Macro Afternoon

So we start the week here in Asia tentatively with some positive news coming out of Korea viz the Olympics and potential US talks with North Korea. Japanese markets were closed for a holiday and gold prices lifted slightly as the USD weakened across the majors. The ASX200 was the ugliest girl at the ball, mainly due to Megabank and a tepid earnings season. The correction is not yet over though, as we await the return of US stocks tonight.

In mainland China the Shanghai Composite is finally having a positive day, currently up 0.6% to 3158 points trying to recover from its horrid last week. The Hang Seng Index is up a similar amount to 29691 points, vainly trying to get back above the previous support level at 30000 proper. The next level of support is down further still at 28000:

S&P futures are actually up a little building on Friday night’s gains, but this is very tentative to call it all over – we need an advance way past 2680 or so:

Japanese stocks had the day off with trading in the USDJPY pair muted as a result, gapping slightly lower and still depressed here in the mid 108’s hanging on to weekly support at the 108.50 level:

The ASX200 actually fell 17 points or 0.3% lower to 5820, after SPI futures suggested a possible rebound in line with other Asian stocks. Reaction to JB Hifi’s earnings was overdone, sending the stock down 8% while the banks managed to pull down the rest of the bourse as the royal commission unfolds. The Aussie dollar wants to bounce back, gapping a little higher above the 78 handle and advancing about 30 pips for the day, taking out the Friday session high. This could be a little too much good news to handle though:

The economic calendar starts the week slowly with nothing of note on the radar, except the usual weekly Treasury auctions.

Comments

  1. Within 2-3 weeks, Melb, Syd, Bris, Adel & Perth will all be in negative house price ‘growth’ territory for the quarter.

    When was the last time that happened, I wonder?

    • proofreadersMEMBER

      Sounds like fake news? Where’s reusa to correct the record? Still at the weekend relos’ party or on the way to tonight’s?

    • I dunno Wall Street looks to be recovering, BTC is going back up.. Seems like it’s business as usual… 🙂 House prices to recover next.

    • Ortega,

      Last time that happened was when the government and regulators allowed it to happen.

      When did they start going up again?

      When the government and regulator wanted them to go up.

      Yes it is rigged.

      When rising house prices are used to drive the demand for private bank credit and private bank credit is used to drive the economy how can it be otherwise.

      What do you think Scott Morrison wants as the next election approaches.

      Falling house prices and a credit crunch?

      • I think you’re right here and they will pull out all stops, but there comes a time, as with every previous house price bubble, when nothing else works to prop them up. Let’s see what happens this time.

      • You’re dead on imo, Ortega. No amount of accommodative policy (already near max settings) is going to change the fact that prices are physically moving beyond people’s income levels. What exactly are they going to do and for how long will it work this time around (if at all)?

      • Otega and Brenton,

        Yes the degree of difficulty is increased.

        When was the last time any of us heard big business and banks calling for wage increases!

        And there is a limiting factor for a CAD country… the AUD.

        We have been able to keep the nonsense going longer because everyone else has been trying to preserve their local productive industries with exchange rate manipulating capital outflows…to places like Australia.

        That limiting factor is the thing to watch.

        Stagnant incomes are a problem but not completely insoluble. The most likely solution will be to relax foreign investment rules so hard pressed locals can sellout to foreigners buying the house and citizenship package. ScoMo the traitor would do that in a heart beat.

        A falling AUD is more of a problem as it will signal rates rising offshore and capital heading home.

        At that point the cost of being a CAD starts to really hurt.

        And while some will say it will just make our property cheaper to foreigners …. No one really likes to buy when the value of their purchase is on the slide.

        Watch the US v China.

        China is not going to slow for any one. If the US are serious about competing they will run deficits and rates will start rising quickly as they go below 4% and then 3% unemployment.

        Fiscal is coming back – and as usual by an Republican administration. Bizarre but they do like running the show.

      • “No amount of accommodative policy (already near max settings) is going to change the fact that prices are physically moving beyond people’s income levels.”

        Beyond people’s income level you reckon?

        https://www.forbes.com/sites/kenrapoza/2017/03/19/shanghai-housing-prices-completely-unsustainable/#7c2f3f7b326e

        “Every year China investors are given the warning that Shanghai housing prices are out of control. They have been rising precipitously now for at least a decade, with an average 1,000 square foot apartment in Shanghai going for $725,000, or around five million yuan. Shanghai’s average salary per month is 7,108 yuan ($1,135) or 85,300 yuan a year. That puts local property in Shanghai at about 50 times median salaries in the city. Housing costs in Shanghai are unsustainable.

        Let’s compare that to New York, the most expensive city in the United States, where the median income is around $52,000 a year and an average 1,000 square foot apartment will cost $1.7 million based on square foot prices of $1,756. By that measure, housing prices in New York City are 32 times salaries of average New Yorkers.

        Sydney? Median multiple of 12.9 (median household income)
        Melbourne? Median multiple of 9.9 (median household income)

        Lets assume dual income households, therefore –
        Sydney 25.8 times median salary
        Melbourne 19.8 times median salary

        Keep pulling 😉

      • Aaah some follow up questions on your reddit quality analysis there, DTF. What proportion of the US’s population lives in New York City? What proportion of Australia’s population lives in Sydney/Melbourne? What is per capita private debt like for US versus Australia? National house prices between the 2 nations etc etc. You know, some context?

        FYI China is in a property bubble, just like us.

      • Where is your analysis? What do u contribute? All you do is parrot the typical bear comments –

        “No amount of accommodative policy (already near max settings) is going to change the fact that prices are physically moving beyond people’s income levels.”

        And piss weak attempts at discrediting any opinion that may not fit your housing crash wet dream –

        ““Dear diary, today I read a post from random internet user, downtownfrump. He said our record levels of debt were entirely sustainable and would, at worst, result in a gentle plateauing affect (before once again accelerating to all time record highs). I think he is right, and can see no scenario in which our ironclad and independent finance sector is unable to proffer ever greater sums of record cheap credit forever; after all, as he sagely acknowledges, we haven’t had a crash yet *insert poorly sketched smiley face*.”

        You cant even handle the suggestion that the house crash scenarios may be wrong.

        Your arguments are weak as p!ss. Now go wipe the sh!t stains off your kid’s nappy. Cleaning other people’s sh!t is what ppl like u excel at

      • Christ, Mig, you can’t take my insults (insults I used on you no less) and treat them like some kind of sloppy seconds to be discarded at a moments notice (btw, say Hi to your mum for me). It’s really poor form and disappointing…Yes, disappointing is the word. I’m disappointed in you, Mig 😌

      • Ah yes, so I used that exact insult on him and now some random no name specifically uses it again? Lol pull the other one, son.

      • Oh…. Uptown Funk is that you?
        Good to see you have flipped again and are long the Ponz. Hope it works well for you.

      • I don’t agree downtownfrump. You are comparing Manhattan prices not the greater NY area. The east coast of Aus is blanket overpriced but is sustainable with 3.5% rates and while there’s work to pay the bills. Once that dries up then all bets are off and people shit themselves and start selling their excess first. I’ve seen it first hand during the last GFC (briefly).

      • oo7…

        America has to run deficits as reserve currency, every time they go into surplus it kicks off the next recession. Seems el’trumpo has no dramas with military expenditure or Silicon Valley assisting the MIC Security complex, shutting down gov is just starving social policy.

        disheveled…. must be why I don’t believe ™ you on anything, preference clouds facts, actually I don’t utilize things like beliefs, thinking works better.

      • Says the person linking to scam sites and then defecting with Hillary and Russia.

        Does America need to run deficits or not as reserve and does that mean surpluses result in baked in recession per bill clinton and rubin.

      • About what one would expect coming from someone using a site that has only been in operation for a 143 days, net worth of just over a hundred bucks and trade vol around 2K w/ a e-mail – out – of America.

        disheveled…. perfect money….. chortle….

    • That reminds me of the early days of the Westfield Bondi Junction. A carwash / high end detailing service was set up in the carpark and prices started at about $90 and went up to nearly $200 as I recall.

      It was reported in SMH Column 8 or some such that someone brought in the their 4WD after having actually taken it out of greater Sydney and, it seems, off road and – reasonably enough – wanted it cleaned. Being an Eastern suburbs local, he was prepared to pay the exhorbitant rates. Well said punter with somewhat soiled 4WD was told it was too dirty for the carwash to handle and it would have been more respectful to give it a good hosing down before turning up to have it cleaned!!

      And in this hell hole we call Sydney, things have just gone downhill from there folks.

  2. NEW ZEALAND … UPDATE 2-NZ’s Fletcher in talks with lenders as covenant breaches loom … Reuters

    https://in.reuters.com/article/fletcher-building-restructuring/update-2-nzs-fletcher-in-talks-with-lenders-as-covenant-breaches-loom-idINL4N1Q10G2

    * Says in talks with lenders, extends trading halt to Wednesday

    * Company had downgraded earnings for fourth time in under a year

    * Spiralling costs and delayed projects causing problems (Re-casts, adds detail and analyst comment) … read more via hyperlink above …

  3. Woman slammed for expecting ‘handout’ from wealthy parents | Herald Sun

    http://www.heraldsun.com.au/business/its-their-money-woman-who-griped-about-rich-parents-not-giving-cash-handouts-savaged/news-story/8b018966fbbb25cf64f90df56aa35ee8

    A WOMAN in her twenties has been described as a “grabby, bitter child” after she whined about her wealthy parents not giving her money online.

    The UK woman, known only as junpinline, recently posted her complaints on the popular parenting site Mumsnet. … read more via hyperlink above …

    • Question is:
      -how can I ignore other people more efficiently and discreetly?
      -how can I cheat on that exam?
      Never thought Id say this but Intel has a bright future.

  4. I believe that the equity correction of the last week is coming to an end ; buying will take the major American and Asian indices to new highs now.

  5. The Traveling Wilbur

    In case Mr H. hasn’t covered this in his regular bond movements analyses (I wouldn’t know, so sorry if he has) the US 10 year bond yield has forgotten ​about recent events already and resumed it’s long march to infinity and beyond. The US 2 year bond yield has not. It awaits notice that the recent stocks blip is over. Or is signalling that this is its new level. Only time will tell.

    Either way, US stocks aren’t risk on just yet.

    • Mining BoganMEMBER

      Just don’t mention the filming quality. That’s a sign you’ve missed the point and are probably one of those losers.

  6. Was just over at news.com and the number of Barnaby stories is interesting, reckon Barnacle could be looking at his own #metoo moment, class act. Not only are NewsCorpse skewering the Alvin Purple of Armidale but they’re drawing about two degrees of separation between the antics of Benny ‘Barnaby’ Hill and what Turnbull knows. It’s Turnbull who’s the real objective here.

    • The big story should be the corrupt creation of $190k pa job for Barnaby’s mistress which was approved by Turnbull. But alas the #metoo butt pinch is likely to cause a societal meltdown.