollar as the Richmond Fed manufacturing index and the Markit PMI both showed solid gains, which reinforced USD strength around the entire risk complex. US stocks though were very weak and the S&P500 has closed below its recent support line that I outlined yesterday, with the FTSE getting smashed (the DAX holds on weakly): This will not be good news for the ASX200 on the open, with the SPI futures pointing to modest losses. Yen (USDJPY)...
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Iron ore daily update (quiet)

Iron-Ore_Banner_Port-Hedland_H by Chris Becker A bit quieter in China yesterday on the iron ore complex, even if the latest flash PMI surprised to the upside. Here's the summary: Spot slipped a little to remain under $80USD while 12 month swaps gained a small amount: Rebar continues in freefall: While Dalian futures also continue to slip, putting more pressure on FMG: Meanwhile, the seaborne supply glut continues to grow apace as Brazil announced it has exported nearly 200Mt of iron ore so far this year (194Mt - almost all from Vale's operations) compared to 180Mt in same period last year. This...
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7.30 Report dissects foreign property debate

ScreenHunter_3949 Sep. 02 08.10 By Leith van Onselen If you get a spare 8 minutes today, make sure that you check-out the above video segment from last night's 7.30 Report,examining whether foreign buyers are helping to push-up Australian home prices, and in the process crowding-out first home buyers. The segment features a wide array of industry participants and commentators, and provides what I believe is a balanced view. Gone is the ruse that foreign investment is not a significant factor, with virtually all participants acknowledging that there is illegal activity going on, it is having a material impact on prices,...
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Agent launches FIRB complaint over foreign property sale

ScreenHunter_4345 Sep. 24 06.40 By Leith van Onselen A Melbourne Buyers' agent, David Morrell, has challenged the Foreign Investment Review Board (FIRB) by requesting that it review a recent sale of a blue-chip pre-existing house in the prestigious suburb of Malvern, which he believes was sold illegally to a foreign non-resident purchaser. From The AFR: In a letter to FIRB chairman Brian Wilson, Mr Morrell said he believed the sale of a Malvern East home for $2.75 million on Saturday, September 20 had been a “clear breach of FIRB rules”. Mr Morrell wrote that he believed the buyer was a Chinese national or someone...
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Housing shortage chimera rises

ScreenHunter_07 Mar. 20 20.55 By Philip Soos and Paul D. Egan Over recent weeks, commentators have repeatedly claimed Australia’s high housing prices are due to a supply shortage. Former Treasurer Peter Costello blamed surging housing prices on a shortage, as did Alan Kohler. Treasurer Joe Hockey has a similar perspective, claiming: It is just an infinite mantra for international commentators, for analysts based overseas to say ‘well, you know, there's a bit of a housing bubble emerging in Australia’. That is rather a lazy analysis, because fundamentally we don't have enough supply to meet demand. That doesn't suggest...
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Links 24 September 2014

reynard Global Macro / Markets / Investing: Let there be bubbles! FT Alphaville (oh, yeah!) Bitcoin forms partnership with Paypal - Business Insider US starts airstrikes on ISIS - Bloomberg (because bombing always works right?) Beating Wall Street with Twitter - NYT America: US house prices up slightly for July - Calculated Risk US manufacturing PMI continues to grow - Markit Confirmed by Richmond Fed regional report - Calculated Risk Mexico president says no to legalized marijuana - Bloomberg (because you're having so much success in your drug war?) Alibaba slips below IPO price -...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets Asia has been pinned on the latest HSBC manufacturing PMI print out of China – there was some nervous trading going into this reading after a string of disappointing data out of China recently. Contrary to pessimistic expectations, the private PMI print came in at 50.5, better than estimates of 50 and above the previous 50.2 reading. This instantly lit up the boards and saw sentiment pick up across regional equities. The composition of the reading was also fairly good, with new orders (52.3) and new export orders (53.9)...
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Experts react to competition policy review

looking ahead Cross-posted from The Conversation Restrictions on retail trading hours, taxis, pharmacies and parallel imports should be lifted according to a far-reaching draft report by the Competition Policy Review. Professor Ian Harper’s new report also advocates the introduction of yet another regulatory body, the Australian Council for Competition Policy. This Council would push for new competition rules and financially incentivise states that implement competition reforms. A separate pricing regulator should also be introduced to oversee industries regulated by the Commonwealth such as gas,...
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ANZ talks its own book on macroprudential

ScreenHunter_4342 Sep. 23 14.32 By Leith van Onselen ANZ Bank has stepped-up its attack on macro-prudential curbs on high risk mortgage lending, claiming that they have been a failure in New Zealand, forcing-up home prices at the lower end of the market. From The AFR: The chief executive of New Zealand’s largest bank says limits on low-deposit home loans introduced by the country’s central bank a year ago have actually increased house prices at the lower end of the market and do not address the key driver of rising house prices – the lack of supply. David Hisco, the chief executive of ANZ Banking Group in New...
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Sandgropers take iron ore denial to the next level

ScreenHunter_29 Aug. 22 11.42 by Chris Becker This is not funny - from ABC News: West Australian Treasurer Mike Nahan says the plunge in iron ore prices is getting to the point of serious concern, after it slid below $US80 a tonne. The benchmark price hit a fresh five-year low of $79.80 overnight, after the Chinese government indicated it was unlikely to implement an aggressive stimulus policy to prop-up construction. It is more than $40 less than the figure WA Treasury used to calculate expected revenue for this financial year, which has led to a state budget hole in excess of $1.5 billion. Dr Nahan said he never...
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Steam in US stocks diverges

USA Muscle by Chris Becker Last night's 0.8% fall on the US S&P500 index hid a greater down move on the small-cap biased Russell 2000, losing 1.5% with more than half of the stocks below the closely watched 200 day moving average. Is this a sign the US bull market is over? Not quite - but the divergence between big cap and small cap stocks is growing giving some pause to the breadth of the market move as absent volatility starts to raise its ugly head. The CBOE Volatility Index gained over 13% to 13.69, a one-week high. This comes on the back of a large drop in monthly volatility, but we're nowhere...
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Draghi mulls QE to revive deflating Europe

Euro by Chris Becker The ECB President, Mario "whatever it takes" Draghi is letting the QE cat out of the bag stating last night that he wants governments to do some heavy lifting on restructuring while he grabs the "unconventional" printing lever: The ECB stands ready to use additional unconventional tools and tweak its existing efforts to spur inflation and growth in the euro zone if needed, ECB President Mario Draghi said on Monday, speaking to the economic and monetary affairs committee of the European parliament. Lower than expected take-up of the initial tranche of loans last week has fuelled...
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Health spending growth at 30-year low

ScreenHunter_05 Mar. 12 11.39 By Leith van Onselen The Australian Institute of Health and Welfare (AIHW) has released a new report revealing that Australian health spending growth has fallen to lowest level on record (in at least 30-years), driven by reductions in spending on the Pharmaceutical Benefits Scheme (PBS), public health, dental services and e-health: ...total spending on health goods and services in Australia was estimated at $147.4 billion in 2012-13 (9.67% of GDP). This was just 1.5% higher than in 2011-12. 'This is the lowest growth the AIHW has recorded since it began the Health expenditure Australia...
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Coal mining job losses roll on

ScreenHunter_12 May. 01 18.48 By Leith van Onselen The Abbott Government's plan to reboot the mining boom by cutting taxes has received another reality check today, with pressure from falling prices and the stubbornly high Australian Dollar leading to another 700 job losses across BHP's Queensland coking coal business. From The Canberra Times: BHP is the biggest employer in central Queensland... Costs across BHP's coal division are under the microscope, with every operation being pushed to operate as independently profitable. The cuts are part of an ongoing review and represent about 8 per cent of of the 6000...
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Does the Coalition have the balls to take on pharmacies?

ScreenHunter_4322 Sep. 22 13.44 By Leith van Onselen You can't keep a good rent-seeker down. Following the release yesterday of the Draft Report of the Harper Competition Policy Review, which sensibly recommended the government free-up rules restricting the location of pharmacies and preventing non-pharmacists from owning a pharmacy, the Pharmacy Guild has hit back, rejecting the Draft Report's recommendations and warning that it would endanger health care consumers: The Pharmacy Guild of Australia rejects the Competition Policy Review’s draft recommendations that regulations governing the ownership and location of...
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China flash manufacturing PMI lifts

Manufacturing by Chris Becker The HSBC monthly flash manufacturing PMI has printed at 50.5 for September. The August print was 50.2,  with the September print forecast to be 50 - indicating no expansion or subtraction - this is a slightly better result than expected. The Aussie dollar bounced over 20 pips up on the release and is threatening the 89 level, while Aussie stocks have retraced most of this morning's losses. Heres a link to the full report at Markit - looks like new orders, including exports are increasing while price pressures are...
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There goes 2014 for stocks

Flatline by Chris Becker Well, there goes 2014 for the ASX200 - all nominal price gains wiped out as the market falls nearly 1.5% to 5350: With dividends, you're up about 2% according to the accumulation index: The iron ore players are mixed, with FMG only down 1.5% while Atlas Iron (AGO) was smashed (possibly on a broker downgrade to 40c target - ouch) down over 6%, but its the big boys BHP and RIO pulling the broader market down, over 1.5% each. Theres a few months left of course and Chinese stimulus is coming isn't it? Isn't...
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