China flash manufacturing PMI lifts

Manufacturing by Chris Becker The HSBC monthly flash manufacturing PMI has printed at 50.5 for September. The August print was 50.2,  with the September print forecast to be 50 - indicating no expansion or subtraction - this is a slightly better result than expected. The Aussie dollar bounced over 20 pips up on the release and is threatening the 89 level, while Aussie stocks have retraced most of this morning's losses. Heres a link to the full report at Markit - looks like new orders, including exports are increasing while price pressures are...
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There goes 2014 for stocks

Flatline by Chris Becker Well, there goes 2014 for the ASX200 - all nominal price gains wiped out as the market falls nearly 1.5% to 5350: With dividends, you're up about 2% according to the accumulation index: The iron ore players are mixed, with FMG only down 1.5% while Atlas Iron (AGO) was smashed (possibly on a broker downgrade to 40c target - ouch) down over 6%, but its the big boys BHP and RIO pulling the broader market down, over 1.5% each. Theres a few months left of course and Chinese stimulus is coming isn't it? Isn't...
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ANZ-RM consumer confidence rebounds

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index rose in the week ended 21 September, up 1.6 points (1.4%) to 112.9, taking it just below its long-run average reading of 113.2 (see next chart). As usual, ANZ chief economist, Warren Hogan, summoned the confidence fairy and wealth effect from rising housing prices: "While we expect soft income growth to weigh on consumer confidence and spending going into 2015, this should be offset to some extent by wealth effects from rising house prices". The below chart plots the most recent Westpac-Melbourne Institute...
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More confirmation of China restructuring

PandaRunning by Chris Becker Some more jawboning - RBA oligarchs get out of your Martin Place palace and take some notes - from Chinese authorities as it pushes "China 21st century" into the spotlight once more: Zhu Min, vice president of the IMF and ex-deputy governor of the PBOC had this to say today (via Forexlive): China can accept a GDP growth of between 7-7.5%, said China will avoid going back to the old investment-driven growth model, particularly reducing reliance on the property sector, and push reforms to develop the economy Said China cannot rely much on monetary and fiscal stimulus if it...
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Aussie gets crushed by Dr Doom and iron ore

dating-dr-doom-20061010114337164-000 by Chris Becker When the crowd turns, get out of the way - or better yet - be prepared in advance. Last time I was here regularly at MB I considered short AUD (against pretty much everything, even NZD) to be not just a sensible hedge, but for me at least, a prudent long term investment. The fortunes of this economy are tied irrevocably to that of China - which means commodities, which means iron ore and coal. The simple dynamic between a burgeoning seaborne supply of iron ore (from everywhere) and a peak in demand at the end of a price bubble spelled an inevitable collapse. The only thing...
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Competition policy must not ignore land values

ScreenHunter_3712 Aug. 12 07.03 By Leith van Onselen Business Spectator's Callam Pickering is on point today questioning why the Draft Report of the Harper Competition Policy Review has largely ignored Australia's sky high land values, which have eroded competitiveness and productivity across the economy: ...the elephant in the room remains land prices. High property prices are, for whatever reason, celebrated in Australia, but they go a long way to explaining our lack of competitiveness. High house prices equal high land prices, which equal elevated business costs. The higher our property prices go, the less competitive...
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Kiwi to fly on National election win?

flyingkiwi by Chris Becker Over the weekend, NZ Prime Minister  John Key's incumbent National party won the general election in a clear majority. The effects of a third term for the conservative (ish) party on the South Pacific nation are being felt and discussed already, with the consensus rising that budgetary and social welfare reforms will continue and probably expand into other areas in a pro-business, conservative sense. From a worldview, that is - according to the multi-trillion dollar FX market - this stability in government and policy are likely to underpin the direction of the inflated...
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IMF shows Australia how to tax for growth

ScreenHunter_4330 Sep. 23 08.20 By Leith van Onselen The International Monetary Fund (IMF) provided a useful blueprint for tax reform to the G20 finance ministers and central bankers meeting in Cairns, which hopefully should assist the Abbott Government in framing its upcoming tax reform white paper. Central to the IMF's reform blueprint is shifting tax bases away from less efficient sources, such as personal income and company taxes, to more efficient sources, such as consumption, resources and land/property: The focus of growth-friendly tax policies depends on the tax structure and taxation levels of a country. Few...
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Iron ore daily update ($80 floor gone)

floor collapse by Chris Becker Continued bad news if you've accidentally tied your company or indeed, your economy, to an iron ore price above $80USD per tonne. First, the complex price update, with spot falling over 2%, below $80, back to September 2009 price levels: The spot iron ore and 12 m swap chart tells the story does it not - now down over 40% for the year (including in AUD, pity we didn't manage that a bit better isn't it Captain Glenn?) Rebar is plumbing new lows: The rationale for the continued falls? The Chinese economy is restructuring and is not punting on round robin...
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Industry slams proposed new foreign property laws

ScreenHunter_4329 Sep. 23 07.27 By Leith van Onselen Industry groups representing accountants and real estate agents have slammed a proposal outlined last week by Liberal MP, Kelly O'Dwyer, to extend the penalty regime for illegal foreign investment in Australian residential property to those that aid and abet such purchases, such as accountants, lawyers and real estate agents. From The Australian: Real Estate Institute of Victoria chief executive Enzo Raimondo questioned the need for change. “If you put in a system where you are fining accounts, lawyers and agents in an attempt to stop foreign investment or people skirting...
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Macro Morning

marketmorning by Chris Becker Monday nights with no real data releases are always fun on macro markets - not. But at least last night we saw the broad return of volatility, with a relatively big slide in the S&P500 down 17 points to below 2000 at 1993. This "slump" (I love how the negativity on reporting on stocks goes to the moon in a bull market - it was only a minor pullback) was on the back of a few things, namely poor existing US home sales, some comments by Mario Draghi on the "sluggish" Eurozone recovery (ha!) and some broader risk aversion throughout the FX and commodity complex mainly because...
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Bob Day is wrong on negative gearing

ScreenHunter_4036 Sep. 05 09.01 By Leith van Onselen Over the past year, I have heaped praise on Family First senator for South Australia and former HIA president, Bob Day, for continually advocating for affordable housing and lobbying for much-needed fundamental reforms to Australia's constipated urban planning system, which has precluded affordable housing from being built in response to rising demand. Not today. The AFR this morning features an article with Day backing the HIA's warnings that limiting negative gearing would worsen Australia's housing supply situation and somehow make homes less affordable: ...negative...
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Charting Australia’s population ponzi

ScreenHunter_4324 Sep. 22 14.19 By Leith van Onselen Late last week, the Australian Bureau of Statistics (ABS) released data on Australia's historical population growth, which revealed some interesting truths about Australia's turbo-charged immigration system. The key chart pertaining to the release is shown below, which shows the historically high level of population growth in Australia since the mid-2000s: As shown above, Australia's population has grown on average by 172,000 per annum since 1900. It also grew by 219,000 on average between 1949 and 2004. However, between 2005 and 2013, Australia's population grew...
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Credit bubble collapses in Handan

China-Bubble-300x200 Cross posted from Investing in Chinese Stocks Handan's housing crisis is centered on illegal fundraising. Earlier this year, banks that used illegal fundraising collapsed, and now developers are going down. Ten of thousands of residents and roughly ¥10 billion is at stake. The local government has formed work groups to deal with the situation, with at least 13 companies already in trouble. One person who helped raise the money said 10% of Handan households may be involved, and in the case of one developer alone, there are more than 10,000 lenders. Investors were offered high interest rates...
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Links 23 September 2014

reynard Global Macro / Markets / Investing: They do ring a bell at the top - Alibaba IPO proves the rule - Zero Hedge Is there an Obama Doctrine? The Diplomat Dr Doom warns on 20% drop in AUD - The Age (h/t Gunnamatta) Bubble in US bonds to end in bad way - Bloomberg (like Japan?) Volatility finally raises its head - CNN Would a 1987 style crash really be that bad? PragCap (would be great for some, bad for most) Iron ore at five year low - is this a bottom? FT Video America: Existing home sales in August unexpectedly drop - Calculated Risk Textbook case of price gouging - The...
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ASX at the close

ASX_logo by Chris Weston It will be an interesting week for short-term-focused traders, with a number of markets that have recently seen better trending conditions exerting clearly overbought or oversold conditions. The sell-off that has materialised in the US bond market of late is coming at a time when we have seen some fairly bearish dynamics in other economies and, as a result, we’ve seen some strong trends in AUD/USD, EUR/USD and USD/JPY. These trends have led to some one-sided positioning, with the 14-day RSI on USD/JPY at the highest level since 2001. We seem to have got to a point where we could...
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How banks’ housing obsession is starving SMEs of credit

ScreenHunter_4319 Sep. 22 13.02 Cross-posted from The Conversation Since the global financial crisis, credit growth in Australia has returned. But while growth in home lending between 2008 and 2014 was relatively strong (0.49% per month), it was actually negative for business lending (-0.04% per month). This pattern of weaker business credit for corporates and small to medium enterprises is not unique to Australia but has been reflected around the globe due to long-term factors, such as the consolidation of banks and the centralisation of credit assessment. The issue has been accelerated by shorter term cyclical factors,...
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Retail needs lower costs not more hours

retail-therapy-girls-with-shopping-bags by Chris Becker It's hard not to be skeptical about the findings from any inquiry into competition in Australia's business sector. One always suspects either a dogmatic economic answer (i.e free markets always good, government interference always bad) or a reinforcement of a status quo of a monopoly or oligopoly - the latter supported in kind and method by the Abbott government as "how it is" or "how it should be". Sometimes you get both and it seems that way with today's release of the study into the retail sector, from Fairfax: Bans on retail trading hours should be scrapped, according...
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Lower rates can’t stop the stress

bill_stress by Chris Becker It seems the RBA's intent to goose the Australian economy in the great hand-off from mining to [insert] something else, while accidentally blowing a housing bubble, is paying off in one area: stress! Dun and Bradstreet are out today with a new forecast of higher stress, amid a backdrop of growing unemployment, low wage rises and elephant in the room consumer debt levels: Despite easing to 18.4 points in the June quarter, from 19.7 points last year, Dun & Bradstreet's Consumer Financial Stress Index is forecast to hit 25.3 points by the end of this month, the...
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Competition review targets rent-seeking pharmacies, taxis

ScreenHunter_4322 Sep. 22 13.44 By Leith van Onselen The draft report of the Harper competition policy review has urged the government to free-up rules preventing competition in the the pharmacy and taxi industries. From Business Spectator: Current restrictions on the location of pharmacies and a rule that only pharmacists can own a pharmacy do not ensure the quality of advice provided to a consumer and should be scrapped... The draft report... recommended that restrictions on ownership and location of pharmacies be removed "in the long-term interests of consumers"... "Such restrictions limit the ability of consumers to...
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HIA continues negative gearing subterfuge

ScreenHunter_43 Jan. 24 08.38 By Leith van Onselen The brainiacks at the Housing Industry Association (HIA) have produced another piece of self-interested "analysis" warning against changes to negative gearing and lobbying to remove stamp duties. From The SMH: Cutting back tax deductions for property investors would erode housing affordability, reduce housing supply and bump up rents, a new report says... ...reducing negative gearing would diminish the incentive to invest in housing and exacerbate current undersupply, pushing rents almost one per cent higher... "Under current housing policy settings, discounting...
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Fortescue heading to $3? UPDATE

vertical-crack-foundation by Chris Becker UPDATE at 230pm: FMG is down nearly 7%: So, following the new five year low in spot iron ore, Fortescue Metals (FMG) is down 2% this morning on the open, with the broader market off half a percent. Not exactly a bearish day as that particular stock can rally or fall multiples of that figure no problem. But before Houses and Holes went on his break last week I mentioned to him that the weekly chart candlestick for Fortescue (FMG) was ominous. I don't use candle analysis on its own (although to be fair, any type of analysis, including random picks can work if your...
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Off-the-plan apartment values slump in Melbourne, Sydney

ScreenHunter_06 May. 06 09.27 By Leith van Onselen The AFR published another report over the weekend warning of an impending oversupply of apartments in the major capitals, with the value of some apartments in Sydney and Melbourne reportedly declining by 20% between purchasing off-the-plan and receiving the keys: Nearly 44 per cent of apartment ­purchases in the most populous cities are below the sale price at the time of completion, and units in mushrooming high-rises in major capital cities are the hardest hit, according to WBP Property Group. ...the negative equity appeared to be worst for ­two-bedroom apartments...
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Mortgage war highlights regulatory failure

ScreenHunter_4312 Sep. 22 09.19 By Leith van Onselen Fairfax has today reported that mortgage competition is heating-up, with NAB offering new mortgage customers $1,000 to take-out a home loan from the bank in a bid to boost it's market share: Australia's big banks have tried to entice borrowers with cash payments worth $1000 or more in the past 12 months in effort to grow market share. But NAB says its latest strategy is different because it is not a rebate... Instead, it will give customers $1000 on an eftpos card to spend however they choose... It comes after NAB tried to poach customers from its competitors last...
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Trading Week

trading week globe world by Chris Becker Its a solid week ahead for local and global markets so let's take a technical look where they are at the moment and analyse the risks and opportunities available. This report is one I compile each week for my own trading decisions, and does not constitute investment advice. I may have positions, long or short, on multiple timeframes (intraday, daily or longer term) in any or all of the markets discussed below. Please seek independent investment advice from a licensed advisor before considering any investment decisions. First, a quick look at bonds with the US 10 year...
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