Macro Afternoon

The Asian session was mixed today due to the Chinese New Year holiday with only a few markets open, Japanese bourses put in a scratch session while the ASX200 launched higher on the post-slap on the wrist “don’t do that again” bank trade. The RBA did nothing at its meeting this afternoon, keeping rates steady but the Aussie launched nearly half a cent higher anyway.

 

US and Eurostoxx futures are flat with the four hourly S&P 500 futures chart still showing an anchoring at the psychologically important 2700 point level that is dependent on continued good earnings, with solid support at 2700 and then 2680 points below:

Japanese stock markets are paused here due to an unchanged Yen and lack of direction with the Nikkei 225 about 20 points lower going into the close at 20865 points. The USDJPY pair has pulled back from its Friday night bounce and has shown itself unable to make any headway above the previous weekly session highs at just below the 110 handle:

The ASX200 was the big focus today with traders pouring in to buy the now-off-the-hook (until the next Royal Commission) banks, with most up 4-7% in a single session! The market closed nearly 2% higher given the huge influence of financials on the bourse, to finally crack the 6000 point barrier. They were helped by a do nothing RBA with the Australian dollar launching on the hold signal, arresting almost all of the decline since the Friday night pause and ready to crack resistance at 72.70 again:

The economic calendar continues tonight with a slew of PMIs in Europe followed by the January ISM non-manufacturing print in the US.

Comments

  1. Wishing everyone a prosperous Chinese New Year! May your equity be positive, your buildings structurally sound, and your Royal Commission findings benign.

  2. The Traveling Wilbur

    So what’s the first concrete evidence of the impact of the RC’s findings?

    A 250.50 [not a typo] rise in the S&P/ASX 200 Financials sub-index.

    Excuse me while I go throw up.

      • A. Trading on an “ideological” approach or “expectations” of huge paydays equals much cog dis ….

      • Anyone sufficiently cynical about Australia would have had no trouble foreseeing this outcome for the banks even without insider trading.

        On the other hand you’d have thought the mortgage broking thing was obvious and priced in, yet they are down 30% + … this is why I don’t short term trade, I’m simultaneously too smart and too dumb. Mostly too dumb.

      • “mortgage broking thing” IMO would be a reflection of viability in the near to medium term as a bunch of sacrificial goats offered up too assuage the unwashed needs. Two’fer as important people “move forward” and banks are far to entrenched in all manner of things to let the dirty people takeout their frustrations on – great free will [tm] metaphor e.g. no force or coercion i.e. only sore losers – see above …..

    • Channel 9 just said the banks have had their best day in a decade. Nothing can stop the Australian bubble economy!

    • The finance industry thought that their days of being masters of the universe had finally come to the end. They had been found out. They aren’t gods in shiny suits that float above everyone else and possess magical powers that justify their obscene salary and bonuses. They are common crooks. Nothing more and nothing less. Yet, it appears that they are the right type of crook in the right place at the right time. The confidence game must go on and so nothing must change. We are most definitely in the best of all possible worlds. Well, all those who really matter are. And those who aren’t, they obviously deserve to be where they are. If they didn’t, they wouldn’t be there. Onwards and upwards. To the impending bailout, and beyond.

  3. If credit growth is no longer greater than existing debt burdens, one would expect new credit to be destroyed in debt repayment. Broad money would fall, as money (credit) is removed from the system. If the debt has become truly overwhelming, then even savings would be run down as budgets are squeezed, further depleting broad money. This is especially true for specufestors (the price setters for asset prices/debt collateral) through a greater pull back in credit growth AND debt shocks via IO to PI transition + out of cycle hikes; a process amplified across multiple properties.

    Translation
    Tap is still pouring water in (credit growth), but can no longer keep the bucket full (broad money), as the hole in the bottom has gotten too big (debt burden). Thus the bucket is emptied, slowly at first, but faster as the tap closes (foreign capital drying up/domestic savings depleted) and more holes open up (unemployment).

    For those wondering why we have positive credit growth (trending down), but falling asset prices and a painful deleveraging ahead.

    Chart showing falling credit growth and broad money evaporating:
    https://www.rba.gov.au/chart-pack/credit-money.html

  4. proofreadersMEMBER

    The Sky News after-dark “assassination-hit squad” members, Jones and Credlin, have just interviewed happy-clappy ScoMo . It’s Tampa revisited and defending the indefensible of franking credit handouts (they are not refunds) to people who have not actually paid the tax.

    ScoMo is basically saying it’s kosher to get a “refund” of tax you never paid ie to pay negative tax. That’s well and truly rubbing the face of actual taxpayers in it, but we do know where he gets his principles from.

    • How you going to get the mopes to invest or keep money in zero rights equity …. you have to incentivize behavior and then make it normal or cultural after a bit.

    • Yeah. It’s basically arguing that a company should pay differing levels of tax depending on whom they share their profits with. It is farcical, yet the AFR can’t smear and misrepresent it far enough.

  5. Mining BoganMEMBER

    Things I learned today.

    Only nerds and punters who have been burnt care about the banking RC. Not a mention anywhere at all.

    People are still lacking a bit of awareness on burning towers. Watching the Spencer St building burning on tv. One bloke took particular attention in it…even removed himself from a MAFS conversation. I told him about cladding and opals and whatnot when he says his daughter bought one recently. He says it’s new so warranty so I taught him about phoenixing. He’s concerned now.

    Young kids who work don’t give a flying about identity politics. Think it’s a joke actually. That was good news.

  6. Federal ICAC NOW.

    Wilson and Wilson: The MP, the fund manager, and the franking credits inquiry
    https://amp.smh.com.au/politics/federal/wilson-and-wilson-the-mp-the-fund-manager-and-the-franking-credits-inquiry-20190205-p50vqk.html

    A high-profile fund manager leading an assault against Labor’s changes to franking credits once boasted about using a taxpayer-funded inquiry to maximise the chances of defeating the policy.

    In an audio recording obtained by The Sydney Morning Herald and The Age, veteran fund manager Geoff Wilson claims he contacted Liberal MP Tim Wilson to ask for parliamentary hearings into Labor’s proposed changes to be scheduled at the same time as of one his own six-monthly investor roadshows.

    Tim Wilson, who is chairing the probe into Bill Shorten’s plan to rein in franking credits, is also a shareholder in Wilson Asset Management, a firm founded and chaired by Geoff Wilson with $3 billion in funds under management. The MP has disclosed the shareholding in the parliamentary register but has not declared it during public hearings around Australia. That is a departure from a standard set by Liberal MP David Coleman, who regularly declared his interests in a financial services firm during a recent banking inquiry.

    Asked about the shareholding on Tuesday, Mr Wilson promised to publicly disclose it at the start of future hearings. The franking credits inquiry is unusual in that parliamentary committees do not usually investigate opposition policies. About $160,000 in public funding is being spent on venues, accommodation and travel. It can also be revealed Mr Wilson and Geoff Wilson are related: the MP’s great grandfather is the fund manager’s grandfather.