Macro Afternoon

The weekend’s G20 meeting with the trade war truce between China and American has seen some big gaps up in risk assets, with Chinese stocks in particular rallying hard. The Australian dollar has been a big benefeciary, gapping up against all the majors and crosses, as has the Kiwi with the Yuan weakening considerably.

The Shanghai Composite is soaring, up nearly 3% to 2663 points going into the close, doing very well to arrest last week’s falls and gets back above the previous support level at 2600 points.  The Hang Seng Index is up around the same or 2.7% to 27217 points, with an obvious gap higher above the previous support level and ATR trailing resistance at 26700 points:

US and Eurostoxx futures are up significantly as the risk on mood brightens with the daily S&P 500 futures chart suggesting a big break higher to previous significant resistance at the 2745 point level from several weeks ago (horizontal black line on the left):

Japanese stocks have put in a good day despite a stronger Yen, with the Nikkei 225 up nearly 1.4% to 22645 points.  The USDJPY pair gapped a little bit higher and then lifted up towards the 114 handle but has reversed late in the afternoon to the previous lows at just above tentative support at the 113.20 level:

The ASX200 has come back strongly after the big falls on Friday, currently up 1.7% or nearly 100 points to 5764 after previously retreating below the previous 5700 point support area. The Aussie dollar gapped right above the previous two weekly highs, almost getting to the 74 handle before stabilising at the 73.60 level as it consolidates above this now important support level:

The economic calendar starts the week with the very closely watched ISM Manufacturing print in the US tonight.

Comments

      • In what way, does it fix the economy like in PIGS or America – ?????? – or is it just a nice excuse for austerity ….

      • I mean I would hope some are not beholden to disaster or never let a good crisis go too waste neoliberal capitalism, because that would make them Chicago School of Economics sorts and all that comes with it.

      • Well here are your three choices Skip. House prices to the moon. House prices crash. House prices flat at real 2017 levels forever.

        Choose your fave and tell us why!

      • I’ve pointed out the alternatives many times, which does not require a crash or endless asset appreciation due to both hot capital inflows or wonky underwriting e.g. so I don’t understand your quire ….

      • No. I’ve pointed out the policies many times and none of it is as you suggest, although you seem to have picked the neoliberal option.

      • See its quips like that which show you don’t know what your banging on about, but assume stuff and run with it, hay there is not much I can do about self inflicted ignorance, and no NC is not the source nor is there just one source.

        To keep it simple I would remind you that I forward, with others, a reformation in mainstream economics e.g. PK, Lars, Warren, Hudson, NEP, EPI, TJN, to name a few. This is firstly based on currant monetary realities vs ideological preferences, secondly its about wonky econometrics that need sorting, so in summation is a multidisciplinary approach and not something based off feelings or ideological millstones.

        To be honest I would question the stagnation of wages during the neoliberal epoch before getting my nickers in a bunch about RE, as RE is just a reflection of neoliberal policies and their effects in several industries and sectors.

        Maybe you crashnicks can move to Brazil …. just saying… be happy and all….

      • Michael Hudson favours a debt jubilee. It is just another variation of transferring wealth from savers to debtors.

      • Most here don’t want to fix housing they just want a piece of the action. eg. see the hysterical responses to Cameron Murray’s article a week or so ago.

      • Freddy ….

        See Hudson’s views on the IMF loan to Brazil and how that squares with his views on surplus labour theory.

      • skip attempts to paint me as wrong and then admits that I am right.

        If debts cannot be repaid then sell the house and declare bankruptcy. Any negative equity handled as part of the bankruptcy process. Full or part debt jubilee is yet another transfer of wealth from savers to debtors via currency debasement.

        Currency debasement is the problem and should not be part of the solution.

      • Australia will never need an IMF loan. MB and many other commentators have many times stated that Australia’s debt is denominated in AUD which is a very different case to the examples you keep on raising.

        Not that I favour QE which is more currency debasement. I much prefer the Iceland approach of telling foreign creditors to get stuffed and lock up all the corrupt bankers.

      • A lot of people are going to feel a lot of pain. Blame poor governance by politicians, the self-serving banking and real estate industry, and the stupid greed of many everyday people “trying to get ahead.”

        The day of reckoning is upon us. It is going to be epic, and I think they will be talking about this one for generations to come.

      • “Currency debasement”

        Again wrong ….

        I had a comment go poof so not concerned about another attempt.

        I think you confused money types and find the error categorical, as a result, but then people beholden to these fallacies have gotten, so much, so wrong, pre and post GFC its quite amazing at them still banging on about anything.

  1. New research suggests the risk of a housing-led spending slowdown in Australia are growing | Business Insider

    https://www.businessinsider.com.au/australia-property-market-wealth-effect-spending-gdp-growth-2018-12

    • Whether falling home prices will lead to a spending slowdown in Australia remains uncertain.

    • A new survey from ME Bank suggests many Australians are concerned about the impact of the downturn in the housing market. Nearly 75% plan to be “more careful with their money in the future”.

    • Concerns were most acute among those who bought a home at or near the top of the price cycle.
    .
    .
    Australian house prices falling at fastest pace since the GFC … Sydney Morning Herald

    https://www.smh.com.au/business/the-economy/house-prices-falling-at-fastest-pace-since-the-gfc-20181203-p50jtf.html
    .
    .
    Google New Search ‘Sydney Housing’

    https://www.google.co.nz/search?q=sydney+housing&source=lnms&tbm=nws&sa=X&ved=0ahUKEwj7zrf71oLfAhWZV30KHQ_nC50Q_AUIDygC&biw=946&bih=416

  2. The Traveling Wilbur

    So … I was reminded today of the age-based requirement relating to obtaining a medical certificate in order to renew/hold your driver licence.

    Any thoughts on whether that concept should be extended to, oh I don’t know, say firearms licences? Anyone? You know, just so we can all stay in our environment a little more safely?

      • The Traveling Wilbur

        I was thinking more it might help protect some of the more fragile and agitated members. From doing stupid to stuff to other ones.

      • I know of no evidence supporting that that’s occurring either – do you? What I do see is a far more proactive, self regulating & conscientious mob who are less likely to turn a blind eye compared to drivers & pretend things are ok if they’re clearly not. They all know what a firearm can do & just like you, they don’t want to see anyone get hurt either. Older drivers self regulate to a fair degree too, but some do like to hang onto & use their (deadly weapon) freedom a bit too long. They’re both privileges not rights, & knowing the intensity on firearms regulation, if there’s a whiff of evidence that there’s an issue there I’m sure it’s being scrutinized. Have you ever been around Australian shooting cultures Wilbs?

    • @TW The firearm owners I know are as a group the quietest, calmest most law-abiding bunch of people I’ve ever run across. How many other sports require a police background check to even be admitted to the club? To suggest otherwise is a mistake.

      • The Traveling Wilbur

        Generally speaking, I concur absolutely.

        I’m just hoping R2M and Wiley see it that way too. Both of them. They’re​ so far over the line with each other I’m not sure they know where it is anymore.

  3. Popular lenders lift rates by up to 20bp as major markets continue to slide
    https://www.afr.com/business/banking-and-finance/popular-lenders-hike-rates-by-up-to-20bp-as-major-markets-continue-to-slide-20181202-h18ms5
    [by Duncan Hughes

    Digital bank ING Australia and Teachers Mutual Bank, one of the nation’s largest mutuals, are announcing another round of rate hikes in response to rising funding and regulatory costs as new analysis shows Melbourne and Sydney residential property values continue to slide.

    The increases are being announced on the eve of the Reserve Bank’s final board meeting for the year at which cash rates are expected to be held at 1.5 per cent amid falling property prices and auction clearance rates.

    Teachers Mutual and affiliates UniBank and Firefighters Mutual are increasing rates by 20 basis points for new and existing variable home loans for both owner-occupiers and investors opting for principal and interest repayments.

    The increases apply to all brands and products.

    The lenders have also responded to regulatory pressure by tightening borrower standards and lowering risk.

    ING Australia, which has more than 1.3 million customers, is increasing variable rates on its flagship Orange Advantage principal and interest and interest only owner-occupier loans by 10 basis points for new loans.

    It has also tightened lending terms, such as excluding Australian citizens living overseas from making applications, but has recently reduced some fixed rates.]

  4. I don’t know … after some betting the house on the fall of the Oz dollar … I guess the only thing left is to chase RE ….

    You know … How Pualson made … cough… earned his moeny.

    I guess the only thing else to ask is if someone works in the financial component of the FIRE sector is that like aiding and abetting or a case of Upton syndrome.

  5. proofreadersMEMBER

    Just heard on 7.30 that apparently, ScoMo has called a party room meeting for tonight to consider something to the effect of raising the hurdle for a party room spill – long live happy-clappy?

    • Mining BoganMEMBER

      Scared of our Tony?

      He kicked a reporter out of question time today because unsuitable attire. Nothing to do of course with said reporter’s story (stories?) criticising the gubmint.

      Each leader we get seems to be more precious than the previous. Wouldn’t have thought it possible but there you go.

      • MB – no the journalist for-whatever-reason-possessed-her seemed to think that the push for gender equality permitted her to wear an all but sleeveless shirt into the question time press gallery. and got pulled up by one of the attendents. They are strict: I once got repremanded in the public gallery for slipping my foot partly out of my shoe. But the journo works there as a full-time professional and deserved to get a red card from the (female) attendent. Just because the pollies trash the standards of the place all the time does not give license to journos to follow suit.

      • proofreadersMEMBER

        ScoMo may have recalled how Xi Jinping entrenched himself as dear leader for life, and probably thought that sounded pretty good?

      • …. either that or that he heard a whisper of some head counting going on when he was playing john doe at the G20. So we know he has locked in at least a third of the party room.

  6. These guys produce a great podcast. Latest episode just dropped, interview with Jonathan Tepper. I haven’t listened to it yet but I am sure it will be good.

    https://thejollyswagmen.com/new-blog/tepper

    Topics discussed

    How did Jonathan come to write The Myth of Capitalism? [5:27]

    What it means to be pro-market. [11:34]

    Why Warren Buffett’s “moats” are bad for society. [12:44]

    Why oligopolies are effectively monopolies. [16:14]

    Why do monopolies lead to inequality, and inequality to social unrest? [20:58]

    How monopolies pervert the political system. [25:07]

    Are monopolies inevitable? [28:35]

    Facebook, Amazon and Google’s monopolistic practices and how they erode productivity. [30:27]

    Mega merger waves. [35:12]

    Has Jonathan been too early in his calls on the Australian housing market? [39:40]

    Has Jonathan seen any house price crashes that have been sparked without interest rate rises? [41:44]

    How do the US tech monopolies compete with the Chinese ones if faced with antitrust enforcement? [42:52]

    How quickly do house prices move in a crash? [43:30]

    Could the banks pump house prices again by loosening credit supply? [44:32]

    What is the main hallmark of bubbles? [45:35]

    What podcasts does Jonathan listen to? [47:04]

    G. K. Chesterton, one of Jonathan’s favourite writers. [47:50]

    How does Jonathan manage his social media use? [49:36]

    How does Jonathan think about life milestones? [50:53]

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