ASX at the close

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

Equities rebound on stimulus expectations 

The trading environment remains volatile and it didn’t take long for equities to erase some of the losses we saw on Friday. Chinese equities have sprung back to life while the Nikkei and ASX 200 are also enjoying some gains. With policy makers continuing to support global growth, investors continue to feel there is room to buy the dips in equities. The reality is should the global economic climate not improve, policy across the globe is likely to become even more accommodative. We have already seen the sort of impact this can have on markets after the relentless gains in US equities through the QE cycle and similar moves in Japan as well. This is the same notion that’s been driving Chinese equities and now signs of this are showing up in some European markets.

Grexit talk continues

The Greece situation is starting to escalate yet again and given the dire situation the country is in, some analysts are already speculating on a third bailout. Greece is in a tough cash position and latest reports suggest Prime Minister Alexis Tsipras has ordered local governments to deposit reserves with the central bank. The situation is very time sensitive at the moment and it seems unlikely we’ll see a solution by the key dates. The issue of a Grexit will also remain on investors’ minds and many will ponder exactly what sort of an impact this would have on the region. Given Greece has a lot more to lose than the euro area, many feel the country will end up succumbing to the eurozone’s demands despite attempting to put up a fight. Perhaps this is why the single currency is not completely crumbling on Greece fears.  Apart from the EUR/USD cross, the euro has remained steady against other majors throughout the Greece noise. Weakness in EUR/USD has been more greenback specific as it’s managed to recover after struggling last week.

RBA in data dependant mode

The AUD has been one of the more volatile currencies in Asia particularly against the greenback with focus pinned on the latest round of policy hints from RBA Governor Glen Stevens and monetary policy meeting minutes from the April meeting. Stevens spoke in US trade reinforcing the central bank’s easing bias and continued to talk down the AUD. He commented that rates should be accommodative and the question of whether they should be reduced further has to be on the table. Stevens went as far as saying he’ll be surprised if the AUD doesn’t fall some more. However, what traders were really after were hints of whether we’ll see further easing in May. There is still no clarity around this and the RBA will want to see the full effect of the February cut on the economy through Q1 data. The minutes suggested the RBA wants more time/data to assess the economy and pinned inflation as one of the key data prints to look out for. Given data hasn’t been that bad off late, it’s increasingly looking like May will be a line ball call yet again. It almost seems the RBA would want to see the AUD decline without cutting rates as a currency depreciation will likely have a broader impact on the economy as opposed to merely pushing up demand through lower rates. With that in mind, AUD/USD remained fairly steady at $0.7700 through Asia. Tomorrow’s Q1 CPI reading could bring some volatility if it’s significantly different from market expectations. The tone in local equities has also been cautious today with investors not particularly sure when the next cut will come. This has kept the yield plays at bay while materials managed to eke out some gains helped by the momentum from China.

Mixed open for Europe

Europe looks like it is headed for a mixed open with the DAX eyeing mild gains and the FTSE a touch weaker. Traders will continue to track headline risk around Greece very closely and on the calendar today we have the ZEW economic sentiment readings. The market is looking for further improvement in sentiment on that front and any disappointment could be used as an excuse to sell. Data is relatively quiet in the US and earnings will remain a key theme with around 35 companies reporting.

Comments

  1. Day twenty in the @UptownFunk v @Stomper challenge saw big irrational gains by RIO (aka I love you Glencore) and BHP (aka The Big Singaporian) who both rallied by 1.5% and 2.6% respectively and FMG (aka CartelCo) down 1.1% for the day giving up all of yesterday’s gains as the market discounted yesterday’s thought bubble while.

    The correction saw the average share price pool increase from (5.29%) back to (3.83%)

    23/03/2015 21/04/2015 Mvt %
    BHP $31.00 $30.600 -$0.40 -1.29%
    RIO $58.21 $55.500 -$2.71 -4.66%
    FMG $1.98 $1.870 -$0.11 -5.56%
    Average $30.40 $29.32 -$1.07 -3.53%

    The proportional calculation improved a little more from (4.82%) to (3.83%)

    It’s now too late to save my FMG shorts which are destined to lapse without value 

    • @Stomper
      Real sorry to hear about those FMG puts. Still lots of time – and potential volatility – left, however, in our wager. The future can be so uncertain sometimes.

  2. Mining BoganMEMBER

    So this is how it works. One side of politics has an idea about how to make the big fellas pay their share. The other side pffts it as a natural reaction. Someone overseas and therefore deserving of being sucked up to has kind of the same idea. So side No2 attacks side No1 for not releasing details to cheat on the exam with, even though side No1 offered to share but now aren’t because they want to suck up to those worldly overseas types themselves one day.

    And we all continue to pay…

    http://www.brisbanetimes.com.au/federal-politics/political-news/joe-hockey-renews-calls-for-details-on-labors-antitax-avoidance-policy-20150421-1mq37i.html

  3. Whoa – Japan continues to break new records as it tests its new bullet trains –

    http://edition.cnn.com/2015/04/21/asia/japan-maglev-train-world-record/index.html

    With Sydney – Melbourne being the 5th most busiest inter-city route on earth the reason are more certain than ever.

    With issues of travel time now cleared up – especially that CRAAAZY one about stopping 6 or 8 times between cities its time to move on with what is CLEARLY an amazing opportunity for Australia during record global low interest rates to embark on an AMAZING opportunity for long term economic growth and rejuvenation.

    The fantastic thing about opening up all that space between Melbourne and Sydney is the HUGE reduction in housing costs which would flow – especially with the NBN.

    Surely MB its time to change the tune.

      • Wow – 8888

        The trains will run to capacity – doesn’t matter if the population was 500 billion – the route isn’t going to carry that many people.

        If the route were to run to capacity at $150 a ticket each way it would be paid off in less than 12 months. The train running on HALF the air travel would be paid off in 10 years without the increase in population from regional towns.

        $3b over ten years is $30 billion – paid for in less than ten years – AWESOME MATHS TIGER.

        Oh and guess what the population between Melbourne and Sydney is well over a million people – these people are serviced by NOTHING at all. Nothing.

        You are so full of crap.

      • Wuhan to Guanzhou which is almost 1000 km cost $16 Billion dollars – now concrete and steel are HALF the price relative to when that was built and guess what interest rates are virtually ZERO.

        So based on your figures the entire project would have paid itself off in 5 years at $16 BILLION.

        Holy shit – thats epic.

        But it isn’t $16 Billion – its going to be half that as steel and commodities crash. lets make it $8 Billion – but we’ll meet half way at $10 Billion.

        HOLY SHIT – that means we pay it off in 3-4 years EPIC.

        That is CHEAPER than the god damned East West Link total costs !!!

        OH MY GOD – we can build a god damned BULLET train from Melbourne to Sydeny for less than 17km of Freeway in Melbourne.

        glad we can agree – there is NO ARGUMENT.

      • No population density
        High wages
        Large distance
        Expensive easements (assuming you want CBD to CBD connectivity)
        Greenies
        Lack of experience

        And seriously, look at the places on this route”

        Goulburn 22,000 people
        Albury 46,000 people
        Wagga Wagga 47,000
        Wangaratta 18,000

        Thats as the crow flies – but you might want to add a few billion more (why not) to go by the 83,000 in Bendigo

        Seriously – these are rounding errors – Sydney Melbourne route in total is 20,000 a day.

      • Seems crucial that the Japanese version was introduced long before air travel took off (no pun intended) in popularity on the same route, back in 1964. That air travel is a well established incumbent makes getting a train on the same route a big ask.

      • Tokaido Shinkansen Tokyo to Osaka takes three hours and costs A$150 each way

        By plane its an hour.

        Tokyo has 13 – 30 million residents depending on how you want to cut it – Osaka has 3 – 18 million on the same measure.

        The train passes through Kyoto (1.5m people) , Nagoya (2.3m people), Hamamatsu (800,000 people), Yokohama (3.5m people, which feels like the outskirts of Tokyo)

        The Tokaido Shinkansen line that connect the cities carries 140 million people a year – 300 trains a day.

        Maglev is another story again – the original Maglev in Shanghai(?) from the airport was one of the most expensive pieces of rail ever laid.

        Then again – that was before the Japanese got involved:

        “Deepest of all is the new Tokyo terminal for the latest incarnation of the bullet train – the maglev, or Chuo (“central”) Shinkansen, which is supposed to connect Tokyo to Nagoya by 2027 and is being built 40m underground. The maglev is the next technological stage in the evolution of high-speed rail travel. It is meant to be a morale booster for Japan’s railway industry, which no longer boasts the fastest trains or the biggest ridership in the world, distinctions that now belong to Japan’s huge neighbour to the west. ”

        http://www.theguardian.com/cities/2014/sep/30/-sp-shinkansen-bullet-train-tokyo-rail-japan-50-years

        A d!ck measuring contest Australia has zero chance of participating in if they have a brain.

      • Would have thought dick measuring contests by definition disfavour anyone with pretension to intellect.

      • If Chuo (“central”) maglev connects Tokyo and Nagoya via the shortest route (and bypasses all the densely populated coastal areas), then it would be similar to connecting Sydney and Melbourne.

      • “Total cost, originally estimated at 5.1 trillion yen in 2007,[22] escalated to over 9 trillion yen by of 2011.[4] Nevertheless, the company has said it can make a pretax profit of around 70 billion yen in 2026, when the operating costs stabilize.[23] The primary reason for the project’s huge expense is that most of the line is planned to run in a tunnel (about 86% of the initial section from Tokyo to Nagoya will be underground)[24] with some sections at a depth of 40 m (130 ft)”

        https://en.wikipedia.org/wiki/Ch%C5%AB%C5%8D_Shinkansen

        5 Trillion Yen – A$54 billion (20% of the current Federal debt outstanding)

        Halve it to make it fair – most of it will be above ground – say $20 billion

        Lets double the passengers to 40,000 day (assuming everybody stops flying and catches the train and brings a friend to see Wagga Wagga)

        They pay $200 a trip

        Annual revenue $3bn.

        Even if the operation ran on air it would be marginal

        I think I just summed up millions of feasibility studies that get funded and then ignored by dreamers

        If you want to ride fast trains Glenn – get on a plane to Japan…

      • Of course it will work here – the only people who think it wont work here will only rely on cognitive bias – even presenting facts which support bringing in a train (annual revenue of $3 BILLION) mistakenly thinking they wont.

        Absurdity.

        The most crucial aspect is economic development and opening up the entire region between Sydney, Canberra and Melbourne – almost 2 million people.

        The route is amongst the most busiest on earth.

    • Apparently you eliminate one shit stirrer and no one gets angry enough to comment any more.

      • The Mig vacuum effect? As a positive it does seem to have reduced the activity of R2M. Guess those looking for an argument have found it elsewhere.
        The other less notable effect may have been the site change. May be that those people whos gravitars speak louder than any of their comments have moved elsewhere.

    • Not sure there’s much left to say at the passing parade of banality ineptitude pork and cronyism dished out by the moribund parties – it’s just more of the same day after day.

      It’s pretty clear what could be done, but there looks like no good policy that can survive the lobby.

      • Seems about right. Chickens are airborne – everyone’s just passing time until they actually come home to roost. Hopefully it’s soon so we can all talk about something else.

      • interested party

        Yep,aj.
        You nailed it…..all been said before so why bother. I have trouble even visiting each day now……at risk of becoming irrelevant in my world.

  4. Nah, its gone quiet ’cause the footy is back…….! Ha
    More interesting than world currency manipulations & money stimulus & shares to the moon & Sydney the best place ever to win a fortune in property & China is back now with more stimuli….. Go the footy.

    • NAh Guys, its gone quiet because it is one thing to sit on the supposed sidelines and sling advice, but when the property crash war comes to your own neighborhood the reality hits home.
      This upcoming depression is going to be of the likes not witnessed before in Australia, the effects will be far reaching and catastrophic, unless you are very wealthy. The punters are finally joining the dots that they are part of the collateral damage.WW