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...
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The Economist warns on renewed housing 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...
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Joye warns again on housing bubble

perfect_bubble From Chris Joye at the AFR: I believe that Australian home values measured relative to disposable incomes are currently breaching the all-time records set in both 2007 and 2010. Yet I expect the current boom, which is arguably turning into a bubble, to continue until the RBA starts raising interest rates. Importantly, you do not require mania or double-digit credit growth to have a bubble, as some pundits claim. What you do need is asset prices way above reasonable estimates of fair value and high levels of leverage, both of which Australia possesses today. Credit growth numbers are only...
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UBS says market missing BHP iron ore value

imgres From Dow: The market’s fixation of BHP Billiton Ltd.’s (BHP.AU) spinoff and the absence of a buyback at its results means it appears to have missed the value being created in its iron-ore unit, says UBS analyst Glyn Lawcock, who lifts his NPV estimate on the stock 10% to A$46.09. BHP’s Western Australia iron-ore division is now expected to expand to 290 million tons from 225 million tons for under US$50/ton of capex. It had previous been expected to lift capacity to 270 million for around US$100/ton, Lawcock says. “The reduction in capital intensity alone is a saving of around US$3...
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Australia’s world-class health system

ScreenHunter_64 Sep. 01 14.23 Cross-posted from The Conversation: There is an old joke about one fish asking another about the state of the water and the other answering “what’s water?” When you’re immersed in something and that is your daily experience, you are not able to step outside it – all you see is what you know. But with all the talk about Australia’s health system being unsustainable, it’s useful to step back and look at the Australian health system in an international context. So, how do we perform against our peers? The short answer is pretty well. Comparing inputs and outcomes Much of the...
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Inflation fading fast

hes From Westpac: The Gauge was flat in August (–0.01% at two decimal places) following a  0.2% increase in July and a flat print in June. The annual pace has  accelerated eased back to 2.5%yr in August from 2.6%yr in July and a recent peak of 3.0% in June. The most recent low was 2.1%yr in Oct 2013. • Whereas a few months ago the gauge was threatening to breach the RBA’s inflation target band, now it has eased back into the mid-point. Westpac had been forecasting inflation to pick up in late 2013/early 2014 and then ease but we have to admit we are surprised by the rate of deceleration. •...
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Don’t mention the war

imgres From Crikey: Why did Labor join with the government this morning and head off the Greens' motion for a debate about our return to war in Iraq? As soon as the Senate convened this morning, Greens leader Christine Milne moved to suspend standing orders "to move a motion relating to the parliamentary approval for the deployment of Australian troops to Iraq". Labor opposed the motion. It was supported by NSW Senator David Leyonhjelm -- who expressed support for Australia's involvement and the hope it would lead to a separate Kurdish state -- PUP Senator Jacqui Lambie and Nick Xenophon. The...
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Australia’s growing youth unemployment scourge

ScreenHunter_3946 Sep. 01 12.43 By Leith van Onselen The Brotherhood of St Laurence has today released a new report on the growing scourge of youth unemployment and underemployment in Australia, which is at the worst level since records began in 1978, with more than 580,000 Australians aged 15 to 24 either under-employed or unemployed: Today, young people are more likely to be underemployed – to have some work but want more hours – than at any time in the last 36 years... Presently, there are more than 310,000 people aged 15 to 24 who are underemployed in Australia. When you add the numbers who are without any work,...
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Phat Dragon on China’s fading PMIs

xdb From Westpac's Phat Dragon: In the previous reading the two surveys were in reasonable accord for the first time in a while, with the headline and the new orders series both in close proximity. August saw a consistent directional move from that common starting point, but consistent with the historical characteristics of the two surveys, the decline in the HSBC measure was greater – or alternatively, the NBS was more resilient. Scaling the two headline outcomes by their respective long run averages, we have the NBS at –3.7% and HSBC at –2.4%. The inventory story, which is so often...
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Iron ore paper resumes tumble, miners rise

majors The news out of China this morning was more deceleration and but that's not affected most miners today with only FMG down at this stage. Here is the up-to-date relative performance chart for juniors: And the majors: Despite equity resilience, the idiocy spread appears to have bottomed. Remember that it's an indexed 7-day moving average so it is still catching up to last week's falls: As mentioned, FMG is most sane today, down nearly 2% and following Dalian and rebar futures in China which are also off 4 and 10 points...
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Mining exploration falls, petroleum lifts

ScreenHunter_03 Jul. 23 09.31 By Leith van Onselen The Australian Bureau of Statistics (ABS) today released its Mineral & Petroleum Exploration data for the June quarter, which revealed a sharp fall in mineral exploration expenditure, but a large lift in petroleum exploration expenditure. Nationally, expenditure on minerals exploration fell by a seasonally-adjusted $35.8 million (-7.5%) over the June quarter. The fall was driven by Queensland, where exploration expenditure fell by $30.2 million (-24.5%): The various components, presented below in non-seasonally adjusted raw terms, actually rose over the quarter by...
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GDP partials save the day

url A couple of Australia's GDP partials are out today and have saved the day regarding Q2 national accounts: The trend estimate for inventories fell 0.5% in the June quarter 2014. The seasonally adjusted estimate rose 0.8% this quarter. The seasonally adjusted estimate for company gross operating profits fell 6.9% in the June quarter 2014. The seasonally adjusted estimate for wages and salaries rose 1.1% in the June quarter 2014. Inventories are well ahead of expectations and will add a huge 2.5% to GDP, erasing the embarrassing figure that was coming down the pipe owing to the -2.2% in...
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Today’s cigarette tax hike will punish the poor

ScreenHunter_3942 Sep. 01 11.09 By Leith van Onselen Today, the price of a packet of cigarettes is scheduled to rise by between $1.12 and $2.81 due to the decisions of the former Rudd Government to raise the tobacco excise by 12.5%. Excise also will be increased under the normal twice-yearly indexation introduced 30 years ago by the Hawke government, although now it will rise in line with average weekly ordinary-time earnings, rather than the Consumer Price Index, as was previously the case. Last year, in response to the Rudd Government's decision to raise tobacco excise, Sam Oldfield, who is an economics student at...
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China’s official PMI eases

images101-200x2001 China's official PMI for August is out at 51.1 versus 51.2 expected. Last month was 51.7 so it confirms the second derivative downshift shift in Chinese manufacturing growth seen in the Flash.  The slowing was broad based with production, new orders and input prices all down. Not that it matters terribly for Australia. Despite the market focus, the non-manufacturing PMI is the more important given it covers...
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Shadow RBA says hold

aggregate_september2014_0 Tomorrow is the RBA's September meet where the chances of either rate cut or rise are zero, even if the RBA shadow board want to be a little more circumspect about it: The picture of the Australian economy painted by the latest data is murky. The housing market and indicators of sentiment are strengthening but growth remains slightly below trend and the unemployment rate rose to 6.4% in July. Relative to the previous month, the CAMA RBA Shadow Board has become slightly more cautious in its recommendations for interest rates. The Board attaches a 74% probability that the cash rate ought to remain...
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TD monthly inflation pulls a donut

images The TD Securities/Melbourne Institute Inflation Gauge for August has printed a month-on-month donut with year-on-year at 2.5%. Last month it was 0.2% and 2.6%. The trimmed mean deflated 0.1% and is now 2.7% year-on-year. Ain't nuthin' here to bother the...
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More reports of foreign buyers evading FIRB

ScreenHunter_06 May. 06 09.27 By Leith van Onselen Another day, another report of foreign investors in Australian property slipping through the Foreign Investment Review Board's (FIRB) net, this time from The AFR: Real estate agents and property lawyers are willingly helping foreign investors to illegally buy prestige homes in Melbourne and Sydney, says buyers’ agent David Morrell... Mr Morrell likened the powers of the FIRB to “a slap in the face with a wet lettuce”. He said estate agents, whom the FIRB relied upon to report foreign buyers flouting the rules, were looking the other way in return for higher...
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Shock! Manufacturing back in recession

dfgr Pasconomics just keeps delivering for manufacturing: The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) slipped back into negative territory this month, following a brief stabilisation in July. The index decreased by 3.4 points, to 47.3 points in August (seasonally adjusted), indicating a mild contraction in conditions across the manufacturing sector. The three-month moving average also moved lower in August, to 48.9 points. Readings below 50 points indicate contraction. Many respondents to the Australian PMI® expressed ongoing concern about the...
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QLD gas prices crash before spike

ddw The Australian has an interesting story today on crashing QLD gas prices: QUEENSLAND gas prices have slumped to record lows just as $70 billion of LNG export projects being built at Gladstone start to increase production from thousands of coal-seam gas wells ­designed to fuel the plants. The flood of cheap gas comes as exporters start to ramp up their CSG wells before completion of their big LNG plants on Curtis ­Island, which will freeze the gas for export at much higher prices. After they start, however, things are expected to rapidly turn around as the LNG plants suck up all available east...
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Sloan’s negative gearing defence sours

images By Leith van Onselen After her dreadful defence of negative gearing in July (thoroughly debunked here), The Australian's Judith Sloan has returned with another abusive post aimed squarely at us "lefty" doomsayers that dare question the merits of Australia's famed tax expenditures on investment property. Sloan's article is chock full of straw man arguments, misrepresentation and insults in lieu of reason. Let's take a look at her latest installment: Without the faintest clue of the rationale or application of the relevant tax rules, these advocates for “social justice” will still quote...
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Daily iron ore price update (dead cat)

fthete Find below the iron ore price charts for August 29, 2014:   Paper markets caught a break and stopped falling. The 12 month swap even managed a small rise. However, that's closed the paltry contango with spot, which also firmed. There are definitely punters on a bottom emerging, as seen in the big upwards reversal of miner equity prices on Friday. I don't buy it yet. We've not moved into contango, which the market usually does before a turn in the cycle. As well, port inventories rose again last week by another 425k tonnes. I've warned many times not to take port...
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Chinese anti-corruption gun takes aim at land ponzi

imgres Cross-posted from Investing in Chinese Stocks. The word epic is overused these days, but it may apply in the case of China's local government land sale abuses. With the audit underway, information is starting to leak out as developers and government officials start talking. The scale of the problem is still unknown, but there's reason to be concerned by the numerous ways local governments have rigged land sales and inflated prices. It is not an exaggeration to say that if the examples listed in a new Ifeng article are not isolated cases, then even the most bearish forecast for the Chinese...
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Auction clearances rise

ScreenHunter_19 Mar. 13 13.12 By Leith van Onselen The national auction clearance rate jumped sharply over the weekend on the back of big rises in Sydney and Melbourne. According to RP Data, the national weighted average preliminary auction clearance rate was 72.2% over the weekend, which was up 5.5% from the 66.7% preliminary clearance rate reported last weekend. Sydney’s clearance rate rose by 4.9% to 81.1%, whereas Melbourne’s rose to 71.0% (last weekend 64.1%). Brisbane, which typically only has a small number of auctions, experienced a decline in its clearance rate to 47.0% from 52.1% the weekend before. Overall...
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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 31 August 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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RP Data house prices jump in August

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen RP Data’s daily house price index for 31 August was released yesterday, which has enabled me to calculate monthly price movements for the five major capital city markets. As shown below, home values at the 5-city rose by 1.18% in August, driven by a big 1.84% gain in Sydney and a 2.26% jump in Adelaide, although gains were recorded across all major markets: It was the third consecutive lift in values after May’s large seasonal fall: Values at the 5-city level have now increased by 6.21% since the beginning of the year, with all major capitals, except...
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