ASX at the close

ScreenHunter_31 Jun. 04 16.42 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets Equities rally despite Greece concerns The biggest surprise in global markets at the moment is perhaps the lack of panic around the results from the Greek elections. Focus has also been on extreme weather conditions in the northeast part of the US, some big earnings this week and the Federal Reserve meeting. It’s not yet certain whether the weather will impact trading hours and by how much it’ll impact activity. All these events perhaps warrant some caution given the big rally driven by the ECB action. On Greece, the polls...
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Is Asia about to drop Australian property?

no-thanks From the AFR: Asia’s wealthy are falling out of love with the Aussie dollar as record-low yields and sustained declines persuade them to look elsewhere, according to UBS. ...“Two years ago when I came to the region, in most client meetings, people were asking about Aussie assets, the Australian dollar, yield play; when you talk about it now, there’s almost no interest,” Mr Smiles said in an interview on Monday. “From the third quarter of last year, there’s a growing belief that the US dollar would start a sustained appreciation trend.” ...The Bank of Canada’s unexpected decision...
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Westpac jobs index loses momentum

ScreenHunter_10 Mar. 29 12.46 From Westpac: There are many business surveys out there and most have questions, in some shape or form, that are applicable to the labour market. To generate the broadest and deepest labour market indicator possible, Westpac compiles all the relevant indictors from these surveys into the proprietary Westpac Jobs Index. The Index firmed a touch to 49.2 in Dec from 48.5 in Nov holding below the long run average (50). The index was 49.4 in Oct and 50.8 in Sep. The Index had been on a general firming trend since the low of 45.1 in Apr 2013 till it peaked at 50.8 in Sep. The Index correctly...
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Goldman describes an iron ore calamity

imgres From Goldies: A sooner than expected decoupling from the Chinese cost curve and growing evidence of cost deflation lead us to downgrade our price forecasts to US$66/61/60/60 over the period 2015-18. In the short to medium term, prices will continue to underperform relative to costs in order to incentivize mine closures and project delays over the period 2015-17. This will unfold while marginal production costs are falling due to weaker commodity currencies, lower input costs and rising efficiency. At approximately 6% of annual seaborne supply, the scale of the adjustment required...
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REIA parasite injects negative gearing poison

imgres By Leith van Onselen The property lobby must be worried that the Government is considering winding back negative gearing tax concessions, with the Real Estate Institute of Australia (REIA) and the Property Council reportedly spending $60,000 on a new report aimed at combating claims that negative gearing distorts the housing market. From Perth Now: Set for release early this year, REIA chief executive Amanda Lynch said the new data revealed mum and dad investors with incomes under $80,000 would be the hardest hit should negative gearing be scrapped... WA Property Council executive director Joe...
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The great CBA vs BHP divergence

tree_diverge Regular readers will know that the Australian economy is not a miracle but a strange and rather unique blend of pre-modern and post-modern business sectors. The pre-modern are the commodity producers. They totally dominate Australian exports and account for a huge proportion of national income. The post-modern is the banking sector and its trick of leveraging up that income in big offshore loans that are re-distributed largely through mortgages to households. One half of the economy can't function without the other for very long, which makes me wonder at the sustainability of certain current equity...
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Fortescue craters

MCDNOAH EC011 The iron ore majors are taking shellacking today but not enough! BHP and RIO are both bouncing through the day as the bottom-feeders presume oil and iron ore have bottomed (at least for today). FMG is bouncing as well but it fell 10% to below $2 at the open, within spitting distance of its GFC low, so is still down 5%. Here are the indexes today: The idiocy spreads are paused before any push closed: The juniors are still guzzling the hemlock: Dalian six month futures are down 1 point. The current move lower has no reason to end yet that I can...
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NAB survey erodes

2 The December NAB survey is out and shows little improvement from November's rollover: The Survey again shows a patchwork economy with little-to-no momentum building. In December, conditions eased for the second successive month after October’s surprisingly strong result. As a result conditions are now a touch below the long run average. Additionally, forward orders fell back significantly (broad based) suggesting soft demand conditions will continue in the near term. On the other hand, levels of capacity utilisation edged up a touch. The fall in conditions was driven by all three...
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Unemployment reprieve hands Newman electoral gift

ScreenHunter_5741 Jan. 27 11.27 By Leith van Onselen The reprieve in Queensland's stubbornly high unemployment could not have come at a better time for the Newman State Government, which is headed for the polls this Saturday in a bid to gain a second electoral term. In the ABS labour force release for December, issued earlier this month, Queensland's headline unemployment rate fell sharply to 6.1% from 6.8% in November, with the more reliable trend measure also falling marginally to 6.6% (see next chart). The sharp fall in the headline rate has enabled Premier Newman to trumpet his Government's so-called strong economic...
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ACOSS schools Hockey on tax rates

dunce_cap By Leith van Onselen In August last year, Treasurer Joe Hockey made headlines for twice claiming on national television that "higher-income households pay half their income in tax".  Hockey was at it again last week when he told Fairfax radio that Australians paid nearly half their incomes in tax: "When Australians spend the first six months of the year working for the government with tax rates nearly 50 cents in the dollar it is a disincentive," he said. "You're working July, August, September, October, November, December just for the government and then you start working for yourself and your...
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Another housing short heads for listing

Best of Go Short 2013Logo w From the AFR: As investors brace for a wild ride, bankers are making sure their clients are ready to test the market as soon as the initial public offering window opens...The latest is QBE Insurance Group, which is understood to be working with Bank of America Merrill Lynch and Morgan Stanley on its $1 billion lenders mortgage insurance (LMI) spin-off. ...It is understood QBE is targeting a deal in the first half of this year and intends to structure the sale through an IPO. Analysts expect QBE will look to offload a 30 per cent to 40 per cent stake. The LMIs are the unlucky insurers of...
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Macro Morning (Greek snow job)

marketmorning By Chris Becker For all the hyperbole leading up to the recent Greek election, markets have largely brushed off the turmoil, save the Euro (literally) which fell from 1.16 to just below 1.11, but has since recovered somewhat. The bigger news, relatively speaking, is the massive blizzard hitting New York and elsewhere in the north-eastern US, which is having an impact on Wall Street. While it gapped-down significantly yesterday morning alongside everything else post-Greek election, the S&P500 has recovered to resistance at 2060 points and looks set to breakout here: European stocks...
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New year’s data wrap

happy-new-year By Leith van Onselen Today is my first day back after one month's leave. For those of you that are like me and have largely ignored the news over January, below is a primer summarising the key ABS/RBA data releases pertaining to the Australian economy over the past month, broken out by broad theme. Australian housing: The year began with the release of the RBA housing credit data for November, which revealed a strengthening of mortgage credit growth (see next chart). Total mortgage credit growth accelerated to 7.06% in the year to November, with investor credit surging by 9.99% and...
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Australian bond curve flattening gets serious

Flat-Tyre Australian bond yields curve continued to flatten over the past few days. The two year yield fell to as low as 2.04% overnight, close to fully pricing two rate cuts, but currently sits at 2.11%. The five year is chasing it down even faster and today is at just 2.19%: Thus the 2/5 year spread is down to only 8bps: This is the flattest curve in 2.5 years. If the RBA doesn't cut next week (it probably will as iron ore gets hit again) it's a good bet that the curve will invert and recession calls will proliferate. The 10 year is holding up better, though still at record lows, probably...
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Greece’s next act

images Nearly 4 years ago I authored a post on MB titled "Greece's inevitable default" in which I outlined why I suspected that Greece would continue to stumble from bailout to bailout while the economy slowly imploded. ... I am simply going to explain what has happened so that I can explain why under the current economic environment it must default on its debt at some point. The main points are: Germany continues to pursue a policy of aggressive wage restraint. Austerity is lowering industrial output in Greece. The common currency binds European countries of differing productive capacity, leaving...
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Steve Keen rises on volatility

url From the AFR: Asymmetric Return Capital is a dynamic volatility investor that is far from “traditional”. ARC’s partners have recruited Australian Steve Keen as their economist, best known here for a calling a crash in the local property market. ...“Now what happens is when something’s very volatile there’s no-one there to take the other side. We want to capture that movement. In the meantime, who’s doing it? A lot of people in vol who had the expertise, it’s kind of gone the way of the dodo. In these big shops there’s not many people left.” ...“We look at full market cycles...
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Comrade Colin reams WA taxpayers

broken-promises-logo1-200x200 What a blessed state it is to be miner in Australia. When it's all boom you get to dictate your own tax rates and when it goes bust you get handouts. From The Australian: Acting WA Mines Minister Ken Baston told The Australian that the royalty rebate was intended to provide temporary relief for junior miners while they restructured their operations “in the face of a sudden and dramatic commodity price fall”. “All applications for royalty relief will be carefully assessed to ensure each applicant is implementing measures to reduce their operating costs,” Mr Baston said. “These...
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Why commodity prices are lower for longer

20150126_oillow1 Below find some great charts from Goldies on why oil will be lower for longer:   This is a graphic illustration of the point I've been making about the entire commodity complex. Prices so high for so long have triggered an historic investment wave that will service the global economy for decades. Commodity investment will be weak a very long time and whenever demand rises it will be met not with price rises but a very swift response of more supply coming back on-stream using new but under-utilised infrastructure. For a decade or more, virtually all major hard commodity markets...
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Daily iron ore price update (free fall)

anvil Here are the iron ore charts for January 26, 2015:   Carnage. Paper markets aren't too bad with the 12 month trying to find a bottom and six month futures still not at new lows (don't blink). But the bottom has fallen out of physical markets with Qingdao iron ore down 4.3% yesterday to $63.54 (above table is two days). Benchmark fell $2.60 to $63.30. Chinese port inventories fell again, by 450k tonnes, but remain high. Rebar average is toast and I've added a long term chart for perspective. Steel demand clearly stinks. Reuters has texture: Cooling Chinese steel demand forced...
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Daily LNG price update (spot smash)

6 Brent oil was down a little last night to $48.33 as I write. The comparable indicative LNG contract price is $7.06mmBtu: The oil shakeout is intensifying with the US rig count plunging again: The same is coming to Australia, from The Australian: US oil drilling giants Halliburton and Baker Hughes say their Australian businesses are expected to take a hit this year as lower oil ­prices slice more than $1 billion off investment in the local oil and gas sector. In earnings calls last week, both drillers mentioned Australia as a chief area where their business would slow this...
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China capital outflows intensify

China-slowdown Cross-posted from Investing in Chinese Stocks. Property developers are being starved of finance, China Property Agony Deepens as Trust-Loan Lifelines Cut: Issuance of property-related products, which channel money from wealthy individual investors, tumbled 62 percent from a year earlier to 38.5 billion yuan ($6.2 billion) in the fourth quarter, data compiled by research firm Use Trust show. Builders must repay 241 billion yuan of trusts in 2015, up from 178 billion yuan last year. Kaisa, which missed a bond coupon payment this month, failed to repay a 2.5 billion yuan trust last week,...
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Links 27 January 2015

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: What’s driving the price of oil down? - Econbrowser Carney Says QE Can Encourage Excessive Risk-Taking in Markets - Bloomberg Mark Carney warns of liquidity storm as global currency system turns upside down - The Telegraph Soros Warns Public Pensions Against Investing In Hedge Funds - Value Walk Where notable go-anywhere fund managers are putting their dough - Morningstar The triumph of the boring 60/40 portfolio - The Reformed Broker 8 ways to blow up your trading account - Mike Bellafiore On the difference between momentum and trend...
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Australia Day 2015 weekend links

reynard Global Macro/Markets/Commodities What gold does in a currency crisis, euro edition - Zero Hedge From Davos, a new framework is needed - FT Euro tumbles to 11 year low post QE against all majors - FT Bill Gates' annual letter - Gates News (an uplifting read) This Chart Shows Why the Oil Bust Will Last - Wolf Richter A Few Savvy Investors Had Swiss Central Bank Figured Out  -WSJ When hedge funds don't hedge - Pragcap How Economists Came to Dominate the Conversation – NYT Martin Wolf on why trade imbalances matter – FT Asia/China Kuroda says BOJ may explore more options...
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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 Euphoric reaction to ECB decision The European Central Bank (ECB) has set the ticker boards alight across the globe with investors responding favourably to another central bank deploying more stimulus. As European equities rallied heading into the ECB meeting and the euro fell, there was a real risk that the outcome would disappoint and spark a reversal in price action. Having disappointed on a number of occasions in the past, it was important for Mario Draghi to get it right this time and keep the momentum going. The highlights...
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UBS: Big miners aiming for “Goldilocks” price

Goldilocks_and_the_three_bears From the AFR: UBS mining analyst Glyn Lawcock says...BHP, Rio, Fortescue Metals and Brazil’s Vale...want a “Goldilocks” price at which only they have the ­incentive to expand, new players cannot enter the market and their smaller rivals are locked in a desperate fight for survival. “The low cost incumbents at the bottom of the cost curve want a price that doesn’t deter them from investing, that makes a good return for them, but not too good a return such that it encourages new entrants and competitors,” Lawcock says. ...The price would be about $US56 a tonne, Lawcock says, at US80¢...
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