By Leith van Onselen In the week ended 23 May 2013, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, recorded a large -0.75% decline, which followed last week’s -0.45% fall. It was the biggest weekly decline in over a year (see next chart). All capital cities recorded falls over the week, with Brisbane fairing the best and Melbourne the worst (see next chart). Values are down -0.64% so far in May at the 5-city level, with all capitals except Perth experiencing significant declines (see next chart). Over the past 12...

By Leith van Onselen The Canadian housing market, ranked by The Economist as one of the world's most overvalued, looks to have finally hit the wall. After peaking in August last year, house prices have begun to fall, down -1.2% nationally (see next chart). More importantly, a new report from the Canadian Association of Accredited Mortgage Professionals (CAAMP) forecasts a dramatic slowing of housing construction across Canada as recently tightened mortgage lending criteria, which reduced amortisations on CMHC-guaranteed mortgages to 25 years from 30 year, start to bite. These changes,...

Another round of PMI data from the Eurozone overnight and once again, even though there are some minor improvements, the data is still poor. PMI signals ongoing recession in second quarter, though downturn eases in May Flash Eurozone PMI Composite Output Index(1) at 47.7 (46.9 in April). Three-month high. Flash Eurozone Services PMI Activity Index(2) at 47.5 (47.0 in April). Three-month high. Flash Eurozone Manufacturing PMI(3) at 47.8 (46.7 in April). Three-month high. Flash Eurozone Manufacturing PMI Output Index(4) at 48.2 (46.5 in April). Four-month high The Markit Eurozone PMI...

After getting a bath over two weeks since the budget, and being slapped in the face with the Ford operations closure announcement on Thursday, the mood around the Australian dollar is darkening. In today's broadcast, Deus Forex Machina and Gunnamatta chew over the backdrop and the outlook, the potential for an AUD bounce, key support levels, and cogitating over how the RBA may relate the upcoming mining capex data to it's next move. Join the Forum discussion on this...

Global Macro/Markets: Austerity: the history of a dangerous idea - The New Yorker 'Recessions Hurt, but Austerity Kills': Study - CNBC The banking crisis as a giant carry trade gone wrong - VOX Don’t fear the bubble - Reuters Are we living in a time of asset bubbles? - Marginal Revolution Fears grow over EM sovereign bond bubble - Financial Times BRICS risk 'sudden stop' as dollar rally builds - The Telegraph North America: Why US corporations should pay more tax - The Economist How Apple dodges paying corporate taxes - New York Times Creative destruction goes MIA in...

Volatility is in full force today and nowhere more so than Japan. It doesn’t matter that asset class, traders are out to play today in a big way, with the Nikkei trading in a 1459 point or 9.2% range! It’s been an incredible move, and anyone wanting to see a full-scale liquidation of a hugely over crowded trade will use this as textbook. Japanese government bonds initially pushed up to 1% on the open, but that was a bit too much and buyers have stepped in, although it has hardly been convincing. Japanese Chief Cabinet Secretary Yoshihide Suga detailed that the BoJ has done a good job in...

By Leith van Onselen Earlier this month, I posted an article arguing strongly that Australia's state and territory governments should look to replace stamp duties on property transfers with a broad-based land values tax, levied on all properties: Broad-based land value taxes (LVT) would... assist in the provision of new housing via two channels. First, an LVT would help make infrastructure investments self-funding for governments, since any land value uplift brought about through increased infrastructure investment (e.g. new roads, trains, etc) would be partly captured by the government via...

By Leith van Onselen RP Data has today released a short note (below) on the state of the nation's rental markets, which it notes are posting solid (but unspectacular) gains, with both rents and rental yields rising: Across Australia’s capital cities over the past 12 months to April 2013, rental rates have increased by 3.5 per cent for houses and 3.3 per cent for units. While according to Mr Kusher this is a relatively measured rate of growth, it remains higher than inflation. Across the combined capital cities, median weekly rents are recorded at $474/week for houses and $440/week for...

The hapless AiG, the most ineffectual lobby in Australia, has responded to the Ford closure today thusly: "Today’s announcement by Ford that it will end production at its Broadmeadow and Geelong plants in 2016 is a watershed moment in Australian manufacturing," Ai Group Chief Executive, Innes Willox, said today. "The loss of 1200 jobs over the next three years is deeply concerning as are the implications for the many businesses and employees linked into Ford Australia’s assembly operations in Victoria. We welcome any support that can be given to those employees impacted both directly and...

China's May Flash PMI is out and the bad news keeps rolling with it sliding back into recessionary territory at 49.6 versus expected of 50.4. As you can see the internals are pretty lousy: Not disastrous but not great either. There was some interesting action in the dollar. It dropped 30 pips a minute before the release suggesting someone had an inside run, then rallied half of that back afterwards. Currently at 96.36 and still looking...

What is it, national MB day today? From the AFR, Warwick McKibbin is out with another warning that will be familiar to readers: Professor McKibbin said the expected massive expansion of shale gas in the US would reduce the price of world gas prices from 2016 onwards. This would cause manufacturers and other energy-intensive industries to switch to gas-fired power from coal-fired power and hurt Australia’s coal prices and export volumes. “From Australia’s point of view this shock in the US reduces Australia’s terms of trade by about 8 per cent over the next couple of years,”...

The Westpac monthly consumer expectations pack is out and shows well anchored inflation expectations: But a big jump in unemployment expectations: Still not quite a tend break but worrying nonetheless. Expectations Bulletin Pack May...

From the SMH: Ford Motor will close its local car manufacturing plants in 2016 after almost nine decades in the country. Ford, the smallest of the country’s three manufacturers after Toyota and Holden, will shut its assembly plant at Broadmeadows in northern Melbourne and an engine plant in Geelong to the west of the city, the company announced this morning. About 1200 jobs will be cut as a result of the closures, the company said this morning. ...‘‘Australian manufacturing can’t keep its head above water,’’ said Katrina Ell, an economist at Moody’s Analytics in Sydney....

In one promising development today, the arse is departing from the Australian dollar, currently trading down towards 96.5 cents. First it was Bernanke and then Ford in the two step: On a longer time frame the key levels are last year's low at 95.70/80 and then huge at 94 cents (h/t Deus Forex Machina): Having refused to keep the dollar down and successfully hollowed out the economy in the process, I can't wait to see the heroes at the RBA buying...

By Leith van Onselen The Australian newspaper today contains some interesting discussion on the state of Federal Government budget finances, which it argues are likely to remain in deficit for a prolonged period of time following reckless tax and spending decisions undertaken by both the formal Howard Government and the current Labor Government, which has left the budget in structural deficit: Ringing the alarm on fiscal policy barely one week after the federal budget, two independent reports from the Parliamentary Budget Office and the federal Treasury reveal a sharp decline in the structure...

Goldman Sachs is out with a note this morning forecasting structurally weak mortgage growth: While we expect lower interest rates to stimulate mortgage credit growth in the near term, we believe investors should expect structurally lower growth to continue in the medium/ long term. Mortgage credit growth helped in the near term by lower rates … After 200 bp of cash rate cuts over the past 18 months, the more recent tick up in housing finance approvals does suggest the recovery in mortgage credit growth is taking hold. Indeed, we note that the number of 12-month rolling housing approvals...

BHP held an investors round table yesterday and it produced a few interesting iron ore snippets. From Citi: WA Iron Ore is on track to deliver 220mtpa by mid-14, with an unapproved US$1b expansion of Jimblebar likely to take that to 240mtpa. To reach 300mtpa an additional mining hub, in-load capacity and berths in Port Hedland will be required, which given forecasts for building iron ore surpluses and calls from shareholders for capital discipline and increased returns could increasingly come under pressure in our view. A decision on whether to push ahead on Jansen will be required in the next few...

From the AFR (and through my Geelong rumour mill): Ford Australia is expected to announce on Thursday that it will shut its car plants in Melbourne and Geelong in 2016, causing the loss of about 2000 jobs. The company has scheduled a press conference for 10.45am at its assembly plant at Broadmeadows in Melbourne’s northern suburbs. From the SMH: A statement from acting Industry Minister Craig Emerson has just been sent out: "The Government is aware of reports that Ford is making a significant announcement about the future of its manufacturing operations. "In these situations our top...

There was little inconvenient truth in Ben Bernanke's speech and then questions last night that has sent US 10 years yields 11 basis points higher to 2.03% , the S&P and Dow down 0.85% and 0.52% respectively and contributed to a wild old night on FX markets. In his prepared remarks Bernanke said that a premature tightening could endanger the recovery which eased fears about the so-called "taper" which helped drive the S&P up to an intraday high of 1687 before closing down at 1655. Euro rallied to a high of 1.2997 at this time, while the Aussie was 0.9827 before crashing to trade under...

The FOMC Minutes overnight showed a front-of-mind intent to plan its exit from QE: After the policy vote, participants began a review of the exit strategy principles that were published in the minutes of the Committee's June 2011 meeting. Those principles, which the Committee issued to clarify how it intended to normalize the stance and conduct of monetary policy when doing so eventually became appropriate, included broad principles along with some details about the timing and sequence of specific steps the Committee expected to take. The participants' discussion touched on various aspects of the...

Senior Australian economist Adrian Blundell-Wignall, special adviser to the OECD's secretary-general, said yesterday that: "Australia is in a very unfortunate position...Having done the right thing, having no capital controls, Australia is now facing the whole avalanche of world investors seeking out Australian assets...the yen had been strong not because interest rates there (in Japan) were high, but because it was one of the countries that wouldn't do anything to push its exchange rate down". Quantitative easing had created a gigantic bubble in global bond markets, whose bursting would cause...

By Leith van Onselen The Housing Industry Association (HIA) has released a new report (below) examining the state of the home renovation market, where activity has declined sharply over the past 18 months (see next chart). The reasons for the declining renovation activity are as follows, according to the HIA: One of the major shifts experienced in Australia’s economic environment since the GFC has been heightened consumer caution. This is demonstrated by the protracted weak consumer confidence measures and also the increased household savings rate – now at around 11 per cent, compared...

By Leith van Onselen The Federal Reserve Bank of St Louis recently released an interesting short report on China's epic housing bubble, which it warns could burst in the event that both household income growth and the savings rate start to decline, and/or capital controls in China begin to relax, removing housing's preferred status as a store of wealth (h/t Bernard Hickey at Interest.co.nz): Housing and land prices in China have increased continuously and dramatically for the past two decades. In fact, housing price growth has significantly outstripped income growth. Current housing prices...

By Leith van Onselen Yesterday, Shadow Treasurer, Joe Hockey, delivered his budget reply speech to the National Press Club (below), which contained some spurious assertions about the causes of recent budget deficits, whilst ignoring the former Howard Government's role in creating the current structural budget deficit. Let's take a look. The Government’s sixth budget fundamentally lacks integrity. Like everything else, they have over promised and under delivered. Let me give you five reasons why you can’t believe the Budget promises. Firstly, they have broken the most solemn promise...