ASX at the close

Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets

Greece back in focus as leaders meet

Asia hasn’t quite managed to maintain the momentum seen in European and US markets. Some of the optimism from yesterday’s disappointing China CPI reading seems to have swiftly waned with investors perhaps coming to terms with the fact this does not necessarily mean stimulus is on the way. Chinese CPI hit a 5-year low yesterday and this was hardly surprising given domestic demand was weak and of course the impact that lower energy prices are having globally. In fact, transportation prices were the main drag on inflation after contracting 2.2%. The main thing here though is that the People’s Bank of China has traditionally targeted growth and not necessarily inflation. However, this provides room for movement should the PBoC need to act. As a result, it may be optimistic to hope that the PBoC will deploy stimulus imminently when the government is yet to set its growth target and with Chinese New Year on the way. This is probably why we’ve seen equities retreat in China today after yesterday’s gains and why commodities remain fairly subdued.

Emergency meeting to take place

We are also approaching a very interesting time for Europe with the timetable for the Greece situation ramping up. An emergency meeting will be held by euro finance ministers and the headlines out of this meeting will dictate the price action for global markets. So far, it seems optimism around the meeting has already managed to inspire some buying, with our current calls for the major European bourses suggesting we’ll see a firmer open. At the moment, it seems European leaders and Greece are willing to meet each other in the middle and this has comforted investors’ concerns after the aggressive tone by Greek Prime Minister Tsipras over the weekend. However, some key officials have attempted to pour water on suggestions a plan for Greece was close. This includes German Finance Minister Schaeuble who suggested there is little room for negotiation. Leaders will be concerned about the precedence this will set for other ‘irresponsible’ nations. Whilst equities and bonds have been choppy in Europe, particularly Greece, the euro itself hasn’t done much at all and continues to hold onto the 1.1300 mark ahead of the emergency meeting. The developments from the meeting are likely to be a binary event for the euro and we could see either the $1.1300 level finally give way or the downtrend which has been in place since December could be broken leading to a reversal. Apart from the emergency meeting, there is nothing else significant on the European calendar.

(EUR/USD downtrend)

ScreenHunter_5994 Feb. 11 15.57

CBA delivers a record result

The ASX 200 has continued its losing streak today and we’ve seen the losses accelerate through the session. There are a number of things at play here, including earnings, some domestic data and regional forces. Earnings ramped up today with CBA predictably the headline after positing another record result. CBA’s cash profit of $4.62 billion topped estimates helped by falling bad debt charges and expenses. However, some feel the $1.98 a share dividend was a bit disappointing. Regardless, the results weren’t enough to keep the bank’s rally going and it experienced a bit of profit taking as a result. This put pressure on other banks as well and saw the financials dip into negative territory. A disappointing result from CSL also weighed on the healthcare sector which has been a significant outperformer lately. With resources stocks also struggling across materials and energy, then the ASX just fell on its own weight. There were also a couple of economic releases today with Westpac consumer sentiment and home loans data impressing. This was partly attributed to lower energy costs and the interest rate cut. Perhaps some in the market would have felt this reduces the probability of further imminent cuts.

Comments

    • Gunna My call is that the AUD will go back up to parity plus with the USD.
      We are not getting full coverage of what is occurring in the US, but verbal reports from the field tell me they’re in a hole and they have just ordered more excavators.
      The whole joint is going to sh*T WW

      • On the contrary, if like your post implies that america is going to shit i think its fair to say the ramifications to Australia would be even more dire if there were another america blow out.

        A another crisis there might make you think we’d go back to parity if you beleive no shrapnel were to hit AUS but I think you’ll find that wont be the case.

      • Phil, Sim, I havent put the full story together, that is a job for Saturday, and probably the weekend links will have more on it. But in a couple of lines; apparently the TOT for the USA especially to China are in reverse, there is something going on in terms of military assistance to Ukraine, which is not sanctioned by the American people, and USD is being sent back to the states to cover expenses incurred by the countries affected by the low oil price.
        In addition, the low oil price is affecting not only petroleum explorers producers, but is having flow on effects to all manner of industries.
        Have added an article from the Courier today to show how the low oil price is affecting the QLD economy. QLD is broke and not being fixed at all. I have no idea what is going to happen. Like the GFC, we may be surprised at the links and associations which are discovered when this unwinds.

        However apart from housing I think our nation is in better shape than the USA, and that will attract funds from there.
        But I am always open to someone telling me how much worse it may become. I think the worst is priced in to the AUD.WW

      • Cheers WW interesting perspective.

        I’m more bullish on american economics as oppose to australian for the long term 10-20 years. Whilst a reversal to parity is quiet likely in the short term i do feel your view is centered on america and not on america and australia.

        If I may elaborate. Lower oil whilst being a big investment for americans would signify to myself a general malise in commodities as a whole something of much greater importance to Australia as oppose to America.

        Lower commodities overall is beneficial to americans via lower input costs to manufacturing etc.

        If commodities tank harder than the world will value tech and companies with the ability, means of production and subsequently the country to a higher degree. These are stereotypically american or albeit owned by americans.

        Further what happens in america isn’t exactly the be all and end all for their dollar as it is hugely utilised around the world and the question finally ends with

        Would you want AUD which is backed by commodities and houses (lol had to add houses) or USD which is back with tech, industry and basically all the things that make the modern world?

        This is on the back of a increase decline in interest rates going forward short term.

        A currency value is generally based on what a country can produce and for the current time we can not rely on yesterday’s data/imputs to figure where Australia will be.

        Coking coal, iron ore, coal, gas are our majors and the future is not bright for any although gas “might” be a surprise.

      • Ah Sim. My call is that interest rates here will be significantly higher here than in the USA or most other nations from the northern hemisphere. There must be a swag of funds in Switzerland looking for a nice warm home. If you look at the Xrates from there to here you are looking at 3%.
        Sooner or later our Govt will get the boot and probably a team from industry will get their hands on the levers ( the Commonwealth bank had an article out to day on the lack of confidence in our leaders)
        So my call is, apart from housing, she’ll be right, after much upheaval this year. WW

      • “We are not getting full coverage of what is occurring in the US”

        I think it would be a pretty safe bet to assume the same could be said for China- making it difficult to assess the true risk to our economy. Both countries, indeed the entire world, face some huge problems. I suspect your last comment is correct, but you need to apply it to the global economy, not just the US!

  1. Here we go fellahs, Jobs down the river first, then house prices. Sell NOW WW

    From the Courier Mail
    HUNDREDS of jobs are being shed in Queensland as LNG companies adjust to a collapse in the oil price and downsize following the end of construction at Curtis Island.

    The impact of the oil shock is flowing through to the Queensland economy, with jobs in the gas fields being shed as well as in the Brisbane head offices.

    And worse may be on the way with one of the world’s biggest banks, Citigroup, forecasting oil prices to fall to $US20 a barrel, more than half the current value and a fifth of where it was a year ago.

    Citi global commodities analyst Edward Morse said the oil price should stay at that level “for a while” as output from the US continued to grow and Saudi Arabia and Iran offered price discounts to grab global market share.

    Arrow Energy has also shelved its multibillion-dollar LNG project and QGC’s parent company, BG Group, has reduced the value of its LNG project by $5 billion because of the oil price shock.

    Santos will also cut $50 million from its spending on its coal seam gas to LNG project.

    The impact will flow on to revenue for the State Government, with royalties likely to fall even further than forecast.

    Origin is believed to be shedding hundreds of jobs and company sources say management has set up a program called Project Crystal to slash costs and jobs from all sectors of the company.

    “Their aim with this Project Crystal is to find money everywhere and anywhere, and what they have started to do is shelf every project on their books until further notice,’’ one Origin worker said.

    “With this in motion departments are being stripped down or even closed down, staff are being laid off, contractors are being given their marching orders earlier than expected.

    “They are also using this to get rid of deadweight staff who have been flying under the radar, which is fair enough but this is causing high-calibre staff and contractors to seek new positions with other firms and ultimately this will be detrimental to Origin in the future.”

    Origin would not confirm the existence of Project Crystal or detail how many jobs had been lost but said staffing levels were reducing both in the gas fields and on Curtis Island.

    “Like all companies, we’re constantly working to lower our cost base and operate as efficiently as we can,” it said.

    Santos and Origin are expected to announce a reduction in the value of their LNG projects this month.

    AMP Capital chief economist Shane Oliver said he could not see oil falling below $US40 a barrel and expected it to average about $US50 for the year

    • I agree with Shane Oliver, personally $20 usd oil sounds like half the world imploded, Saudi arabi probably wouldn’t even bother producing at 20usd oil let alone all the ones above them.

      • SIm they can stop pumping yes, but they have to spend money to keep the wheels turning. Huge amounts of it.

        Those stockpiled USD from the OPEC days and beyond are heading home like carrier pigeons. Flock wont be the word.

        What bankers really hate is cash in the vaults, how are they going to put it to work?,
        How about we send some over to M Turnbull our old mate now running the show in Aussie. He’ll look after us.
        And there is the dilemma. WW

      • Lol! Its the most startling realisation to myself when you said – “what banks really hate is cash in the vaults” –

        Its funny but it hurts cause it true. Just think about that sentence.

        Ughhh let stupidity prospour on more credit because economics are only based on a few years -.-

    • WW,
      “My call is that interest rates here will be significantly higher here than in the USA or most other nations from the northern hemisphere”

      What makes you say that? The evidence points in the opposite. Perhaps you can outline your thesis.

    • Mig.amazing. Here we are arguing about spending 80 billion dollars, of the tax payers hard earned cash, on frigging submarines, when the Intelligentsia of the Axis powers could probably take out our computer systems in a afternoon. (for days on end)
      The balance of power is changing, and I fear we wont have the capability to even keep our basic command systems operating.WW

      • 0xFF2489DCBB333A

        [wo]man in black: “Lord Brandis we have an open channel on the “pope”‘s communication device”

        Brandis: “Ah! I see Abbott is using the landline again, who’s he calling – descrab…”

        [wo]man in black: “Its not scambled my Lord, and the shouting is very loud”

        Brandis: “…..” 0.o “…. probably just complaining the to credit card company that he doesn’t believe his wife uses the card for porn and he wants answers… again….”

      • The Traveling Wilbur

        I did. And therefore assumed it was hex. And then restrained myself from observing you’ld typed one too many chars. I won’t have been the only one.

      • assumed it was hex. And then restrained myself from observing

        BOOM!!!

        10xpoints go to Wilb!

        Normally people give me shit or say nothing, I was trying to gauge who still had a pulse out there tonight….

        Hint: Its not AUD 0.o

      • and I fear we wont have the capability to even keep our basic command systems

        So you’re the right guy to bounce this off.

        We all know who the “Lord of the Admiralty” ‘s are, so, for what its worth, those command systems will stay “up”. But…. to what purpose? To fight a non-existent “conventional” war? Good luck with that…

        But who are the Lords of the Dark[net] armies? To whom are they accountable?

        Haven’t heard peep from Brandis lately…

        … Is it possible Brandis is “holding the rebels back” to get concessions from Turnbull, or whoever is Lorax’s favourite today, to retain control of the Empire? I doubt Brandis would handle the Libs getting turfed well, and he strikes me as oily enough to enjoy his newfound power….

      • Her mama so fat Hockey the only other mofo the uber guy wid a Semi is getting any bi’ness from!

      • Oh! And Gina … [click click click *snaps fingers*] what’s her name … [click click …. *shrugs palms facing out and articulated slightly above the shoulder line*\ … whatever

  2. Sweet Mother of Moore’s Law!

    Cable ramping, AUD tanking.

    I swear if I have too see one more algo-ignited-mid-session-FX-arb I’m going to leverage up all that shitty algo has to play with!

  3. China lifts ban on massive iron ore ships from Brazil

    Investing in Chinese Stocks—投资大中华地区股市: China Takes Advantage of Iron Ore Price Drop

    http://investinginchinesestocks.blogspot.co.nz/2015/02/china-takes-advantage-of-iron-ore-price.html

    China seizes upper hand in iron ore market after deal with Vale

    Beijing’s removal of the ban on Brazilian miner Vale’s giant iron ore carriers is a sign of mainland China’s strong hand in the global iron ore market as major producers Brazil and Australia scramble to preserve market shares in supplying the commodity to the world’s second-largest economy.

    A circular by China’s Ministry of Transport published on late Monday amended the regulation for mainland ports to handle mega dry cargo ships, legitimising the docking of vessels with a 400,000 deadweight ton capacity and effectively ending a three-year spat between Beijing and Brazil over Vale’s giant ore carriers known as Valemax.

  4. AUSTRALIA FAILING TO DEAL WITH ITS HOUSING AFFORDABILITY ISSUE … WALL STREET JOURNAL … WHY ? …

    Australia’s property boom spurs interest in “granny flats” … WITH VIDEO … Wall Street Journal … google search title if blocked …

    http://www.wsj.com/articles/australias-property-boom-spurs-interest-in-granny-flats-1423593357?tesla=y

    With Affordable Housing Scarce, Homeowners Build Backyard Apartments to Rent Out … read more via hyperlink above …

    2015 11th Annual Demographia International Housing Affordability Survey

    http://www.demographia.com/dhi.pdf