Macro Afternoon

The positive mood from the weekend’s G20 meeting has turned sour as the Trump trade “deal” between China and the US has fizzled into empty promises with both sides dialing back expectations. No surprises there. Stocks have retreated with the US Treasury yield curve inverting once more while the US fell against Yen and the other majors.

The Shanghai Composite is up slightly after fading mid session, closing 0. 4%  higher to 2666 points,. still remaining above the previous support level at 2600 points.  The Hang Seng Index has retreated slightly, down 0.1% to 27148 points, still hanging on above the  previous support level and ATR trailing resistance at 26700 points:

US and Eurostoxx futures are down going into the London open, the former off by at least 0.6% in a sign last night’s session may have been a one hit wonder. Four hourly S&P 500 futures show a possible reversion to the relief rally trendline here:

Japanese stocks have slumped in line with a lower USDJPY pair, with the Nikkei 225 down nearly 2.4% to 22036 points, reversing all the previous gains and then some.  The USDJPY pair popped below its recent building support level at the 113.20 level, heading straight for the 113 handle as risk aversion kicks in – there’s daylight below:

The ASX200 has also retreated on the risk off mood, closing 1% lower to 5713, still hanging on to the tentative 5700 point support area. The Aussie dollar did nothing as the RBA did nothing, although a late afternoon blip saw it almost match the Monday night highs are the 73.80 level, where it could shoot higher:

The economic calendar is relatively quiet tonight although there is a speech to the UK Parliament from BOE Governor Mark Carney that is likely to be Pound Sterling sensitive.

Comments

      • The Traveling Wilbur

        +1.

        And how did you know? (1 down, 5 to go… already… sigh…). PS was expecting Devo. I should know to expect better from your good self. My bad.

      • I know a karaoke bar that has it on their song-list. The crowd is at first taken aback by the bold opening before before appreciating the mellow melody with it’s contrastingly abrasive sonic palette. The clean, triumphant finish rounds out this slightly fruity number quite nicely. Not to be served too early in the evening, it most definitely should be offered up after the mood has lifted and before Bacchus and Dionysus have had their way with one and all.

        There is one place in Melbourne that has Tom Waits’ The Piano Has Been Drinking. That’s definitely the night-cap of the karaoke world.

      • The Traveling Wilbur

        Ah… the karaoke bar. The last chance saloon of solace and recovery of the soul for the atheist. Some say for wine and song and spiritual needs one must avail themselves of a Sunday of the Catholics. Those with fewer stars in their eyes and warmth in their hearts will instead Nick off for a Cave. And possibly some bad seeds.

  1. This is what Mrs May and her Remainer friends have organised with the EU behind the scenes……EU says UK can revoke Article 50 on its own

    https://www.rt.com/uk/445514-brexit-article-50-revoke/

    Looks like the contempt of parliament charges have been sidelined by the speaker to a committee …………..It will come down to a no confidence motion eventually………too many shenanigans and the streets of London will look like Paris

    https://www.bbc.com/news/uk-politics-46435128

    Looks like the French fuel taxes will come off tonight………..violence is the only way to scare the oligarchs into line

    • “violence is the only way to scare the oligarchs into line”

      Be very careful with the violence thingy IMO, more than not its used as an excuse to action even more authoritarian force or have some forgotten the 14 city sweep of Occupy. Lest we forget a lot of the so call violence was perpetrated by agency sorts infiltrating and then the whole property damage issue got the propertarians all wound up.

      I mean I would find it quite absurd to give those – here – back in the day, a serve for past deeds ….

  2. Of course Engineers took responsibility for this disaster & learned from it – https://www.youtube.com/watch?v=CsKKDLKYsVU – I easily reflect that imagery onto politics & what they’re putting us through, & all I see are spoiled brats with no accountability, no responsibility & too hubristic to learn anything from their endless sea of wrecks. One built our civilization, the other is hell bent on controlling it for their own gain. I blame my parents for not encouraging sociopathic lying, I could’ve been rich & untouchable too…….

    • “I blame my parents for not encouraging sociopathic lying, I could’ve been rich & untouchable too…….”

      What part about atomtistic individualism in a market place matrix eludes some ….

      • I don’t know if I understand you properly Skip, but if I do then I’d say as a child I was a product of my environment & what it instilled. By the time you realise you can choose your environment & assimilate it you’re probably too old for it to be deeply in your bones – unless of course you are a nurtured sociopath or a natural psychopath, & they’re just not in me. Back to building bridges for them to walk all over I guess.

      • Without doing a dissertation I would offer that all societies operate on a narrative, so, question is, whom wrote the one we currently experience and why.

        Per se why did Hayek feel the need to rewrite his book to dumb it down for Americans.

  3. Australian property prices could crash by 50% in ‘outrageous scenario’ … News Com Au

    https://www.news.com.au/finance/economy/australian-economy/house-prices-crash-by-50-per-cent-rba-launches-300-billion-bank-rescue-in-outrageous-forecast/news-story/dfe04760314817d932f6a82c32fd19b6

    The Reserve Bank could be forced to step in with a $300 billion bailout program to rescue Australia’s banks if the housing credit crunch accelerates into a “doom loop” that causes property prices crash by 50 per cent, plunging the country into recession.

    That’s according to Saxo Bank’s latest “Outrageous Predictions” report, which outlines a series of “unlikely but underappreciated events” that could send shockwaves across financial markets if they were to occur. … read more via hyperlink above …
    .
    .
    Saxo Bank presents its ‘outrageous’ predictions
    In-Depth-The Australian
    … behind paywall …
    .
    .
    Access earlier MB post …

    https://www.macrobusiness.com.au/2018/12/deutsche-australian-property-crash-like-ireland/#comment-3240973

    • Eleanor Creagh was one of the panelists at the Business Insider event last week. Hot! Crazy bullish on China though.

      Also, I wouldn’t even call that an ‘outrageous’ prediction. A ‘likely’ prediction has a better ring to it.

  4. I’ll ask this on weekend links too for a wider and drunker audience, but:

    If your PPOR profits are CGT free, then can you claim PPOR capital losses against other capital gain? Obviously not other income, God forbid.

  5. On the topic of predictions, who thinks Interest rates for the average mortgage will climb back to 7-7.5%? I use 7.5% as my baseline for interest rate calculations etc.. but will they get back there in the near future? With Ubank doing 3.59% I’m wondering if in 10 years it will be 5% or 6% or 7%? Or has the FED / RBA led us down a lower forever path?

    • The reality is that monetary stimulus has driven wealth inequality. Wealth inequality leads to populism. Populist political parties/leaders are more likely to seek to fix this wealth inequality, which invariably unlocks inflation. Inflation is combatted by higher interest rates.

      Within the next 10 years we’re going to see economic crises throughout the Western world. That’s when you’ll see this quiet and sporadic bubbling of populism roar to life. Yep, I reckon you’ll see the cost of borrowing rise within the next 10 years.

      • What monetary stimulus are you talking about Brenton and it was widely argued that a fiscal stimulus was needed to complement it but economic libertarians said pound sand. That investors were rational agents and bid up financial assets that don’t have human legacy profit drags is just a reflection of the dominate view of the wealth set.

    • There are entire US States going bankrupt due to interest rates being too low to honour pension fund commitments. Something has to give soon.

      A few commentators suggesting a currency reset. i.e. you come into work on a Monday and your salary has doubled, the price of everything has doubled, the value of your cash savings remains the same. Your 20% deposit for a house becomes 10%… back to working and saving up for that deposit!

      • Go to NC to get a more granular perspective on pension funds e.g. corruption and under funding [looting] with a side of PE reach around. But then the whole thing was a sham to start with to funnel deferred spending in to the Casino to buff equities, not to mention 34Tish was deployed to put a floor under the market and not on socially productive enterprise. But then the monetarist said devaluation of currency would make the world end after gold went to the moon.

        I think they need a new 8 ball ….

  6. “John Howard has declared the Coalition will win the next election on the strength of the economy and “unchallengeable credentials” on border and national security, as he urged the Liberal Party to give Scott Morrison “100 per cent support” after a challenging few months in office.

    The former prime minister, who was in Canberra to open the Howard Library at Old Parliament House, refused to comment on Malcolm Turnbull’s intervention in Craig Kelly’s preselection battle or direction for the government to go to an early election, but praised his successor as a person with “problem solving pragmatism”.

    “(Mr Morrison’s) got off to an excellent start, it’s not easy, I think we all know and understand that and don’t need to go into any detail of it but I think he’s got a lot of energy and he’s got a willingness to tackle and solve problems and they are two absolutely fundamental requirements for the job. I can testify to that,” Mr Howard told The Australian.”

    https://www.theaustralian.com.au/national-affairs/john-howard-says-coalition-can-win-next-federal-election/news-story/cea8ad8a75dd0be5fdd62b2d13774d3c

    LMMAO … the emperor is truly naked for all to see and makes late stage Raygun or Bush Jr look like intellectual giants ….

  7. HODL HODL HODL LOLOllolOLL!1!

    If a borrower goes into negative equity, the best thing to do is stay put and try to keep paying off their loan.

    “People have gotten used to rising prices, but when we look historically the people that do well are those that hold through down and up cycles,” Ms Conisbee said.

    “If we look at the worst price crash we’ve seen in the ‘80s, it took about four years for prices to recover. You need to be mindful property is a long-term game, it pays to hold, it doesn’t pay to panic sell.”

    If you do have an investment property and it’s gone underwater but you have a stable tenant and can afford to pay off the loan, “try and get through this cycle”.

    “The biggest problem when prices fall is that we start to see distressed sales when people can’t service the loan,” she said.

    “We’re not yet at that situation. That typically happens is when we start to see rising unemployment. But it is possible we may start to see some panic selling if they think the value of their home or investment starts to drop rapidly.”

    https://www.news.com.au/finance/real-estate/selling/one-million-aussies-could-become-prisoners-in-their-own-home-as-falling-prices-put-them-in-negative-equity/news-story/1921b57f528eee0629ac52ab390b5816

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