Macro Afternoon

The bounceback is getting a bit wobbly here in Asia with confidence not returning in full as expected. Japanese stocks are down while Chinese bourses are treading water, as local stocks are bid as the Australian dollar falls in the wake of a “surprise” lift in unemployment.

The Shanghai Composite is floating along here, currently up 0.25% to 2945 points while in Hong Kong, the Hang Seng Index is not doing much better, up only 0.15% or so to 28317 points. Momentum was clearly way oversold and is coming back to a swing play but there’s a lot of daylight overhead to fill with not much buying support as yet:

US and Eurostoxx futures are falling back in the wake of a poor close in Tokyo with both down around 0.3% as the four hourly S&P500 chart shows a desire to swing higher, but trailing resistance at 2890 points maybe too far a hurdle:

Japanese share markets are not able to withstand a stronger Yen, with the Nikkei 225 taking back the previous session gains to close 0.59% lower at 21062 points. The USDJPY pair has been pushed down slightly to mid 109’s as it fails to make any new daily high – watch the low moving average and former lows at the 109.30 for signs of an inversion:

Australian stocks have done well in the wake of the unemployment print with the ASX200 lifting 0.7% to be at 6327 points. This is all due to the Australian dollar which remains on a nice downtrend falling again to another new low and threatening the 69 cent handle proper:

The economic calendar is relatively quiet tonight with housing figures from the ‘States and not much else although there are a few ECB secondary speeches to keep an eye out for.

Comments

  1. Macquarie says 1 in 25 loans are under water. I thought we are already in the 1 in 15 territory and fast approaching 1 in 10.

    • Apparently there are at least 400 homes on Darwin that are being prepared for foreclosure sales.

      • But but but…. the Peachystan constitution clearly states that banks will never foreclose on the hordes, lest they panic the stupids. What gives?

      • The question is at what rate will they be put to market? Nothing is selling up here so they won’t be putting them out there at once.

      • if banks take too long those 400 will become 800 if economy continues to slow down.Yes, I doubt banks will dump all 400 at once but they will not be dragging it for long either.
        It will be dictated by the rate of how many new defaults are popping. Also, I am sure, banks will be talking to the new government on Sunday for possible bailouts.

      • @ ino
        But but but…. the Peachystan constitution clearly states that banks will never foreclose on the hordes, lest they panic the stupids. What gives?
        Peachystan say wut now??? only warns off bullshee price CRASHES CRASH CRASH CRASH CRASHES…
        darwin gives.. like perf gives..simples

  2. Something that hasn’t been discussed for a while – are we still waiting for Australia’s AAA rating to be stripped, or is that no longer a thing as everyone acknowledges that government capacity to create debt is infinite?

    • You say that article nails it. I say it is way off the mark. NIMBY is growth lobby propaganda, shaming residents to achieve an outcome. Younger generations have been conned into believing perpetual population growth is the way to go and now attempting to solve the wrong problem.

  3. I’m only part way through but this is already very good.
    https://thejollyswagmen.com/new-blog/chrisjoye
    Topics discussed

    Does Chris think the RBA was complicit in blowing a huge housing bubble? [5:34]

    What does Chris think is the likely extent of falls in Australian house prices? [9:26]

    Chris believes the Australian housing market is facing an ‘orderly correction’. [16:27]

    How does Chris define ‘bubble’? [19:55]

    The centrality of speculation and why Joe is reluctant to rely on Joiner’s analysis. [27:56]

    Responsible lending. [42:24]

    Differences and similarities between the Irish and Australian housing bubbles. [45:31]

    The wealth effect. [50:35]

    Investor expectations can precipitate big changes in house prices. [52:21]

    Why Chris may have underestimated his house prices falls if Labor comes to power. [59:46]

    The unique characteristics of housing markets that generate inefficiency and downward price rigidity. [1:02:20]

    • Looking fwd to it. So far all their podcasts in “housing bubble week” have been excellent.

    • In that debate with John Adams, Chris didn’t even acknowledge a bubble still exists. Chris presented a graph that “demonstrated” that prices had fallen to meet repayments at current mortgage rate levels. No acknowledgement of tighter credit post RC.

      I am curious to see if Chris contradicts himself in this interview.

    • that was a great podcast. Finally this debate is getting to the point where it should have been all along.
      ie. on a *valuation* basis. Not the idiotic a priori false argument along the lines, its a bubble because interest rates, zoning, population, credit …
      No its a bubble because the asset trades well above its intrinsic value. That is why it will burst.
      And see how the whole conversation changes once you frame the topic correctly. All of a sudden Joye is on the backfoot compared to the first round knockout he gave Adams.
      Joye made a couple of good points. eg. trying to better define speculation. But he is wrong that it should be defined as expectation of unrealistic CG. Definition is *expectation of CG not supported by a realistic forecast of cash flow on a terminal basis* – ie. if the asset was held forever. If the asset is at intrinsic value expected growth in P = expected growth in E. So he is wrong that Buffet buys based on CG expectation, he is buying based on E growth expectations which can be realised in the CG when sold – as he isn’t planning on holding forever.
      Joye was also quick to define the intrinsic value based on houshold income. But you can’t do that because it’s an unrelated cash flow. Houses return rent not household income.
      Ultimately the question which needs to be put to Joye is why he thinks the gross rental yield on the median house in any random suburb in the south east of Melbourne is equal to or less than the 10y yield, is it because:
      1) cash flows are safer
      2) houses are more liquid than second most liquid asset in country
      3) never before seen rental growth is priced in (when rents can only plod along with GDP)
      4) there is a bubble.

    • The Traveling Wilbur

      I believe your question is answered by Jacob’s post below. Wonderful juxtaposition.

      btw, what’s your definition of “gotten”?

    • Arthur Schopenhauer

      There was a poster in the Couier Mail news room that said: “Remember, you are writing for 12 year olds.”

    • Being able to remotely control a car from 20 to 40 metres away would be good for 4 car households. The neighbour has 2 cars in the garage and 2 cars on the driveway.

    • With all that alcohol still flushing around in veins consumed in his younger wild years they better be careful if he wanted to be cremated.

      Top guy, despite his many personal failings.

      I would think news of his passing this close to the election will only favour the ALP vote, at the expense of the LNP

      • Due to the sympathy vote? I can sort of understand the sympathy vote in Pakistan after Benazir Bhutto was assassinated.

        But a sympathy vote here? For a man who was not assassinated? Then surely Rudd should have won the 2013 election. (because Rudd was knifed and we saw him crying before TV cameras the next day)

        On 16 June 2016, an anti-Brexit MP was assassinated and Britons still voted for Brexit.

      • …. on hearing the news scummo makes a phone call to the Howard residence checking to see how the rodent is sleeping these days …

      • It’s already happening, the tv stations are reminiscing about Labor achievements (deemed progressive) in the 1980’s, the accord, Medicare etc.
        Such media coverage about past achievements can only help today’s Labor party, as if today’s Labor deserve to be associated with 1980s Labor that is debatable

      • C.M.BurnsMEMBER

        Jacob, Hawkie was truly a man of the people. Chugging schooners of beer at sporting events and declaring a public holiday for a yacht race (yacht race !) has permanently endeared him to a large swathe of lower and even middle class Australia

      • @triage – hilarious, hopefully the rodent is having trouble passing a few kidney stones. 😀

      • I think Thallus is right, it reminds voters that Labor is not just automatically disastrous and gives them some warm associations (a few might also muse that even ex union bosses can be good PMs!).

        It might make a small difference at the margins. In an election that might yet be very closely, perhaps that will help.

        As for Abbott trying to claim Hawkey as a Liberal – that is in such poor taste I can’t see it doing anything but losing him a bit more support in his electorate. What a tin eared goose.

    • But we will decide which suspected murderers come to this country and the circumstances in which they come.

      • The Traveling Wilbur

        I’m really looking forward to the next Project interview with ScoMo (yeah, I know)…

        Mr Ex-PM, just how many murderers and rapists do we have exactly on…

        QANTAS flights coming to Australia that your Government paid the airfares for?

        REALLLLLLY looking forward to that.

  4. Just watched an Alan Greenspan interview on Fox Business which runs on the Your Money Channel after hours on Foxtel. Looks like that’s it for the Your Money channel. At 1am the program guide reads “”YM Transmission Ends – LIVE! It was nice doing business with you. From the team at YM.””…………….The subsequent programs all read “”Thank you for watching. Please tune to Sky News for all of your financial news needs.””…………….yibbida, yibbida, That’s All Folks!

  5. Oh me! Oh my! Oh dear!

    ASX-listed Resimac is set to axe mortgages to apartments known – or suspected – of being clad in combustible materials, the first big lender to publicly take a hardline on lending to borrowers wanting to buy in risky buildings.
    The non-bank lender is set to make an announcement despite affected buildings across the nation being kept secret by state governments and developers.
    Mortgage brokers warn other lenders are likely to quickly follow and that it will make obtaining credit for apartments “exceptionally difficult”, particularly buyers in large high rise complexes.

    https://www.afr.com/business/banking-and-finance/major-lender-swings-axe-on-loans-for-flammable-cladding-buildings-20190516-p51nvw