Fitch: Aussie banks will need to raise capital

ScreenHunter_06 Jun. 26 22.42 By Leith van Onselen Global credit ratings agency, Fitch, has labelled Australia's big four banks’ capital profiles as “about average” and claimed that they could be forced to increase their capital buffers by up to $53 billion - equivalent to nearly two year's combined profits - if the Murray financial system inquiry takes aggressive action to bolster the banking system: Australia's Financial System Inquiry (FSI), due to report by end-2014, is likely to recommend higher capital requirements for the large banks, says Fitch Ratings. A higher capital charge and/or a rise to the mortgage...
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Consumer confidence index points to rising spending

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index rose by 1.3 points in the week ended 23 November to 114.3, to be just above its long-run average reading of 113.2 (see next chart). ANZ chief economist was particularly happy with the result, noting that “alongside low interest rates and rising house prices, this should support consumer confidence and retail spending as we head into the Christmas season”. ANZ also provided the below chart, which compares the sub-index of the financial situation compared to a year ago against real household consumption...
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Aussies flee to New Zealand

ScreenHunter_5145 Nov. 25 09.48 By Leith van Onselen Statistics New Zealand has today released its permanent & long-term migration figures, which revealed that New Zealand net migration is at record highs, with net migration from Australia to New Zealand also at the highest level in 21 years: Seasonally adjusted permanent and long-term (PLT) migration figures showed a net gain (more arrivals than departures) of 5,200 migrants in October 2014. This surpasses the previous high, recorded in August 2014 (4,800). Before 2014, the last peak was in February 2003 (4,700). Net migration has increased in most months over the...
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The last stand of Australia’s dying economic model

url The AFR is reporting that: Australia’s big four banks are tipped to raise $134 billion from wholesale markets this financial year, the most since 2009-10, as lenders use cheaper global funds to fuel domestic competition. ...The last time banks raised this much wholesale money was in financial 2010, when the government was guaranteeing bank borrowings in response to the financial crisis. The trend helps to lower banks costs, as most of the wholesale money being raised replaces more expensive funding secured during the crisis. Three cheers for them! Here are the latest offshore borrowing...
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The population monster that’s swallowing Victorian governments

ScreenHunter_5140 Nov. 25 08.03 By Leith van Onselen The Australian's Judith Sloan has questioned why Victorians are set to throw-out the one-term Napthine Government when its performance has not been all that bad: It’s not as though the Coalition government has been especially bad. There is a good news story to tell about fiscal management, expense control and initiatives for some needed new infrastructure. Victoria retains its AAA credit rating, which is in marked contrast with most of the other states. To be sure, the Victorian economy has been sagging along with the rest of the economy. And given the relative...
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Macro Morning: German joy

marketmorning By Chris Becker A relatively calm night on macro markets with small gains in most stock markets, USD strengthening against all but the Euro currencies with only two data releases of note. First, the German IFO survey surprised a little on the upside which helped the DAX move along, up 0.5% with further gains in futures: The daily trend for DAX is now a little over-extended, having now reached its former high in September but is following the S&P500 in lockstep, up 0.3% to another record high. The second data print - services PMI for the US - came in strong, but a bit lower than...
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Why do talking heads hate short-sellers?

somebody-clipart-1227973289772298741celfred_Pointing_finger.svg.med One of the more enduring mysteries of investment is the special hostility that is reserved for short-sellers. Most (if not all) of the major investment talking heads never offer short calls and more often than not spend their days trying to have them banned. It's a mystery for two simple reasons: shorts are the smartest players in the market and it is they that take out the rubbish why would anyone restrict themselves to only one half of the gains available in investment? Of course it's not a mystery at all. The hostility is a result of three generations of a credit-driven rise in asset...
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NZ gives Oz an income thrashing

ScreenHunter_5138 Nov. 25 07.35 By Leith van Onselen Statistics New Zealand has released its annual National Accounts (Income and Expenditure) data for the year to March 2014, which revealed that New Zealand national disposable income increased by a strong 8.2% over the year: New Zealand earned $14.4 billion more as a country than in 2013, Statistics New Zealand said today. National disposable income was up 8.2 percent to $189.2 billion, in current prices, in the March 2014 year. The growth was led by business profits, while income from employment also grew. Business profits were up $9.0 billion (9.8 percent), due to large...
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East coast leads national income shock

ScreenHunter_5123 Nov. 24 15.26 By Leith van Onselen The income shock afflicting the Australian economy has been well documented on this site. Essentially, the ending of the biggest commodity price (terms-of-trade) boom in the nation's history in 2011 ushered in a new era of sluggish income growth, whereby real national disposable income (NDI) would significantly lag the growth in the economy, as measured by GDP. This situation is best captured by the next chart showing the falling terms-of-trade dragging down NDI per capita: As well as the below charts showing NDI per capita falling relative to GDP since...
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China hard landing risks are rising

imgres31-200x200 Late yesterday I looked on as another talking head declared a Chinese hard landing was off at Gina's mining newsletter: Graham Harman, Russell Investments’ Asia-Pacific strategist, said that China’s policy move fit neatly with the ‘bad news is good news’ mentality of investors. “We’re in bull market mode, with zero interest rates and a recovering world economy your broad pre-disposition is to be positive about all that. If you then get negative news but if it immediately elicits a rate cut or a stimulatory package be it from China, Japan or Europe... the market has been very much taking...
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China’s non rate cut

Screen-Shot-2014-11-24-at-14.05.40 From Society Generale's Wei Yao via FTAlphaville on the Chinese rate cut:   ...due to the further rate liberalisation announced at the same time, there is actually no de facto rate cut. The PBoC surprisingly lowered the benchmark deposit rates by 25bp and the benchmark lending rates by 40bp. After the change, the 1-year benchmark deposit rate is 2.75% and the 1-year benchmark lending rate is 5.6%. We did not see this coming, but we are not wrong either – the cut is not really a cut. The PBoC conveyed the same message in its communiqué following the cut, stating that the interest rate cut...
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Daily LNG price update (how low?)

uyvyu The Brent oil benchmark was more or less stable overnight. That should have left the contract LNG price where it was. However, I shifted from WTI  to Brent yesterday in my charting the Japanese Crude cocktail (JCC), which is the underlying price used for LNG, and in the process discovered a glitch in my old calculations. I've been far too generous in filling in some of the gaps in the JCC formula and it turns out that I've overestimated LNG contract prices by roughly $1mmBtu. So, here is the new LNG contract chart, based upon Brent oil, today around $12mmBtu: You'll have to forgive me, the...
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Daily iron or price update (bear market fizzer!)

anvil6-200x200 Here are the iron ore charts for November 24, 2014:   This is a real fizzer of a bear market rally. Dalian six month futures barely budged, Singapore 12 month futures have crashed to new lows and physical hasn't moved at all (benchmark rose 20 cents to $70). Mining equities also rolled over in London, with both RIO and BHP down more than 2%. Rebar average only managed to slow its fall. Also hitting sentiment will be another rise in Chinese iron ore port stocks, by 550k tonnes on the week. There's still oodles of red dirt piled up over there. If I'm a Chinese buyer, this price action is a...
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Links 25 November 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: What big economies got right (and wrong) after the financial crisis - Wall Street Journal The $400 billion bond mis-match keeping bears at bay - Bloomberg Hedge funds bet big on coal mining failures - Wall Street Journal The global policy mix turns more growth friendly - FT Blog Are low interest rates responsible for the soaring stock market? - The Fat Pitch Louis CK on bull & bear markets - A Wealth of Common Sense What is a CEO really worth? - MoneyBeat North America: US home renovations are booming again - Real Time...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets There will certainly be a number of money managers outperforming benchmarks wishing that the year would end abruptly so they could lock in performance. Still, there is much water left to flow under the bridge, so traders need to stay vigilant. There are five weeks to Christmas and six to the New Year, but traders still have to navigate through the lower liquidity and the raft of December event risk. Here we get the ECB meeting (4 December), the second Targeted Long-Term Refinancing Operation (11 December) and the Japanese election (17...
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QLD’s mega-casino fails

rca__casino_550 From the AFR: Hong Kong billionaire Tony Fung said he is still committed to building the $8.5 billion integrated casino resort at Yorkey’s Knob in Far North Queensland, despite failing to acquire the Reef Casino in Cairns. ...The acquisition of the Reef Casino was crucial to Mr Fung’s plans as the Cairns casino licence was a fall-back if probity checks failed on the Aquis Resort. Aquis said it could not meet the deadline for regulatory approvals for the Reef Casino due by this Friday. I'm sure Comrade Campbell can come up with...
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Is Medibank’s sale a dud deal for taxpayers?

ScreenHunter_5121 Nov. 24 12.54 By Leith van Onselen Business Spectator's Alan Kohler has penned an interesting rebuke of the Medibank privatisation today, arguing that it represents a dud deal for taxpayers: ...someone might have pointed out (but didn’t) that taxpayers are forgoing a dividend of $231m that grows each year, and could have borrowed that $5.7 billion for $185.4m in interest, fixed for 10 years. But that would be debt, wouldn’t it, and we can’t have that. ...with the bond rate at 3.2 per cent, taxpayers would be better off keeping Medibank and borrowing the money for infrastructure rather than...
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Iron ore miner short squeeze disappoints

url I was hoping for better. RIO and BHP are up a lousy 3.5%, reversing just two days of losses. FMG is doing better, up 9.5% and reversing 3 days of losses and one third of the Aitken crash. Here are the comparative indexes: The idiocy spreads are all widening again: The juniors have given the PBOC one giant yawn as the dirt is shoveled over their caskets. ARI is up 5% and BCI 6% but that's about it: Dalian May futures have opened up 2.1%, also muted. Let's see if they get moving later in the...
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BIS’ happy mining cliff

ScreenHunter_08 Nov. 07 08.52 By Leith van Onselen BIS Shrapnel is out today warning of a 40% slump in mining investment: the biggest decline on record. From The ABC: BIS Shrapnel has released the findings of its Mining in Australia 2014-2029 report which points to a 40 per cent collapse in investment in the sector over four years. "Already we're seeing a substantial slump take place in iron ore and coal investment around the country but now with the LNG investment boom about to end we're about to see the biggest slump ever in mining investment," spokesman Adrian Hart said. He said the current slump had barely...
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HIA sees record new home construction

ScreenHunter_01 Mar. 03 22.48 By Leith van Onselen The Housing Industry Association (HIA) has released a new report forecasting a record level of new home construction across Australia in 2014, and elevated construction levels to 2016: “In aggregate, we will commence nearly 190,000 new dwellings in 2014, surpassing the previous record of 187,000 back in 1994.” “The momentum culminating in this milestone has provided a substantial boost to Australia’s economy at a crucial juncture in the cycle. Below trend economic growth and weak labour market outcomes would be considerably worse without the reach a new home...
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ABC joins the austerity drive

BamtcdqCQAE6raU I'm a big fan of the ABC but this will be good for a national broadcaster which is a very deep trough of entitlement. From itself: More than 400 ABC staff could lose their jobs as the public broadcaster moves to implement the $254 million the Federal Government will cut from the public broadcaster over the next five years. Managing director Mark Scott made the announcement when he addressed staff at the ABC's Ultimo Centre in Sydney this morning. Mr Scott said the Corporation was committed to using back-office and overhead savings to fund the $207 million that would be cut from the ABC's budget...
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Why is mining so unpopular?

imgres From her newsletter: Gina Rinehart has attacked the "negativity" she says the mining industry is regarded with, considering Australia couldn't "survive" without it. "For an industry that delivers so much, wouldn't you think there would be just a little more understanding and less negativity for what mining contributes to our country?", Rinehart said in a speech in Darwin on Saturday. ..."Mining is the largest earner of export income generating more than $200 billion in much-needed revenue for our country, a country in record debt", she told the Mining and Related Industries annual lunch at the...
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Sour China steel sentiment turns rancid

images From Mac Bank come the November Chinese steel sentiment survey taken during the APEC week. They're not happy: Demand stinks, especially property: More want less iron ore: Because China is swimming in the stuff: Pre rate cut,...
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Hammer to fall on dodgy Chinese property money

ScreenHunter_5115 Nov. 24 09.52 By Leith van Onselen Details about the parliamentary inquiry's report into foreign investment in Australian property, which is scheduled for release this Thursday, are becoming clearer, with information leaks pointing to the implementation of a new $1,500 application fee on foreign property purchases, as well as an overhaul of the existing monitoring and compliance regime. As reported yesterday in the Daily Telegraph, the proposed new $1,500 application fee would raise some $600 million over the next decade, which would be used to beef-up monitoring and compliance activities by the Foreign...
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CS: RBA to cut on fading property

csrba From The Australian: The Reserve Bank of Australia is moving closer to cutting rate according to Credit Suisse. “Recent comments from RBA Governor Stevens suggest that the Bank is more concerned about the growth outlook than financial stability in the abstract,” Credit Suisse strategists Damien Boey and Hasan Tevfik say in a report. “The unwillingness of the RBA to implement macro-prudential tightening suggests to us that the Bank is worried about overtightening, which in turn implies downside growth risks.” “We believe that the Bank’s next step will be to cut rates, especially...
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