More sell side iron ore myopia

imgres From Gina's iron ore newsletter today: JPMorgan argues the focus on this deal risks over-shadowing one of the mining giant’s most important recent developments, its expanded iron ore production in Western Australia. ...Although JPMorgan has not lifted its rating on the stock, it has outlined a bullish scenario for the company’s WA iron ore business, calculating total export volumes could soar to 310 million tonnes per annum (Mtpa). ...The bank is also impressed by the potential returns from the US$3.2 billion expansion, pointing out that the internal rate of return (IRR) is likely to rise...
read more

Miners fall as iron ore futures bounce

dfgwr Today's midday iron ore update is an interesting turn of events. Junior miners are down today and I've added BCI given I can't really ignore it's ongoing crash: The majors are down too: And the idiocy spread is beginning to close: What's interesting is that Dalian iron ore futures are up 3 points today but rebar futures are taking a shellacking,  down 20 points. We're pricing off steel futures today, quite...
read more

Moody’s warns on growing bank wholesale debt

dfgwe The great flaw in Australia's economic model has Moody's exercised today: Data from the Australian Prudential Regulation Authority (APRA) highlights the trend that bank loans in Australia started to rise faster than deposits during 1H2014. As a result, banks could be pressured to increase their use of wholesale funding, a development which we would view as a key credit sensitivity for the Australian banking system. That said, any increased exposure to the wholesale funding markets is likely to be partly offset by higher holdings of liquid assets and improvements to maturity structures, supported by...
read more

Dwelling approvals lifted in July

ScreenHunter_01 Mar. 03 22.48 By Leith van Onselen The Australian Bureau of Statistics (ABS) has released dwelling approvals data for the month of July. At the national level, the number of dwelling approvals rose by a seasonally adjusted 2.5% to 16,318. The overall increase was broad-based, with the volatile unit and apartment segment rising by 5.9% and the more stable house approvals segment increasing by 1.4%. The result beat analysts’ expectations, who had expected a 1.7% rise in approvals over the month. In the year to July 2014, dwelling approvals rose by a seasonally-adjusted 9.4%, with house approvals up by...
read more

More mixed GDP partials

imgres More GDP partials out this morning from the ABS. Net exports is in worse than expected at-0.9%: The current account deficit, seasonally adjusted, rose $5,938m (76%) to $13,742m in the June quarter 2014. There was a turnaround of $7,258m on the balance of goods and services, resulting in a deficit of $4,691m in the June quarter 2014. The primary income deficit fell $1,275m (13%) to $8,605m. In seasonally adjusted chain volume terms, the surplus on goods and services fell $3,624m (25%) from $14,281m in the March quarter 2014 to $10,657m in the June quarter 2014. This is expected to detract...
read more

Roy Hill to ship early?

imgres Gina's newsletter may not report iron ore price collapses but the prospect of early shipments form Roy Hill makes a headline: “Roy Hill’s staff morale is high, and the hardworking team hope to be able to bring the first shipment due September 2015, ahead of time”, Mrs Rinehart said. The optimistic comments come despite the main engineering and construction contractor, Samsung C&T, winning a 46 day extension to its contract earlier this year. That rather suggests being behind...
read more

Why Australia’s governments are addicted to consultants

ScreenHunter_3957 Sep. 02 10.36 By Leith van Onselen The Australian's Adam Creighton has written an article today on the huge surge in the use of consultants, which is second only to the United Kingdom: AUSTRALIA has the second highest usage of consultants in the world, relative to GDP... Australian businesses and governments spent a total of more than $US4.2 billion ($4.5bn) on consultants last year — up 2 per cent from 2012 and ahead of an ­expected 5 per cent rise this year. This put Australia second only to Britain in the use of consultants, after allowing for gross domestic product, according to a survey to be...
read more

Beijing mulls iron ore pricing revenge

images From The Australian: ...BHP’s China boss, Chai Tan, met Chinese industry officials last week to update them on BHP’s proposed demerger, among other issues. After the meeting the National Development and Reform Commission issued a statement which raised the issue of iron ore prices...According to the report from newsagency PaRR, the department told BHP executives that “BHP and other iron ore suppliers should avoid abusing dominant market positions” and that there should be “a new pricing model” in the global iron ore market. Chai Tan met NDRC deputy inspector Li Zhong...
read more

AFG crocodile tears as FHBs collapse

ScreenHunter_30 Aug. 27 15.36 We'll have a full wrap on the latest AFG results tomorrow but today it's worth noting the tone of empathy in the press release: Fewer mortgages were arranged for first home buyers last month than at any time in the  past four years according to AFG, Australia’s largest mortgage broker. AFG Mortgage Index  shows that loans for first home buyers comprised only 9.5% of all mortgages processed in  August – the lowest such figure since June 2010. Of the total $3.9 billion of home loans  processed by the company, $324 million were for first home buyers. This contrasts sharply  with the $1.5...
read more

ANZ-RM consumer confidence falls

ScreenHunter_20 Apr. 10 19.28 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index fell marginally in the week ended 31 August, decreasing by 0.9 points (0.8%) to 112.6, taking it just below its long-run average reading of 113.2 (see next chart). This week's fall was driven by a 5.5% fall in household perceptions about their ‘financial situation compared to a year ago’ The below chart plots the most recent Westpac-Melbourne Institute Consumer Sentiment index against the ANZ-RM Consumer Confidence...
read more

Moody’s warns on investor mortgage bubble

dfgwrq From Moody's Credit Outlook: Last Tuesday, the Australian Prudential Regulation Authority (APRA) released its latest statistics on Australian authorized deposit-taking institutions’ (ADIs) exposure to residential property, which showed an increase in the proportion of higher-risk loans underwritten by Australian banks, including investment loans, interest-only (IO) loans and loans written outside normal serviceability criteria. The increase in higher-risk lending is credit negative for Australian banks because it weakens the credit quality of their portfolios. APRA’s data show three notable...
read more

Stock on market rebounded in August

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen SQM Research has released its stock-on-market figures for the month of August, which revealed a 3.8% seasonal rebound in the number of for sale listings over the month, although total listings are still 2.1% below August 2013 (see below table). According to SQM: Of particular growing importance [in these results], is the narrowing difference in the yearly decrease of stock on market, where an ongoing trend has now become evident. Indeed we are not seeing the large drop in stock levels year on year, as we were at approximately this time last year, when the market...
read more

What’s the the hit to iron ore miner profits?

gwreg Here's my chart of the quarterly average of the iron ore price (updated to September quarter to date): Major miners prices earned tend to follow this chart with a lag as contracts catch up. For instance, the last quarter saw Rio and BHP enjoy a $106 per tonne average rate, a little above the average price at $102. The current quarter average so far is $94. For some notion of what this will do to profits, here is UBS: Diversifieds: All else remaining equal, our BHP & RIO earnings estimates for CY 15  would be -5% and -13% (prev. -11% and -9%) respectively under a spot scenario....
read more

McGrath contradicts self on Chinese property boom

imgres By Leith van Onselen John McGrath from McGrath Real Estate has hit back at claims made yesterday by buyers’ agent, David Morrell, that "real estate agents and property lawyers are willingly helping foreign investors to illegally buy prestige homes in Melbourne and Sydney" and that this was "causing a domino effect" in the local market and helping to price-out locals. From The AFR: Prominent Sydney estate agent John McGrath says he hasn’t seen Asian buyers rorting foreign investment rules to buy blue-chip real estate. “I am not aware of any such practices,” said the founder and chief...
read more

D&B business expectations see boom, baby!

dfgwrew The Dun and Bradstreet business expectations index continues to trade in the Twilight Zone: Business earnings are expected to return to pre-GFC highs during the final three months of this year on the back of sustained levels of optimism and healthy sales forecasts, with retailers particularly upbeat about increasing their profits. According to Dun & Bradstreet’s latest Business Expectations Survey, the profits expectations index has lifted to 29.1 points, up from 19.9 in the last quarter and 21.1 last year. With 40 per cent of businesses anticipating higher profits during Q4 2014, compared to 11...
read more

Hockey’s super guarantee pause is good policy

ScreenHunter_3902 Aug. 22 15.25 By Leith van Onselen The Abbott Government has set to delay the planned increase in the superannuation guarantee - the amount that employers must contribute into employee's super accounts - by three years in a bid to ease pressures on the Budget. From Peter Martin: Superannuation contributions at present are set to climb from 9.5 per cent of salary to 12 per cent over the next five years. The Coalition wants to delay the next scheduled 0.5 percentage point increase for three years to ease pressure on the budget. Rushed through the House of Representatives on Monday as part of the mining tax...
read more

Daily iron ore market update (absolutely smashed)

anvil Here are the iron ore charts for September 1, 2014: Paper markets tanked, including rebar futures which are at new record lows. In physical, spot is at a new low for the move and just 50 cents above the post-2009 low. There's no contango any more and it's going to break. Worse, steel prices just keep falling indicating that the entire price deck is shunting lower with any rebound distant and likely very subdued. Texture from Platts: "The large international traders still have a lot of cargoes they have yet to sell off, and the medium and smaller ones don't dare to buy more because...
read more

China’s steel PMI deteriorates

sertwe Regular reader will know that within China's official PMI there is a partial PMI for steel. It's out today and in August showed a mixed result but in total further signs of deterioration. The headline number was relatively unchanged showing modest weakness for the third month running at 48.4. Output was strong at 54.3, the best turnout this year. However new orders fell to 44.6, the lowest since February and signalling growing weakness in domestic markets. Export orders were some offset at 53.6 but are a much smaller component. Inventories of steel remained high and inventories of raw materials...
read more

Abbot Point coal play gets even weirder

imgres The strange and weirdly uneconomic Galilee Basin coal play just got weirder and more uneconomic: Plans to dump 3 million cubic metres of material dredged from the ocean floor into the Great Barrier Reef area will be abandoned under changes to already approved plans to expand the Abbot Point coal terminal in Queensland. North Queensland Bulk Ports, GVK Hancock and Adani Group will re-submit a proposal as early as this week to Environment Minister Greg Hunt proposing alternative dumping sites on land. The change is designed to neutralise controversy over potential damage to the reef and avoid a...
read more

Commodity price index posts small rebound

ScreenHunter_07 Nov. 26 16.13 By Leith van Onselen Yesterday evening, the RBA released its commodity price index for August, which registered a 1.6% rise in Aussie dollar terms – the first monthly increase in 2014 – and also a 1.6% rise in SDR terms – the first increase since December 2013: Preliminary estimates for August indicate that the index rose by 1.6 per cent (on a monthly average basis) in SDR terms, after declining by 1.3 per cent in July (revised). The largest contributor to the increase in August was the price of iron ore. The base metals subindex rose in the month while the rural commodities subindex...
read more

Chinese house price falls continue

images101-200x2001 Cross-posted from Investing in Chinese Stocks. In August, new home prices fell 0.59% on average. Prices fell an average of 0.8% in July, and 0.5% in June. There were larger price gains at the top and larger declines on the bottom, while in the middle home price declines moderated slightly. One of the most important cities is Hangzhou. It lifted some buying restrictions at the end of July, but home prices fell 1.81% in August versus 1.53% in July. The initial easing of restrictions was for larger homes, which the government data will break out. However, prices declines have been stronger on...
read more

China accelerates carbon pricing

imgres Ah, the irony of it all, as the communists go where the capitalists fear to tread. From the AFR: China is accelerating plans to introduce a national carbon trading market, with a framework expected to be in place by 2016, as the government puts environmental policy at the top of its agenda. The National Development Reform Commission said over the weekend it would finish its draft rules for how the scheme would work by the end of this year and send them to the State Council, China’s cabinet, for approval. It then expects to set emissions caps and allocate carbon credits under a national...
read more

Links 2 September 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Has the market overpriced stocks and long bonds? - Econbrowser How the relentless bid from share buybacks has driven this rally - The Reformed Broker How sports betting is similar to the stock market - CNN Money Private debt funds are the new banks - Financial Times Alarm at Basel impact on shorts and swaps - Financial Times Hedge Funds Cut Gold Bull Bets to Lowest Since June - Bloomberg UN predicts climate hell in 2050 - The Guardian A global economy divided into the good, bad and ugly - The Guardian North America: Why many Americans...
read more

ASX at the close

ScreenHunter_31-Jun.-04-16.423-200x200 Chris Weston, Chief Market Strategist at IG Markets Asian indices and other futures markets have got off to quiet start in what is shaping up to be a very interesting week for a number of closely watched macro themes. Naturally, developments between Russia and the Ukraine will be in the cross sights. However, despite more concerning rhetoric that tensions are nearing a point of no return, we haven’t really seen a heavy bias towards defensive trading strategies today. China has dominated the local news front, with the official manufacturing PMI falling 60 basis points to 51.1, while the HSBC...
read more

The Economist warns on renewed bubbles

20140830_FNC602 From The Economist: Since some recovery was bound to occur after the housing slump, how worrying are the renewed signs of exuberance? To assess whether house prices are at sustainable levels, we use two yardsticks. One is affordability, measured by the ratio of prices to income per person after tax. The other is the case for investing in housing, based on the ratio of house prices to rents, much as stockmarket investors look at the ratio of equity prices to earnings. If these gauges are higher than their historical averages then property is deemed overvalued; if they are lower, it is...
read more
Page 1 of 68712345...102030...Last »