Macro Afternoon

See the latest Australian dollar analysis here:

Australian dollar pops and drops on Evergrande vs Fed

A relatively quiet start to the week here in Asia with Japanese markets closed and news dominated by the latest Chinese trade figures which surprised on the downside, pushing Yen higher against USD, the Aussie and Kiwi. Further volatility is expected mainly on FX and bond markets tonight with continued pressure on Theresa May as the Brexit deal goes to a vote which is almost certain to fail.

The Shanghai Composite is down by nearly 0.5% or so going into the close, selling off from the start of the session amid the lower Yuan fix and the trade figures, currently at 2540 points.  The Hang Seng Index is off much more, closing about 1.4% lower to 26288 points, unable to breach the weekly downtrend channel (black line) on the daily chart below. Friday’s session had set up a potential breakout but the trade news is knocking it back to the moving average band:

US and Eurostoxx futures are down slightly going into the London open with the four hourly S&P 500 futures chart showing the staunch resistance at the psychologically important 2600 point level as Wall Street goes into reporting season and we all await the outcome of Trump’s tremendous deal-making with the government shutdown:

Japanese stock markets were closed for yet another holiday. Light trading in the USDJPY pair saw it sink again following the release of the Chinese trade results, still clinging to just above the 108 handle but looking like taking out the tentative support line from the previous two week lows:

The ASX200 had a scratch session amid the mixed messages, helped by a lower Aussie dollar, but not the economic news, finishing only a couple points down to 5773 points. The Aussie dollar didn’t gap down at least but fell back below the 72 handle on the Chinese trade figures and is starting to wane here despite the USD weakness:

The economic calendar starts the week slowly with no major releases, but all eyes are on the newswires regarding Brexit developments anyway.

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Comments

    • At least a few people must be starting to sweat by now. A few developers must be sh1tting themselves.

    • What I don’t get is why are vacancy rates up? Increased supply? People leaving Sydney? Moving in with folks/family? What is the driver?

      • TailorTrashMEMBER

        Those nice glass and Gyproc apartments need big debt piles to buy with good incomes to service ….or rent …….many of our new immigrants are on third world wages ….they need third world accomodation .
        …..I saw this in Thailand in the Asia financial crisis in the 80s …….glittering new apartments going up in streets where the inhabitants were having their 5 baht lunches off a banana leaf ……….

      • Students shuffle off home between the end of the uni year and the start of the new one in March. Another driver, particularly for Sydney and the inner ‘burbs may actually be the AirBnB effect where places were put up online to capture the seasonal summer and New Years travelers. Interesting if owners will be putting them back on the longer term lease because of concerns about vibrants or other concerns with the real estate market where it may be in their best interest to lock in a tennant rather than risk the prospect of falling yields. Unclear if bank lenders are driving it but there has been some anecdotes reported.
        Expect all developers would have been rushing to completion before the end of the year so there may have been some stock come onto market that has only just come through in the stats.
        Purely speculative.

      • Could also be that they rolled on to p&i. I had heard chinese investors prefer to keep the place empty to preserve value but perhaps when the io has to change to p&i, the math doesnt add up anymore and they need to rent it to keep afloat.
        Dont know tbh, i am sort of guessing here.
        Also works for people trying to avoid the downturn and rent it for a while to see if the market comes back.

    • TailorTrashMEMBER

      “identify better ways to get vulnerable international students to access mental health support.”……..and paid for as an operating cost by the universities from their lucrative business …

      • You must be new here, no silly. Give international students access to medicare “temporarily” it’s not like they would rort it or anything. 🙂

      • Do you mean 2 July 1997 rather than 1980s?

        Asian financial crisis can be traced back to 2 July 1997. That was the day the Thai Government announced a managed float of the Baht and called on the International Monetary Fund (IMF) for ‘technical assistance’. That day the Baht fell around 20 per cent against the $US. This became the trigger for the Asian currency crisis.

        https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Publications_Archive/CIB/CIB9798/98cib23

      • TailorTrashMEMBER

        Correct Jacob …..thank you …I have senior moments …..lived through a rich tapestry……..the strands can get intertwined….
        …after the 60s and 70s ……the old brain floated through the rest in a tad impaired state ……..and to think I got paid for using it ……shocked I am ……..

      • TailorTrashMEMBER

        Gavin ….we need to set up mental health services in mandarin …….we can staff with 457 s due to skills in language shortages …….this will contribute to jobs n growth
        and GDP expansion …….Garn Straya !…….
        ps ……..do universities pay taxes on their “export “ operations ? One would hope so

    • Hang on, the respective uni offered the student a place but clearly failed to determine if the student had a reasonable chance of completing the course. This is not the Governments job to determine if an international student has prerequisite skills to complete the degree, the just process the visa. Blood on that uni’s hands.

      • Guess that’s the last time that lecturer or professor is going to try and hold someone to a higher standard and fail them. Participation trophies all around.

        Disappointing because neither student, nor lecturer should be in that place to begin with.

    • Slowdown certainly seems to be global and all it took was a couple of incremental rate hikes from the fed?

      • interested party

        I reckon we have run out of planet to convert to profits……peeps will be doing well to just hold even— in a few short years or so.
        Just an opinion though…..worth nuthin really.

      • interested party

        Wino…..and Gavin….

        If you agree with that thought…..and you intend to buy a place of residence……. it would be best if you pick a spot that you can put down roots [[ read be happy and content ]]….cause the market most likely ain’t gonna float ya boat and makes ya rich. Because if you but in the wrong place….forever can be an eternity.

      • Funny you should say that, I put in an offer today. Place sold 2017 (Jan) for $770k. Vendor wants $900k. I offered $760k. Agent doesn’t think vendor will accept.

        It is a really great place and I’d be happy long term. Agent says it sold too cheap last time. Maybe, maybe not. But that’s what it sold for..

      • I’d wait until the place is wanting 350k.
        That saved money will mean everything if you want to change jobs or retire early or the industry goes kaput.

      • I would usually give others the same advice, however this is a semi-rural property built in the early 80s and replacement cost would be quite high. It’s a mud brick home with solid timber, brick floors etc.. It’s very much in that Eltham style. Similar to these 3 in look/feel and style.

        https://www.realestate.com.au/property-house-vic-eltham-129744510
        https://www.realestate.com.au/property-house-vic-eltham-129659190
        https://www.realestate.com.au/property-house-vic-lower+plenty-129797082

        I honestly think it would cost more than $500k to replicate and build in today’s money and land size is a couple of acres.

        Repayments at 7.5% interest would be $1000 p/month less than what I’m paying in rent right now in Sydney.

      • China PlateMEMBER

        Oh thanks for the clarification IP I thought it was “your” and not “you” where the typo lay

      • It certainly feels like we have run out of bubbles to make. Seems the entire planet is tapped out on cheap credit. No wonder a few measly interest rate hikes is making the planet sh1t the bed. This sort of thing can only go on for so long until it blows up.

      • CP agree and it also sits on the flood zone (at the rear) (Diamond Creek). I surveyed the property in person and realised it wouldn’t work for me. I couldn’t build a workshop for my cars. But it’s been on the market for a few months now and they haven’t been able to get their price. Agent called my partner multiple times even though she said it wouldn’t work for us. Seemed desperate right before Xmas.

        The property we’re looking at is similar in style (it also has air bnb potential, but not banking on it), the middle link is out of our range ($1.3-$1.4M) then again it’s been on the market for a similar amount of time and isn’t sold yet (next to large Power Lines in Eltham). So that may have something to do with it. But I do love that 1 and would love to make an offer on it, but more at $800-$900k than their current asking price.

        I tend to think properties like this will better hold their value than the crap being slapped up by developers in the urban fringes etc.. and the apartments / townhouses in the city. Plus I’m buying for keeps, not speculative flip for capital gains.

      • interested party

        Yeah Timmeh….I totally agree with that….it feels like the music has stopped. So far, it’s been musical chairs and there has always been another tune….but now?

    • Same thing happened in Canada when the market turned down. You expect the scum that is real estate agents to report a softening market?

    • The larger figures are for private sales (not auctions). They’ve started emphasizing this figure to assure punters that sales are still taking place despite the appallingly bad auction results.

      The total number of scheduled auctions can be viewed by clicking on the auction results. NSW only had 15 scheduled auctions this week. Auctions won’t really kick off for a few more weeks.

    • NSW … 5 reported auctions / 580 non-auction sales
      funny, isn’t it. Try to find where those 5 actions were held. I did find Yamba, 2464 – two auctions and no private sale. The vast majority of suburbs have private sales and no auction. Anecdotal evidence from the past suggested some auction results were actually private sales…improving the overall statistics. Now it’s official method of reporting.

      Previously auction results @ realestate.com.au were data from CoreLogic. It seems CoreLogic no longer supplies realestate.com.au with auction results data. The new auction reporting is a joke.