Fairfax vs PBOC on a new China credit boom!

imgres Gina's mining newsletter couldn't wait to get its teeth into this one: "Top leaders have changed their views," said a senior economist at a government think-tank involved in internal policy discussions. The economist, who declined to be named, said the People's Bank of China had shifted its focus toward broad-based stimulus and were open to more rate cuts as well as a cut to the banking industry's reserve requirement ratio (RRR), which effectively restricts the amount of capital available to fund loans. ..."Further interest rate cuts should be in the pipeline as we have entered into a rate-cut...
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Phat Dragon on the Chinese rate cut

2 From Westpac's Phat Dragon: The full range of policy interest rates were lowered to varying degrees on Friday night, surprising the market, Phat Dragon included. This is an important move for the real economy and for structural reform, on a number of levels. The actual moves were that the benchmark one year deposit rate was lowered by 25bps to 2.75% from 3.00%, while the ‘top-up’ factor was increased from 1.1 times to 1.2 times. All other maturities were lowered by 25bps, except the 2 year, which was lowered 40bps. Simultaneously, the benchmark one year lending rate was lowered by 40bps,...
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Aussie banks ill-prepared for property crash

ScreenHunter_5114 Nov. 24 09.00 By Leith van Onselen Australia's big four banks are ill-prepared for a housing crisis, according to AMP Capital's head of credit markets, Jeff Brunton, who claims that official stress tests failed to account for the impact on mortgages that did not default. He takes up the argument pioneered at MB by Deep T, from The Canberra Times: "The banks will have enough capital to deal with the mortgages and the corporate borrowers who default, but they will then be left with a financial system that has got a high loan-to-value, with many Australians in negative equity positions"... "The standard stress...
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Macro Morning: Central banks a set a fire

marketmorning By Chris Becker Well its going to be another interesting week on macro markets again with news of an interest rate cut in China and Mario Draghi smacking down the Euro setting the bulls nostrils flaring! First, in Europe Draghi's strident comments on combating deflation saw the union currency crash against the USD, down over 130 pips to just below the 124 handle and just above earlier support in the month: Everyone is watching the 1.2360 terminal support line closely for capitulation and a target down in the low 1.20s from July 2012 levels. The EURAUD actually crashed further, falling over...
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Cometh the moment, cometh the man

Malcolm Turnbull webshot The Australian Liberal Party has a chance to rule the country for a generation. Here is how. Tony Abbott is a dead duck. Anyone still breathing can see the massive shift towards climate change action taking place around the world. China has pledged to cap emissions and will very likely do so ahead of schedule. Coal is in deep trouble. The US has committed to huge cuts in emissions and although the Republican Party is hostile to the commitment it does not have the power to prevent the US Environmental Protection Agency (EPA) from moving ahead. Any attempt at legislation will be blocked by...
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Senate to block cuts to auto industry assistance

ScreenHunter_5113 Nov. 24 07.42 By Leith van Onselen The Australian is reporting today that the Senate will block the Abbott Government's bid to cut assistance to the automotive sector (known as the Automotive Transform­ation Scheme, or ATS) by $900m between 2013-14 and 2020-21, by bringing forward the end date for the scheme and lowering the amount that individual firms can claim: Blocking the bill would reverse $500m in cuts to 2017-18 announced in last year’s Mid-Year Economic and Fiscal Outlook and a further $400m in savings announced in the May budget... “All available evidence shows that decimating the...
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NSW surges to top of land cost leaderboard

ScreenHunter_18 Jul. 05 10.22 By Leith van Onselen Earlier this month, the Australian Bureau of Statistics (ABS) released its 2013-14 Australian System of National Accounts (ASNA) data release, which provided a detailed presentation of annual national accounts data. Locked away on Table 61 was my favourite section of the release: data on aggregate land values at the state and national levels. This years release confirmed that, at a national level, the land values underpinning the Australian house prices surged, with all states and territories recording growth in nominal terms, but with New South Wales and Victoria leading...
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Auction clearances slip on high volumes

ScreenHunter_19 Mar. 13 13.12 The national auction clearance rate slipped over the weekend on the back of falls in Sydney and Melbourne. According to RP Data, the national weighted average preliminary auction clearance rate was 67.7% over the weekend, which was down 1.3% from the 69.0% preliminary clearance rate reported last weekend. Sydney’s clearance rate fell by 0.9% to 74.3%, whereas Melbourne’s fell to 64.9% (last weekend 66.7%). Brisbane, which typically only has a small number of auctions, experienced a big jump in its clearance rate (up 6.9% to 52.2%). Overall auction volumes (3,294) were up slightly on last...
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RP Data weekend property market update

ScreenHunter_18 Mar. 18 17.58 Click to view RP Data’s latest weekly housing market update, which provides a useful snapshot of the housing market as at 23 November 2014. This week’s report includes: Latest weekly dwelling value results; Auction results & clearance rates; Latest median house & unit prices; Average time on market & vendor discounts; Mortgage market activity; and New listings...
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How far will the iron ore short squeeze run?

images Charlie Aitken will probably be patting himself on the back today. On Friday morning he said buy iron ore: “Obviously, the most beaten up sector in Australian equities is pure play iron ore stocks,” says Bell Potter Executive Director Charlie Aitken. “Yet, from a trading perspective they should be bought. All I know is every time the AFR runs a front page article about how much less Andrew Forrest is worth on paper that it’s usually the short-term bottom in iron ore prices and a solid, tradeable rally in Fortescue(FMG) follows.” “If we get any stability, or dare I say it, actually a...
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Daily iron ore price update (sixties)

anvil6-200x200 Here are the iron ore charts for November 21, 2014: And so, paper continued to burn on Friday, even after the Chinese rate cut, Dalian recovered but not much. Singapore is clearly more hopeful. Benchmark spot fell faster than Qingdao and ended at a new low of $69.80. Rebar average is clearly headed back from whence it came. Reuters has texture: "We knew that this year was going to be the first year when iron ore was in oversupply and I think we're just living with the consequences of that," Goldman Sachs analyst Christian Lelong said. "Right now there is no hard floor for...
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Daily LNG price update (the next iron ore)

dgwr Lot's of material news today for LNG and none of it good. The oil price managed a small bounce to $76.50 on the central bank bonfire Friday: That's got the LNG contract price up to $13.14mmBtu: But the central bank action won't reverse oil declines, only delay them a bit. From the FT: US imports of crude oil from Opec nations is at its lowest level in almost 30 years, underlining the impact of the shale revolution on global trade flows. The lower dependence on imports from the cartel, which pumps a third of the world’s crude, comes amid advances in hydraulic fracturing that has...
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China cuts interest rates, and?

imgres31-200x200 During the awful Chinese October data dump, I had this to say: One wonders if said target isn’t about to be cut, along with 2015 GDP and, possibly even reserve ratio requirements. Yes, the data was poor, moreover it showed no evidence of any turn from easing measures too date, so it's not really any great surprise that China cut rates late Friday. The FT says the following: The People’s Bank of China slashed its benchmark lending rate by 0.4 percentage points, while cutting its deposit rate by 0.25 per cent. This was a departure from previous rate adjustments, in which the lending and deposit...
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Sell side blows on China rate cuts

1311618182438 From Danske Bank: While it was clear that there was a slight easing bias in monetary policy in China, the interest rate cut was nonetheless a bit of a surprise. It suggests that China now has a more substantial easing bias in monetary policy and the government’s attempt to contain credit growth will be loosened somewhat in coming months. Hence, supporting growth now appears to be a higher priority. The implication of today’s interest rate cut is that the Chinese growth manufacturing PMIs and growth have probably bottomed out and should start to improve in Q1 when investment demand and...
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Links 24 November 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: The liquidity monster that awaits - Financial Times Where Is the Outrage Over Foreign Exchange Manipulation? - New York Times A Global Explosion in Ultra High Net Worth Individuals - The Reformed Broker Why alpha is becoming more elusive - Larry Swedroe GMO Q3 letter: How asset classes would react to a rise in short-term interest rates - GMO The TechCrunch Bubble Index - Todd Schneider The coming blackout epidemic - Vice North America: The Wisdom of Peter Schiff - New York Times Rental Apartment Construction Is At a 27-Year High - Wall...
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Sunday Macro November 23

Sunday-Reading China Bank regulator proposes tightest shadow lending oversight to date (SCMP) Early signs of a floor under China's sinking property market (CNBC) A Real Deal: To appreciate the U.S.-China climate agreement, there’s only one number you need to pay attention to. (Slate) At Factory Waste Ponds, Fumes Choke Fantasies (Caixin) The Low Official Found with Towering Pile of Cash, Gold and Properties (Caixin) Xi puts the willies up China’s super wealthy (Finance Asia) Chinese general caught with tonne of cash (FT.com) China's 600 Million Searchers Push Global Internet Toward...
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Weekend 22-23 Nov Science, Technology, Society etc Links

science_grande Science & Technology Deregulation at heart of Japan's new robotics revolution (CNBC) The Statistical Crisis in Science (American Scientist) In the World of Wearables, Tech Companies Are Suddenly Taking Heart (Rate) (Recode) How to Ask Programming Questions (ProPublica) Flat battery? New prototype turns waste heat into electricity (The Conversation) The Rosetta lander detects organic matter: the seeds of life? (The Conversation) Brain food: diet’s impacts on students are too big to ignore (The Conversation) The Proton and Neutron Just Got Two Brand New Subatomic Cousins...
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Weekend Links – 22nd – 23rd November 2014

reynard   Global Macro / Markets: They go all in: China’s PBOC Cuts Interest Rates for First Time Since 2012 - Bloomberg Spice Island is a case study in debt traps - FT LEAKED: Internal Uber Deck Reveals Staggering Revenue And Growth Metrics - BI Americas: Obama’s huge new immigration plan, explained - Vox Obama unveils U.S. immigration reform, setting up fight with Republicans - Reuters Federal Reserve Could Add to Toolkit for Raising Rates - WSJ SEC Director big stock holding stirs debate - Reuters Europe: Royal Bank of Scotland admits overstating financial...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets With the S&P 500 trading to a new record high and continuing to eye the top of the multiyear channel resistance, there seem to be a number of countertrend moves taking place. Around the Asia region today, equities are generally offered, with the Nikkei leading the way. The USD has been sold, predominantly against the JPY and AUD, while the JPY has been the star as it rallied against all G10 currencies. Commodities are generally flat, although energy is seeing better buyers. A few thoughts from the trading day: 1)      There seems to...
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Iron ore miners flog dead cat as Dalian heads for Hades

awfq3 Finally today some relief for the army of reckless tards that pile into iron ore every time it falls. The majors are both up 1% after yesterday's 3% shellacking that broke all sorts of technical levels and set them up for more pain, much more, in my view. FMG is also enjoying a 3% bounce but is still languishing far below the former support line and now resistance level at $2.92. And so, onto the comparative index charts: The majors are breaking down, however the idiocy spreads are trying but failing to close given the speed of the iron ore decline: But the juniors are showing no such...
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Phat Dragon sees rough road for China developers

rth35 From Westpac's Huw Mackay: Phat Dragon has allocated a considerable portion of the available column inches in this chronicle to housing sector activity of late. A week ago, the very welcome signs of stabilisation in housing starts, and to a lesser extent sales, were presented, alongside a further update on the promising trend in daily sales activity post Golden Week, with Beijing highlighted as the exemplar in this regard. New information coming to hand in the intra-chronicle period - the October update on house prices (70 city series) - showed that while the market remains under...
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What’s the cost if energy assets get stranded?

ScreenHunter_03 Jul. 23 09.31 Cross-posted from The Conversation: In the last week the US and China announced goals to reduce emissions by 26-28% and cap emissions by 2030 respectively. India also signalled its aim to end coal imports within 2-3 years. These are telling signs of a move away from fossil fuels by some of the world’s biggest emitters of greenhouse gases, including countries that are key importers of Australia’s coal and gas. The latest report from the UN Environment Programme (UNEP), released this week, called for an end to carbon pollution by 2070, followed by action to reduce greenhouse gas emissions...
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Goldman sees 2015 crapola economy

Crapola-500x500 This is two days old now but is worth revisiting: There are two main changes in our Australian economic forecasts. Firstly we have shaved our 2015 GDP growth by 30pps from 2.3% to 2.0%. This compares with consensus forecasts for 2.9%. The core themes behind our bottom-of-consensus forecasts that we held through 2014 appear to be still the central themes; 1. A terms of trade shock from lower commodity prices driving nominal income growth back towards stall speed. 2. A household income shock as an uncompetitive exchange rate and labour costs coalesced with 'cost out and capital...
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Population ponzi masks fall in Victorian living standards

ScreenHunter_5103 Nov. 21 11.35 By Leith van Onselen Victoria's population growth fetish has once again been shown to be false economy, with today's State Accounts, release by the Australian Bureau of Statistics (ABS), showing a 0.2% fall in Victorian gross state product (GSP) per capita in the year to June 2014, despite a 1.7% headline increase (see next chart). The ACT also registered a fall in per capita GSP, down 0.9% over the year, whereas the mining strongholds of Western Australia and the Northern Territory registered 2.6% and 4.8% rises respectively, with the former's due to rising export volumes and the...
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RBA up-sells dirt phase three

images Find below a fresh (or, rather, stale) speech from the latest RBA doyen to be using the mining rear vision mirror. For all of its happy points, the analysis overlooks one crucial fact. If Chinese demand isn't growing then neither are Australia's export earnings. It simply does not matter that demand is strong if it is not stronger than last year, especially if we've entered oversupply. Rate of growth is all that matters to an economy hooked on expanding dirt exports. It's increasingly obvious that Chinese steel output has peaked, given it's been falling all year ex-exports, despite the's RBA...
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