ASX at the close

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

China data disappoints again

The lull in global equities continues with investors finding any excuse to stay on the sidelines after having enjoyed a period of good gains. The key drivers of risk aversion at the moment are Greece and China although the latter is always hard to judge. On Greece, investors are still feeding off comments made by Prime Minister Alexis Tsipras over the weekend. After a period of relative calm following the ascension of Syriza to power, the type of rhetoric that investors were initially fearing is beginning to flow through. Quite frankly though, it was always just a matter of time before this happened as Syriza was elected to ring in some changes. Tsipras has gone as far as throwing around language such as World War II repatriations from Germany and such language is certainly not constructive in bridging the gap. As a result, Greece started the week off on a sombre note with yields spiking and equities declining. This also put pressure on the rest of the region and derailed some of the recovery we’ve been seeing in recent weeks. The DAX in particular has now retreated from record highs but I continue to feel it remains in a very good position and even the data has been showing signs of bottoming in the German economy. Yesterday’s trade balance numbers showed a better than expected surplus with a sharp rise in exports being the dominant theme. Perhaps this was driven by the sharply weaker euro and with many analysts forecasting further weakness in the single currency and this trend is likely to continue.

India growing at a faster pace than China

In the emerging market space, China released more data today which continued to show signs of weakness. China’s CPI for January came in at just 0.8%, lower than an expected 1% and essentially confirmed the weakening domestic demand/activity the economy is facing. This CPI reading was also the lowest in around five years and PPI contracted by a wider than expected 4.3%. An interesting statistic is the fact India is now growing at a faster pace than China. Yesterday’s GDP figures out of India smashed expectations, coming in at 7.4% when the market estimate was just 6.6%. China announces its growth target of the year in March and analysts are expecting this at around 7%. This will be a key event as it’ll then determine whether China will need to open the taps or not. If there is no need to (should the target be easily achievable), then it’s likely China will be just looking to press on with reforms. Regardless, China equities managed to edge higher today with the recent run of data in China driving speculation of further easing. With Chinese investors continuing to drift away from property and shadow banking, excessive speculation in equities is likely to remain a key theme this year particularly given the state of the economy.

CBA and Telstra retreat

The ASX 200 is headed for the second negative day after the twelve session run ended on Friday. This lull is not a big surprise given the Greece situation is seeing investors continue to shed risk and we are headed for some key corporate earnings this week. The situation in China hasn’t done iron ore any favours and it seems the restocking that many analysts were expecting heading into Chinese New Year hasn’t really ramped up. While iron ore futures have gained in Asia due to stimulus speculation, a lot of the fundamentals remain subdued. This is likely to keep most of the iron ore names contained in the near term. CBA reports tomorrow and Telstra on Thursday and it seems investors aren’t keen to keep pushing the stocks higher at the moment.

Greece to remain in focus

Ahead of European trade, we are calling the major bourses flat to mildly weaker as investors continue to deliberate how the Greece situation is going to play out. Any calm on that front will be well received by markets and headline risk around the issue will remain rampant. The euro continues to hold on despite the drama surrounding Greece but unless we start to see some positive reinforcement on a fundamental level, then the price action will likely come under threat at some stage. There isn’t much data on the calendar but we have Eurogroup meetings and UK manufacturing and industrial production to look out for.

Comments

  1. Don’t know if you missed it but BOJ couldn’t be more f#@%ing boned!

    10Y .382

    Bund 10Y .358

    Ruh roh!

      • Well BOJ was the original “trash your currency through bond issuance” player. They’re not going to like this one bit! Sure, fine for the Swiss or some upstart ECB to NIPR… but this means WAR! … as in currency….

      • The more intelligible version is:

        Germany sells more into the same market Japan is selling to, in a deflationary world with Chinese imports collapsing, slice of the pie is where the action is…

      • In his defence I did like some of his ideas (not theft of superannuation). He said someone earning his sort of money shouldn’t get medical care for free and that there are too many superannuation concessions.

      • To be more fair, the government can fund its own ventures at whatever interest rate and for whatever duration it feels like!

        The douche is a public econs windbag, he should know that perfectly well!

        Sure, clips his wings, but WTF does stealing your wages AGAIN achieve!?!

      • He said someone earning his sort of money shouldn’t get medical care for free […]

        He doesn’t. He pays substantially more tax than the average punter.

        If he doesn’t pay more because he’s avoiding tax, and feels guilty about that, then the solution is pretty obvious, and doesn’t require burdening the less well off with higher out-of-pocket costs.

        (It would be nice if the people who don’t want publicly funded healthcare would just come out and say it, rather than try and construct flimsy justifications that don’t stand up to even a cursory examination.)

      • Who exactly is against “public funded heathcare” in that insinuation smithy?

        Myself?
        BullionBaron?
        Alan Jones?
        All of the above?

      • I can’t stand Q&A but I did see a bit of it last night. Jones was not advocating getting rid of medicare. He was simply criticising the fact that he can show up to a hospital or doctor and get treated for nothing.
        Where we have limited resources we should allocate them carefully and some sort of market mechanism for that seems desirable.
        The Australian tax structure is a separate debate.

      • He was simply criticising the fact that he can show up to a hospital or doctor and get treated for nothing.

        But flawse, that’s what public funding means. I do agree with smithy here, we should be taxing the douchebag more not taxing him less so we all pay more through insurance!

        My unclaimed insurance will still be subsidizing his old arse! and yes flawse, unlike a car where you become a more cautious and aware driver with age, you become susceptible to massive payouts with age! And the insurance companies run this government funded bullshit scam where if you’re under 30 and no fucking to reason to get insurance, you get a “mates rates” discount so the oldies get their payout today!

      • There’s terrible ideas then there’s Alan Jones, how terrific for the future of Australian’s having their super locked into government bonds for below inflation returns until the end of time.

      • The Australian tax structure is a separate debate.

        Medicare is funded by taxes. Hard to see how it can be separate in this context.

        Jones was not advocating getting rid of medicare.

        But he is parroting the comically broken reasoning of people who *do* want to get rid of Medicare. Consequently, it is difficult to interpret it as anything other than implicit support.

        He was simply criticising the fact that he can show up to a hospital or doctor and get treated for nothing.

        He can call 000 for “nothing” as well, but I don’t hear him fomenting any outrage about that.

        Anyway, as I pointed out, he doesn’t get treated for “nothing”, he gets treated for whatever percentage of his taxes go toward funding Medicare. Here are some off-the-cuff numbers so quick they don’t even qualify for back of the envelope:

        The typical punter earns about $60k and will have an average tax rate of around 17%, so their income tax bill is ostensibly about $10k.

        Let’s say AJ has a taxable income of a million (no idea how much he earns in reality). His average tax rate will be around 45%, giving him a tax bill of about $450k.

        So in reality, Alan Jones pays 45x as much than Joe Blow for his “free” healthcare. Further, even if he goes to the doctor every month and paid the requisite $7.50 (or whatever) each time, the $90 this adds up to over a year wouldn’t even count as a rounding error on his $450k tax bill.

        Where we have limited resources we should allocate them carefully and some sort of market mechanism for that seems desirable.

        Like the police, you mean ? How about a $10 co-pay for calling the cops when you have a break-in ?

        Despite the religious beliefs of some, “the market” is not the best answer to every problem. Our healthcare resources need not be spread so thin that we deny healthcare to the poorest. Nobody has come even close to demonstrating that healthcare resources are being allocated inefficiently.

      • Thanks drsmithy… some think the “Magic Market” is an all knowing super computer that believes in a more mythical singularity.

        Skippy… numerology cubed.

      • @ mig and others…….

        I wrote the original chapter in Halsbury’s Laws of Australia on Health Insurance (and Medicare and Nursing Homes btw)….tried to get the links for you’all but Lexis have it tied up very tight.

        That said, we in Oz have a rather disjointed view of health care, who pays for it and how and it is, I think, part of the much bigger problem of our approach to our collective responsibilities and willingness to pay for what we get and our understanding as a community of how it can be made to work (as distinct from the mind destroying stupidity of our political class).

        Health is (literally) a bottomless bit of special interests which work against a rational allocation of limited resources to limitless need/demand.

        It is really hard to find a middle policy line. Our political caste can’t make easy / obvious decisions…….health? Get real

        I’m hedging it all by the investment in Houston TX …. wait for the next installment

    • Jones actually said some sensible things last night — super concessions, means testing pensions — but there was plenty of loopy stuff as well.

  2. Climate Scientist Wins $50,000 In Libel Lawsuit Against Conservative Newspaper

    So how can scientists — or any plaintiff in a defamation case, for that matter — prove that their character has been defamed? In Weaver’s case, he pointed to the comments section of the Post’s site. In testimony to the court, he called them “crushing” — “people claimed he was a fraud; a liar; many people attacked him in phone, in shows. He did not know what to do to defend himself. All of this was based on a complete fabrication of facts,” Justice Burke wrote.

    The court’s opinion even excerpted some of the comments, including this one: “Dr. Weaver is as big a hypocrite as he is a fraudster. He was front and center with his “global warming” lies and deception and should be made to repay his research monies and lose his tenure and degrees. A few centuries in jail would give him time to reflect on his part in the biggest fraud in the history of mankind. Perhaps he would settle for a 100-year sentence by giving evidence against his fellow fraudsters?”

    • The decision did not touch on the accuracy of climate science itself, instead focusing on statements the Post and its columnists repeatedly made about Weaver

      And so it should! Despicable actions on the part of the media have nothing to do with your sob-story…

    • Revert2idiot, I love the juxtaposition and the hypocrisy of your post when you have a display picture of tony Abbott with the words “dead man walking” above his head. How lovely…

      A sad story indeed posted in a totally irrelevant thread. I do note that it has been a few days since MB posted about climate change and i sense you needed to get your rocks off by any means. Congratulations at being such a 1 dimensional character.

      • I’ll resist the temptation to get into a futile slanging match with a Tory-voting, religion-believing climate denier like you.

        I learned long ago, never to wrestle with a pig. You get dirty, and besides, the pig likes it.

      • Enlighten yourself with the book three little pigs straw house man.

        I wont call you a pig in return although the joke is set up beautifully straw house man. No you are sick man getting yourself off on MB website by hearing bearish economic news because poor world economy in your mind equates to less consumption and less co2 emissions.

        ( a fallacy that your environmental smoke screen intellect cant decipher)

        Is that not correct? Is that not basically the greens ideology? Revert2mean your name says it all. You dream of humans reverting to horse and cart and straw houses dont you? Well wake up.

      • Really lorax?

        There’s no greater losers in this world than those who feel any benifit in criticising other on religious ground or those who push their beliefs either for or against onto others.

        It’s strictly personal. Lets not drag this any more into pathetic slandering of irrelevant self beleifs.

        Seriously drop it. It doesn’t offend me, it’s just pathetic conversation the ultimate cheap shot. Unrequired.

    • Id like to hear comments to your question.

      Personally i feel we are on extremly shakey territory. Anything could bring on a toppling of equities.

      Iron ore / commodities crashing harder (ex oil)

      Australia fed losing AAA

      Euro crisis, lending to Australian banks subsequently decreasing.

      Oil spiking back to 80/100 usd and aud decline hampering lower interest rates.

      Australia posting early signs of recession by years end.

      • So. Wait. You want comments or you want BS? Because I can point you in the direction of Terry McCrann (who conclusively does not pay attention to these pretentious pages).

        But otherwise… Equities? I think Weston said last China year equities are go. I’m still long. Didn’t hear anything about equities collapse around here (except yours truly around June calling October…) but Albert Edwards was out with this

        http://www.zerohedge.com/news/2015-02-08/albert-edwards-next-shoe-drop-realization-core-inflation-us-and-europe-are-same

        Still, its the ultimate bet against the CBs. I’ll take BTC for that for hedge….

      • yeah I just want to know where to put my super… last year my return was healthy (all in Aus shares) but I think that’s a bit aggressive going forward even though I’m only 31…

      • @Bendy: ProTip: Not with Alan Jones…

        Considered any portion in bullion? Always an easy option if you haven’t done it imo.

      • Bendy wire, super is long term. Could simply turn super into cash if you wish to rebuy at a later time hopefully at lower prices.

        You don’t really need to invest in anything except cash if you wish to advert a collapse.

    • so, is there going to be a great collapse in equities this year?

      No idea. No-one has any idea. I’m spread all over the place. Its a strategy that seems to be working, but I’m the first to admit it could all blow up tomorrow.

      If you want advice from someone who knows he’s right, ask Mig.

  3. Hey, fancy buying a straw house?

    Building with straw – the figures
    ☼ Straw is the leftover stalks from cereal crops – normally used for animal bedding
    ☼ Just under four million tonnes of this leftover straw is produced every year by UK agriculture, according to the Agricultural and Horticultural Development Board
    ☼ It takes about seven tonnes of straw to build a three-bedroom house with this pre-fabrication method
    ☼ That means there is potential to grow the material for more than half a million new homes every year in British fields

    Since straw absorbs carbon dioxide as is grows, using it as a building material actually “locks carbon into the walls” of a building.

    • Doesn’t growing renewable wood do the exact same thing but have the benefit of you know being wood?

      Anyway add some links? I cant see it being any worse than malemine and with that said I cant see much benefit (from your point of view) when you factor in what crazy dangerous resins would be required.

      • Don’t even! If you tell him anything about capture capture in the oceans via algae and plankton, he’ll tell you acidification of the oceans will kill all that. But then he tells you the sea levels will imminently rise to between 20-40 meters.
        So naturally your follow up question is, won’t all that fresh water act against acidfication? And to what extent will it?

        …. crickets…..

      • Mig are you implying that the earth has some kind of balancing mechanism? Thats like talking science to creationist. How dare you? (Note i am a christian)

        And after researching i see that there are no dangerous resins involved in building these rat infested shacks. Isn’t it better to just build houses that last and don’t require replacing every 30 years? (You know the opposite of houses in built in australia today)

      • “”…Join Us Now in Argentina where we will be building a 3U Earthship based on the Simple Survival Design…”

        Sounds like it has ample room for my beans and ammo !

        Awesome.

    • Woof woof woof

      Whoooo let the dogs out…

      … at any rate, the whistle was heard loud and clear…

    • I love this stuff.

      Dr Wilson and a Bank Economist wax lyrical.

      Of course it is not a bubble – the RBA still have 2.25% to play with. Plenty of upside to come folks.

      “But other economists dismissed talk of a bubble in the Sydney housing market and said prices were not about to go down.

      “I don’t think there’s a bubble, although Sydney is a red-hot market,” said Andrew Wilson, the senior economist of Domain. “There’s no bubble, it’s still a strong market in Sydney with plenty of upside for prices growth.”

      Michael Workman, senior economist with the Commonwealth Bank, also said a bubble was unlikely.

      “I doubt it,” he said. “There’s still reasonable scope for price rises this year across most of the suburbs within 20 kilometres of the city. There reserve bank has cut interest rates once, it’s likely to go again pretty soon.”

      • Its interesting how the apparent floor of Australian interest rates continues to decrease. Three or four years ago economists were talking about 2% being the floor without potential capital flight and other unintended consequences. Now however Morgan Stanley were just yesterday calling 1.75% by the end of the financial year.

        Exactly what is the floor of Australian interest rates? With the spread between Australian and U.S government shrinking by the day the RBA is quickly running out of its supply of hot air to keep the bubble inflated.

      • As the bombs are falling on Baghdad an anxious international press gallery, clearly a little rattled by closeness of the shelling, gathers in the spacious, though dust filled and rimmed by blown out windows, foyer of the once majestic Ottoman age hotel.

        Clamouring and shouting, with cameras raised furiously firing off shots, they draw near the communications director who for months has been assuring international audiences that all was in hand. The man widely referenced, in a risible fashion, as Baghdad Doc.

        “There are no bubbles here, what you are hearing is the boom of house prices as each auctioneers mallet is slammed from the North Shore to Wollongong, from Gleebe to Mt Druid”

      • “Of course it is not a bubble – the RBA still have 2.25% to play with. Plenty of upside to come folks.”

        How succinct. And how mad. Running down the cash rate to keep the festering, rancid bubble going for the dimwits.

        THIS is economic growth now, a race to the bottom. It’s an obvious illusion. Its insane. And it will end by shocking even the most hard-nut catastrophists.

      • “Exactly what is the floor of Australian interest rates?”

        The floor on the cash rate is 0%. Real question is, what’s the floor on the aussie dollar?

  4. Good government started today….apparently….

    My pick: The “debt and deficit disaster” lines are still there, under the heading: “If asked – pressure on budget revenues, returning budget to surplus.

    “We know the budget is under pressure. The Abbott government was elected to fix Labor’s debt and deficit disaster and return the budget to surplus, and we won’t shirk our responsibility,” MPs are advised to say.

    But the government is in the process of back-pedalling on its previous fiscal strategy, which was supposed to be about ending the aforementioned debt and deficit disaster. It isn’t looking for alternative, fairer budget savings to those it put forward in last year’s budget – or not that it’s telling us about anyway.

    Lenore Taylor lists a whole bunch more examples of why this is a genuinely shitful government.

    ‘Coalition’s first day of ‘good government’ but the message hasn’t changed’

    http://www.theguardian.com/australia-news/2015/feb/10/coalition-first-day-good-government-but-message-hasnt-changed

  5. proofreadersMEMBER

    I am sick (no pun intended) of hearing the likes of Alan Jones telling the great unwashed (such as me) that it is totally reasonable that we should be prepared to pay an extra $5, $10, $20 or whatever, each time we go to see a GP.

    I pay (and have done for years) a couple of thousand dollars each year as a Medicare levy (including 0.5% per annum on taxable income for the disability insurance scheme effective 1 July last year – BTW, I wonder how that scheme is tracking cost/benefit wise?). For this levy, I visit my GP (as much as I like him) less than six times each year, even in my current senior years – I go only as really, really needed.

    I do not begrudge at all, paying a Medicare levy far, far in excess of my cost to Government for my GP visits and other covered services, as I believe in a universal basic healthcare system – perish the thought that we end up like the US, even with Obamacare if it works.

    However, if my excessive Medicare levy contribution is not enough, do not call that contribution a specific levy as such – it is just another 1.5 to 2.0 percentage point addition to the relevant marginal income tax rate and should be treated thus.

    Alternatively, if the Government (whether it is the current incumbent or the next iteration) insists on slugging us some more for GP visits, just increase the “Medicare levy” to 2.1% on taxable income.

    For a taxpayer (a diminishing breed, what with all the other offsets, rebates etc available) with an $80,000 taxable income, the 0.1 percentage point increase would amount to $80 a year.

    If the Government had done it that way, it probably would have got it through with little aggravation – do not dress the co-payment up as “user pays”, when a great number of people were/are to be exempted.

    In the context of a suggested 0.1 percentage point increase, do I hear anyone complaining about the 0.5 (I repeat 0.5) percentage point increase in the “Medicare levy” that has been operative since 1 July last year to cover the disability insurance scheme?

    The “silence” is deafening.

    Instead, the current Government had to be too smart by half and decide to attack it in another way and initially, dress it up as another “thought bubble” (aka signature policy) idea of setting up a grossly overfunded medical research scheme, from which “thought bubble” it seemingly then backtracked to almost call “a spade, a spade”.

    BTW, I also pay (and have done for years) thousands (ever increasing) of dollars a year in private health insurance for which I get SFA return. More money just p.ssed up against a wall?

    • Gunna
      Write this on your fridge.
      The oil price strategy has nothing to do with supply and demand, those are the tactics used to lower the price. The battle is to unseat the USD as the reserve currency. The intermediate outcome is to bankrupt oil companies and their financiers.
      The destabilising of the Australian economy as a result of the energy industries here being made uneconomic is collateral damage. WW

      • @WW,
        “The battle is to unseat the USD as the reserve currency”
        who’s doing that? and doesn’t that mean that War with that party is imminent since that’s what the US does when any country tries to deal with anything other than peterodollar(Iraq,Libya…)?

      • Paul, the USA is now “considering” supplying hard military aid to the Ukraine. What does that tell you.
        Another battle front right on Europe’s door step. WW

    • Actually think a lot of the cool advanced additive manufacturing techniques will allow the creative types to go nuts and innovate.

      Koniseggs variable ratio turbocharger is one such product manufactured by 3D metal laser sintering. There is youTube videos out there but I find the patents diagrams are much more interesting.

      http://www.google.com/patents/US8807929

      Internal geometry of that turbine housing is impressive and either impossible or very difficult with existing fabrication methods.

      Wish there was a few contract 3D metal printers and precision CNC milling machines around domestically that could handle exotic materials at a reasonable price. You would have 15 year old kids building their own jet engines and doing a better job than the F35 program. But no…. bush mechanics.

      • Cee, you need to get on to the Rolls Royce web site and see how they cast metal single crystal turbine blades, that is impressive.
        Sintered metal construction does not have the structural integrity to withstand stress. That patent is innovative but with no practical vale, but thanks for showing us. WW