ASX at the close

ScreenHunter_31 Jun. 04 16.42 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets Greenback recovers on CPI and hawkish fedspeak Asia is facing a quiet finish to the week with renewed US dollar strength being the key theme. Earlier in the week, Fed chair Janet Yellen emphasised the significance of inflation and wage growth to the timing of rates lift-off. As a result, the CPI data released Thursday was always going to carry significant weight. While the headline inflation reading fell 0.7% and was a touch below expectations, the core CPI reading was up 0.2% and slightly ahead of estimates. This implied a...
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Washington Post: Beware the TPP trade deal

ScreenHunter_3418 Jul. 23 10.44 By Leith van Onselen The Washington Post has joined the chorus of experts warning about the dangers lurking in the Trans-Pacific Partnership (TPP) trade agreement - the US-led trade deal between 12 Pacific-rim nations (including Australia) - which is expected to be signed within the next month: Who will benefit from the TPP? American workers? Consumers? Small businesses? Taxpayers? Or the biggest multinational corporations in the world? One strong hint is buried in the fine print of the closely guarded draft. The provision, an increasingly common feature of trade agreements, is called...
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Weak labor folds on data retention

ScreenHunter_6181 Feb. 23 14.54 By Leith van Onselen As expected, the Labor Party has folded in its opposition to the Government's data retention plan, paving the way for the Government to pass legislation requiring internet providers to store customers' metadata for two years. From The AFR: Labor has called for some amendments but largely backed the most controversial parts of the plan – its duration and scope. There is also no firm push to detail exactly how much the government would pay for the plan, which internet service providers have warned could lead to higher service prices. Under the changes, the definition of...
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RBA meeting preview: Expect another rate cut

ScreenHunter_02 Apr. 22 19.55 From Bill Evans, chief economist at Westpac, who believes that the RBA will cut rates by another 0.25% at Tuesday's meeting and will adopt an easing bias: The Reserve Bank Board meets next week on March 3. We expect that it will decide to cut to overnight cash rate by 25bps from 2.25% to 2.00%. On December 4 last year we forecast that the Bank would decide to cut the cash rate by 25bps at both its February and March meetings. At that time market pricing put the probability of consecutive rate cuts at around 15% with the probability of the February rate cut alone (that has since been delivered) at...
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Investor mortgage growth keeps on rising

ScreenHunter_12 Sep. 23 12.54 By Leith van Onselen The Reserve Bank of Australia (RBA) today released its private sector credit aggregates data for the month of January: A chart showing the long-run breakdown in the components is provided below: Personal credit growth (0.0% MoM; 0.0% QoQ; 0.8% YoY) remains in the gutter, whereas business credit growth (0.8% MoM; 1.6% QoQ; 5.5% YoY) and housing credit growth (0.6% MoM; 1.8% QoQ; 7.1% YoY) are stronger, but remain below their long-run average growth rates (although housing credit is still growing more than twice as quickly as wages and off a ginormous debt...
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Melbourne property “so far out of whack”

ScreenHunter_02 Apr. 23 10.34 By Leith van Onselen If you get a spare 10 minutes today, make sure that you listen to the above interview with property developer/investor, Michael Drapac, from Tuesday's Mornings With Jon Faine show. Drapac is a prominent developer/investor that has been in business since the 1970s. In the mid-2000s, he held the biggest portfolio of CBD land in Melbourne (now sold-off). And now, he holds a multi-billion dollar land portfolio in South Eastern United States. According to Drapac, Melbourne is home to one of the world's biggest property bubble, and anyone that "believes this time is different...
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Macro Morning: Mad World

marketmorning-200x200 By Chris Becker Following yesterdays "mini-stimulus" by Chinese authorities, almost all Asian bourses rallied, with the Shanghai Comp up 2% and the Nikkei up over 1%, while the local ASX200 was dragged down by the worse than expected private capex figures. The Nikkei is taking another step up into the stratosphere here, becoming seriously overbought on the dailies: SPI futures are pointing to a very modest open this morning on the ASX200, absorbing the good lead in Europe but dampened by the slip in Wall Street. The marginally poorer than expected German unemployment report, where the...
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Budget under more pressure as nominal GDP fades

ScreenHunter_88 Sep. 05 08.32 By Leith van Onselen Stephen Anthony, principal of consulting group Macroeconomics, has today warned that the Federal Budget is facing more downgrades as growth in nominal GDP disappoints. From The Australian: [Anthony] said “nominal” GDP, or the value of all the goods and services produced, was not rising as quickly as projected because of the fall in export commodity prices, a currency that was still too high and very weak wages growth. Although he commended Treasury for heavily marking down its forecasts for nominal GDP for 2014-15 in the midyear budget update, he said the outlook was...
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Bring light to the Council of Financial Regulators

blog1 Cross-posted from Martin North's DFA blog. Behind the scenes, it is the mysterious Council of Financial Regulators which is coordinating activity across the Reserve Bank, APRA, AISC and Treasury. This body, is the conductor of the regulatory orchestra, and although formed initially in 1998, it has only had an independent website since 2013.  It is the coordinating body for Australia’s main financial regulatory agencies. It is a non-statutory body whose role is to contribute to the efficiency and effectiveness of financial regulation and to promote stability of the Australian financial system. The...
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Glencore slashes coal output

1 This is interesting from Bloomie, Glencore is to cut Australian coal exports by 15 million tonnes in 2015. This represents 16% of Glencore's projected Australian output and 6% of total Australian exports. 15mt is roughly 1.4 of the global traded coal market. Any implications? Prices have been up the last few weeks as China restocks, passing $67:   The cuts can do the market balance no harm though change little longer term. Glencore was scheduled to open the 13mt Clermont mine in QLD this year so this is actually just cutting back expansion and may simply be some...
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Long-term unemployment soaring

ScreenHunter_6256 Feb. 27 08.10 By Leith van Onselen Fairfax's Ben Schneiders has penned two good pieces today (here and here) on the growing scourge of long-term unemployment, which has risen some 150% since the GFC hit in 2008: An analysis of Bureau of Statistics data by Fairfax Media shows that the number of people out of work for more than a year rose to 175,200 people in January, an increase of more than 150 per cent since mid 2008. ...both the young - without skills and experience - and the old, in particular those in declining industries, were being hit by long-term joblessness. The Bureau of Statistics data shows...
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RIO chops hundreds in Pilbara

images From the SMH: Rio Tinto is poised to cut several hundred jobs from its iron ore division in Western Australia, weeks after iron ore boss Andrew Harding sent a memo to staff warning of a "degree of urgency" to quickly achieve deep cost cuts and maintain its mantle as the world's lowest-cost exporter to China. Further deep cost cuts at Rio have been well flagged, and the miner is putting the heat on high-cost players around the world by drilling its world-beating production costs even further down. It exited the December quarter with cash costs just under $US17 a tonne. Rio declined to...
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“Mad” Adam: Interest rates at bottom

dads_army_t_shirt_-_dont_panic_cu From Adam Carr at Dad's Army: Basically, I think that whatever the cash rate is by June, it’ll be the trough, which means that he window for the next 50bp is quite narrow. There are two reasons for this: firstly, and taken at face value, the Federal Reserve is preparing the world for a tightening cycle sometime later this year. ...As simple as it sounds, that one small decision from the Fed will have a profound impact around the globe: it’ll effectively put an end to the global currency wars, or at least establish some form of hiatus. ...This brings me to the second reason: all in all, most...
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Coalition to “save” the ABS

ABS_Logo_Small_mono By Leith van Onselen In a strange turn of events, the Abbott Government is planning to rescue the Australian Bureau of Statistics (ABS) by merging it with the nation's health statistics agency - the Australian Institute of Health and Welfare (AIHW) - and injecting $250 million to update the Bureau's ageing computer system. From The Canberra Times: The reform effort has been dubbed "Project Archer" and would include the integration of AIHW's 340 public servants with the ABS's 2800 workers, with the smaller agency allowed to retain some of its identity. A target date of July 1 has been set for the...
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Hopeless for Tony

1234567 From Laura Tingle: National security. The way things are going in Canberra these days, it feels so, well, Monday. The Prime Minister's statement on national security – that old reliable issue for conservative prime ministers in trouble –seemed but like a distant memory by Thursday. ...The government's shoddy attempts to end Professor Gillian Triggs job has instead put a cloud over the Attorney-General George Brandis, Foreign Minister Julie Bishop and Prime Minister Tony Abbott...The government was so cocky in thinking this was a "beltway" issue, it did not notice that many casual observers...
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The Australian dollar must fall much further

d0hdrk2awqd6iglcwdcrxkd3.300x299x1 The Aussie was hit hard last night and is trading under 78 cents again this morning. The weakness was a combination of yesterday's terrible capex outlook and a rampant US dollar fired up by signs of US wages growth. That lent the peso weakness against the crosses as well. Lot's of healthy red on the boards: Versus developed economy competitors the picture is improving with downtrends against the US dollar and Euro: There are some encouraging trends against commodity market competitors too: We've been outpacing the rand to the downside for eight months, have stablised...
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Deteriorating economy drives exodus to NZ

ScreenHunter_6250 Feb. 26 16.27 By Leith van Onselen Statistics New Zealand yesterday released its permanent & long-term migration figures for January 2015, which revealed that net migration to New Zealand hit the highest level on record: Moreover, migration from New Zealand to Australia is at its lowest level in 22 years: According to Statistics New Zealand: The increase in migrant arrivals between the January 2014 and January 2015 years was led by India (up 5,100), Australia (up 3,500), China (up 1,700), and the Philippines (up 1,300). The increase in arrivals from Australia included 2,600 more New Zealand...
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Hewson: foreign property restrictions “jingoistic”

ScreenHunter_6248 Feb. 26 15.11 By Leith van Onselen I have a lot of time for former Liberal leader, John Hewson. But his comments yesterday afternoon about the Abbott Government's tightening of the foreign investment regime pertaining to residential property are ridiculous: “It may help first-home buyers in the market for new apartments, where there has been a lot of foreign investor interest, it seems mostly to do with that, but I think there may be a jingoistic element to it, for the government to be seen to be doing something about foreign investment,” he said. “But how far can a country like Australia, totally...
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High density housing’s biggest myth

ScreenHunter_07 Feb. 10 11.46 By Ross Elliott, author of The Pulse Advocates of higher density housing development in Australia’s major cities – inner city areas in particular - are fond of pointing to a range of statistics as evidence of rising demand. Dwelling approvals, dwelling commencements, tower crane counts and various other sources, both reputable and dodgy, are referenced and then highly leveraged to support claims that our housing preferences have fundamentally changed in favour of high density apartments. But what’s the one inescapable fact that these advocates are missing? “Higher density living on the...
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RP Data weekly Australian house price update

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen In the week ended 26 February 2015, the Core Logic-RP Data 5-city daily dwelling price index, which covers the five major capital city markets, rose by 0.22% (see next chart). Home prices rose in rose in all major capitals except Perth (see next chart). So far in February, home values nationally have risen by 0.33%, with values in Sydney, Melbourne and Adelaide rising and Brisbane and Perth falling (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...
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Why mining hits income so hard

wages-mining-growth From The Australian: “If you lose a job in mining, or if someone in that space has to trade down to a lower-paid job, then that’s less income for the individual and less purchasing power,” senior ANZ economist Justin Fabo said. “If that happens on a large scale it all adds up.” Put simply, it’s not just about the percentage of the Australian workforce employed in the mining sector, it’s the size of their pay packets. “We’re looking at some substantial job losses [in the mining sector]. Some of those people will leave the country or get jobs elsewhere, so it might not show up...
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Daily LNG price update (shut-ins)

elephant-clipart-black-and-white-13285-cartoon-elephant-clip-art-design The Brent oil price fell back 1% last night after yesterday's thin excuse for a rally to $60.90. News was thin. The indicative LNG price contract fell to $8.86mmBtu: In news, the approaching glut is throwing up forecasts of falling volumes for projects: NYC-based PIRA Energy Group believes that strategies are emerging for keeping LNG trains operating amid weak seasonal demand. It is widely agreed that the LNG market is heading into a soft patch that may persist for some time. Between the relatively casual rate at which China and India are increasing imports and the sizable amount of new LNG...
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Daily iron ore price update (vale Vale)

anvil-200x200-200x2001-200x200 Here are the iron ore price charts for February 26, 2015: Paper markets recovered much of their losses. The benchmark iron ore spot price fell 40 cents yesterday to $62.50 a tonne. Texture from Reuters: Physical trading hasn't kicked off yet after the holiday, and we expect the supply glut to continue weighing on the market before construction projects fully resume in a few weeks," said a Shanghai-based trader. Some Chinese steel mills have held inventories for about 10-day use and are expected to restock the raw material, given that steel demand is likely to pick up...
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China’s landing gets bumpy

China-slowdown-200x200 Cross-posted from Investing in Chinese Stocks. Chinese currency traders viewed the first day of trading in the Year of the Goat as ominous, as the renminbi barely moved on Thursday, effectively a dead market. The lack of activity comes as the yuan is sitting on the edge of the daily trading band. Unable to trade the yuan lower, the currency has become fixed again. The peg is here again. iFeng: 人民币再趋跌停 交易员:这个市场死掉了 不会动了: Reuters quoted a trader saying, this market is dead, it doesn't move. Another trader at a large Chinese bank feels the same:...
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Links 27 February 2015

ScreenHunter_01-Apr.-02-06.192 Global Macro / Markets / Investing: Meet the Most Powerful Female Hedge Fund Manager in the World - Bloomberg Global equities hit new record as cheap money reigns - Yahoo ‘Feeling Certain’ and Other Mistakes That Trip Up Investors - Wall Street Journal After the Bitcoin Gold Rush - New Republic Liquidity risk and systemic banking crises - VOX North America: Yellen Seeks Right Blend of Inflation Data to Raise Rates - Bloomberg Marijuana Legalized in Washington D.C., But Congress Isn’t Happy - Bloomberg Elizabeth Warren is furious over Obama’s proposed trade deal -...
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